Humans are by
nature optimists - all is going to be OK, but is it?
Look where we
are in July 2016:
Oil production going strong while
demand has slowed down. Why?
Iran has
pushed the “pedal to the metal”, producing as much as it can trying to recapture
its old customers. Saudi Arabia is not sitting still, lowering prices to
counteract Iran. The hoped-for US production slowdown is wishful thinking
(0.6MBPD out of 10MBPD is a drop in the bucket), and clever shale operators can
still make a buck at $30/bbl.
Meanwhile,
the US and EU economies are stagnant, hounded by corrupt politics, incompetent
politicians, and revolt of the middle class. Hence BREXIT and Donald Trump and
Bernie Sanders. The good thing about the US presidential race is that all this was
exposed clearly due to efforts by the “outcast” unconventional candidates.
Unfortunately, there is no clear-cut outcome, hence more uncertainty…
The other
parts of the world aren’t in better shape: Venezuela, Libya, Nigeria, rest of
Africa are mostly basket cases, and so are Irak, Syria, and Afghanistan. The
Middle East is a “clash of civilizations” cauldron ready to erupt, China has
been hit by the slowdown in the West and unsure of where it’s going, and so are
the “Asian Tigers”. Russia is trying to assert itself, and Mr. Putin isn’t
going to be scared by West’s “messages” (this how we go to war today: we send “messages”,
very scary!). A former bright light, Brazil, is disintegrating. One of the truly
bright lights is India, but one out of many hasn’t enough pull by itself.
The Crystal Ball
Is it dismal?
In the short term (2016-2017), yes. So
what is this going to do to oil prices? They will oscillate around $50/bbl +
20%. So far, the first half of 2016 confirmed this.
People that
hang on to market’s every nickel-and-dime up or down (and secretly praying that
the prices will go up, up, up…) are just deluding themselves. So, plan
accordingly for 2016-2017. Of course, all the bets are off if another war erupts
in this highly combustible mix.
Any Miracles?
There is some
reason for optimism: the world’s population is mostly young (under 30 years
old), well versed in social media and communication and plugged-in the news –
the great equalizer. The other truth: “nobody lives forever”. However, the
impact of younger generation, time constant wise, is unknown: how long will it
take until “I am mad as hell, and won’t take it anymore”? Most likely, decades…
