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Thursday, 26 May 2016 20:18

Fifty- The "Imaginary Sweet Spot" for Crude Behavior

Few commodities are capable of triggering an instantaneous and significant reaction across virtually all sectors of the global economy. Crude oil price points remain, as one of the few measurements able to visibly shake the world's economy at its foundation. Volatile shifts in "price per barrel" of Light Sweet Crude Oil are recognized to be linked, with "real time" technology, to extrinsic influences throughout the world.

The "Big Five- Oh"

With "perceived" and purely subjective price points, considered to signal "turning points" in the economy, today's upward move touching $50 per barrel, created a uproar of varying opinions from most major media sources. With the world oil reserves operating at what most consider to be "glut" levels, it took a significant chain of major events in order to boost the previously depressed prices. Decline in US oil production, catastrophic wildfires in Canada, pipeline explosions in both Iraq and Nigeria, in addition to the recent leak in the Colombian Gulf, were each a part of the chain of events, which spurred the sudden increase.

Enough is Still Enough:

Oil stocks have been rising significantly, since the price per barrel began to rebound, off of lows nearing $25 per barrel. With prices up over 80% from January lows, several oil stocks are experiencing dramatic increases. Most of the world's largest oil producers remained dim in tone with respect to long term conditions. As oil reserves continue to maintain almost glut levels , the significantly rare set of simultaneous oil-related disasters, triggering the sudden spike in prices, appear to be misleading.

Global Oil Drilling, Much More than "Just a "Bit" Sketchy:

The fact that "perception is reality" could not be more clearly demonstrated than the widely accepted belief in "magic price points" in the price per barrel of crude oil. Supply and demand are traditionally what drives the price of virtually all goods and services in the world. Crude oil prices are manipulated by nations and large oil companies, who contribute the majority of the supply, resulting in control of the highest volume of "chips" in the "oil game." Some nations, for example, will continue to flood the market with huge releases of oil, until prices drop below the "break-even point" in nations with higher production costs. Time spent as prices move upward, while inventories are reduced, creates a "window of windfall profits." Rewards for the clever manipulation of other countries are easily obtained. After other oil producing nations begin to cut thousands of jobs, as a result of the price per barrel dropping, the unapologetic process of racketeering and "price-fixing" resets itself for another round.

Transportation's Mission-"Keeping Customers Over a Barrel:

Airlines and other transportation companies use the price per barrel as a significant reason for increases in fares to their customers. However when oil prices drop by more than 50% ticket rates are only slightly adjusted, or remain untouched. Blame shifts to personnel costs or weakness in other sectors of the economy. Crude oil may be the best example of a completely "logic free" and "greed driven" industry.

Moral Boundaries:

Nations, using the disguise of wanting to greatly reduce and eventually eliminate dependence on foreign oil, are ignored by large companies, who realize there are certain "prime" price points where profitability becomes exponentially higher. That prime price point is where the desire for profit surpasses the respect for patriotism-the point of moral "no return."