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Showing posts with label Venezuela. Show all posts
Showing posts with label Venezuela. Show all posts

Wednesday 6 April 2016

Oil Prices: What’s Behind the Drop? Simple Economics

    Some think it will be years before oil returns to $90 or $100 a barrel, a price that was pretty much the norm over the last decade. Credit Michael Stravato for The New York Times

The oil industry, with its history of booms and busts, is in its deepest downturn since the 1990s, if not earlier.

Earnings are down for companies that made record profits in recent years, leading them to decommission more than two-thirds of their rigs and sharply cut investment in exploration and production. Scores of companies have gone bankrupt and an estimated  250,000 oil workers have lost their jobs.

The cause is the plunging price of a barrel of oil, which has fallen more than 70 percent since June 2014.

Prices recovered a few times over the last year, but the cost of a barrel of oil has already sunk this year to levels not seen since 2003 as an oil glut has taken hold.

Also contributing to the glut was Iran’s return to the international oil market after sanctions were lifted against the country under an international agreement with major world powers to restrict its nuclear work that took effect in January.

Executives think it will be years before oil returns to $90 or $100 a barrel, a price that was pretty much the norm over the last decade.

What is the current price of oil?


Brent crude, the main international benchmark, was trading at around  $38 a barrel on Wednesday.

The American benchmark was at around $37 a barrel.

Why has the price of oil been dropping? Why now? 



This a complicated question, but it boils down to the simple economics of supply and demand.

United States domestic production has nearly doubled over the last several years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once was sold in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices. Canadian and Iraqi oil production and exports are rising year after year. Even the Russians, with all their economic problems, manage to keep pumping.

There are signs, however, that production is falling because of the drop in exploration investments. RBC Capital Markets has calculated projects capable of producing more than a half million barrels a day of oil were cancelled, delayed or shelved by OPEC countries alone last year, and this year promises more of the same.

But the drop in production is not happening fast enough, especially with output from deep waters off the Gulf of Mexico and Canada continuing to build as new projects come online.

On the demand side, the economies of Europe and developing countries are weak and vehicles are becoming more energy-efficient. So demand for fuel is lagging a bit.

Who benefits from the price drop?


Any motorist can tell you that gasoline prices have dropped. Diesel, heating oil and natural gas prices have also fallen sharply.ny motorist can tell you that gasoline prices have dropped. Diesel, heating oil and natural gas prices have also fallen sharply.

The latest drop in energy prices —  regular gas nationally now averages just above $2 a gallon, roughly down about 40 cents from the same time a year ago — is also disproportionately helping lower-income groups, because fuel costs eat up a larger share of their more limited earnings.

Households that use heating oil to warm their homes are also seeing savings.



Who loses?


For starters, oil-producing countries and states. Venezuela, Nigeria, Ecuador, Brazil and Russia are just a few petrostates that are suffering economic and perhaps even political turbulence.

The impact of Western sanctions caused Iranian production to drop by about one million barrels a day in recent years and blocked Iran from importing the latest Western oil field technology and equipment. With sanctions now being lifted, the Iranian oil industry is expected to open the taps on production soon.
In the United States, there are now virtually no wells that are profitable to drill.

Chevron, Royal Dutch Shell and BP have all announced cuts to their payrolls to save cash, and they are in far better shape than many smaller independent oil and gas producers.

States like Alaska, North Dakota, Texas, Oklahoma and Louisiana are  facing economic challenges.

There has also been an uptick in traffic deaths as low gas prices have translated to increased road travel. And many young Saudis have seen cushy jobs vanish.

What happened to OPEC?


Iran, Venezuela, Ecuador and Algeria have all pressed OPEC, a cartel of oil producers, to cut production to firm up prices. At the same time, Iraq is actually pumping more, and Iran is expected to become a major exporter again.

Major producing countries will meet on April 17 in Qatar, and some analysts think a cut may be possible, especially if oil prices approach $30 a barrel again.

King Salman, who assumed power in Saudi Arabia in January 2015, may find it difficult to persuade other OPEC members to keep steady against the financial strains, even if Iran continues to increase production. The International Monetary Fund estimates that the revenues of Saudi Arabia and its Persian Gulf allies will slip by $300 billion this year.



Is there a conspiracy to bring the price of oil down?


There are a number of conspiracy theories floating around. Even some oil executives are quietly noting that the Saudis want to hurt Russia and Iran, and so does the United States — motivation enough for the two oil-producing nations to force down prices. Dropping oil prices in the 1980s did help bring down the Soviet Union, after all.

But there is no evidence to support the conspiracy theories, and Saudi Arabia and the United States rarely coordinate smoothly. And the Obama administration is hardly in a position to coordinate the drilling of hundreds of oil companies seeking profits and answering to their shareholders.

When are oil prices likely to recover? 


Not anytime soon. Oil production is not declining fast enough in the United States and other countries, though that could begin to change this year. But there are signs that supply and demand — and price — could recover some balance by the end of 2016.

Oil markets have bounced back more than 40 percent since hitting a low of $26.21 a barrel in New York in early February.

Some analysts, however, question how long the recovery can be sustained because the global oil market remains substantially oversupplied. In the United States, domestic stockpiles are at their highest level in more than 80 years, and are still growing.

But over the long term, demand for fuels is recovering in some countries, and that could help crude prices recover in the next year or two. - The New York Times

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Wednesday 5 March 2014

Western hegemony & violence: ousting democratically-elected leaders in Ukraine and elsewhere!

City on fire: Anti-government protesters clashing with police in the centre of Kiev in Ukraine. — AFP

The ousters of democratically-elected leaders have often been carried out directly or indirectly by champions of democracy themselves.

IF Ukraine is on the brink of a catastrophe, it is mainly because the present regime in Kiev and its supporters, backed by certain Wes­tern powers, violated a fundamental principle of democratic governance. They ousted a democratically-elected president through illegal means.

President Viktor Yanukovich, who had come to power through a free and fair election in 2010, should have been removed through the ballot box.

His opponents not only betrayed a democratic principle. They subverted a “Peace Deal” signed between them and Yanukovich on Feb 21 in which the latter had agreed to form a national unity government within 10 days that would include opposition representatives; reinstate the 2004 Constitution; relinquish control over Ukraine’s security services; and hold presidential and parliamentary elections by December.

According to the deal, endorsed by Germany, France and Poland, Yanu­kovich would remain president until the elections.

His co-signatories had no intention of honouring the agreement.

Without following procedures, the parliament – with the backing of the military – voted immediately to remove Yanukovich and impeach him. The parliamentary speaker was elected interim president and after a few days a new regime was in­­stalled.

One of the first acts of parliament was to proclaim that Ukrainian is the sole official language of the country, thus downgrading the Russian language, the mother tongue of one-fifth of the population.

Anti-Russian rhetoric which had become more strident than ever in the course of the protest against the Yanukovich government has reached a crescendo in the wake of the overthrow of the government.

The protest gives us an idea of some of the underlying issues that have brought Ukraine to the precipice.

There was undoubtedly a great deal of anger in the western part of the country, including Kiev, over the decision of the Russian-backed Yanu­kovich to reject closer economic ties with the European Union (EU) in favour of financial assistance from Moscow.

It explains to some extent the massive demonstrations of the last few months. Police brutality, corruption within the government and cronyism associated with Yanu­kovich had further incensed the people.

But these legitimate concerns tell only one side of the story. The protest movement had also brought to the fore neo-Nazis and fascists sworn to violence. Armed and organised groups such as the Svoboda and the Right Sector provide muscle power to the protest.

They are known to have targeted Jewish synagogues and Eastern Orthodox Christian churches.

It is the militias associated with these groups that are in control of street politics in Kiev.

Elites in Germany, France, Britain, the United States and within the Nato establishment as a whole are very much aware of the role of neo-Nazi and fascist elements in the protest and in the current Kiev regime.

Indeed, certain American and European leaders had instigated the demonstrators and were directly involved in the machinations to bring down Yanukovich.

US Assistant Secretary of State for Europe Victoria Nuland had in her infamous telephone conversation with the US Ambassador to Ukraine admitted that her country had spent US$5bil (approximately RM16bil) promoting anti-Russian groups in Ukraine.

For the United States and the Euro­pean Union, control over Ukraine serves at least two goals.

It expands their military reach through Nato right up to the doorstep of Russia, challenging the latter’s time-honoured relationship with its strategic neighbour. It brings Ukraine within the EU’s economic sphere.

Even as it is, almost half of Ukraine’s US$35bil (RM115bil) debt is owed to Western banks, which would want the country to adopt austerity measures to remunerate them.

It is largely because of these geopolitical and geo-economic challenges that Russian President Vladi­mir Putin is flexing his military muscles in Crimea, in the eastern Ukraine region, which not only has a preponderantly Russian-speaking population but is also home to Russia’s Black Sea Fleet. Besides, Ukraine is the cradle of Russian civilisation.

This is why Putin will go all out to protect Russian interests in Ukraine, but at the same time, there is every reason to believe that he will avoid a military confrontation and try to work out a political solution based upon the Peace Deal.

The catastrophe in Ukraine reveals five dimensions in the politics of the ouster of democratically-elected governments:
  •  The determined drive to overthrow the government by dissidents and opponents, which is often un­­compromising;
  •  The exploitation of genuine people-related issues and grievances;
  •  The mobilisation of a significant segment of the populace behind these mass concerns;
  •  The resort to violence through militant groups often with a pronounced right-wing orientation; and
  •  The forging of strong linkages between domestic anti-government forces and Western governments and other Western actors, including banks and non-governmental organisations, whose collective aim is to perpetuate Western control and dominance or Western hegemony.
Some of these dimensions are also present in Venezuela where there is another concerted attempt to oust a democratically-elected government.

Some genuine economic grievances related to the rising cost of living and unemployment are being manipulated and distorted to give the erroneous impression that the Maduro government does not care for the people.

President Nicolas Maduro, it is alleged, is suppressing dissent with brutal force.

The truth is that a lot of the violence is emanating from groups linked to disgruntled elites who are opposed to the egalitarian policies pursued by Maduro and his predecessor, Hugo Chavez.

They are disseminating fake pictures through social media as part of their false propaganda about the Venezuelan government’s violence against the people – pictures which have now been exposed for what they are by media analysts.

Support for this propaganda and for the street protests in Venezuela comes from US foundations such as the National Endowment for Demo­cracy (NED). It has been estimated that in 2012 alone, the NED gave more than US$1.3mil (RM4mil) to organisations and projects in Vene­zuela ostensibly to promote “human rights,” “democratic ideas” and “accountability.”

The majority of Venezuelans have no doubt at all that this funding is to undermine a government which is not only determined to defend the nation’s independence in the face of Washington’s dominance but is also pioneering a movement to strengthen regional cooperation in Latin Ame­rica and the Caribbean as a bulwark against the US’ hegemonic agenda.

It is because other countries in the region such as Bolivia, Brazil, Argen­tina, Nicaragua, Uruguay, and Paraguay know what the US elite is trying to do in Venezuela that they have described “the recent violent acts” in the country “ as attempts to destabilise the democratic order.”

A third country where a democratically-elected leader is under tremendous pressure from street demonstrators at this juncture is Thailand.

Though some of the issues articulated by the demonstrators are legitimate, the fact remains that they do not represent majority sentiment which is still in favour of Prime Minister Yingluck Shinawatra and her exiled brother, former Prime Minister, Thaksin Shinawatra.

As in Ukraine and Venezuela, violence – albeit on a much lower scale – has seeped into the struggle for power between the incumbent and the protesters. However, foreign involvement is not that obvious to most of us.

Both Yingluck and the protest movement are regarded as pro-Western. Nonetheless, there are groups in Washington and London who perceive the current government in Bangkok as more inclined towards China compared to the opposition Democratic Party or the protesters.

Is this one of the reasons why a section of the mainstream Western media appears to be supportive of the demonstrations?

There are a number of other instances of democratically-elected leaders being overthrown by illegal means.

The most recent – in July 2013 – was the unjust ouster of President Mohamed Morsi of Egypt. In 1973, President Salvador Al­­lende of Chile was killed in a coup engineered by the CIA.

Another democratically-elec­ted leader who was manoeuvred out of office and jailed as a result of a Bri­­tish-US plot was Mohammed Mosad­degh of Iran in 1953.

It is only too apparent that in most cases the ouster of democratically-elected leaders have been carried out directly or indirectly by the self-proclaimed champions of democracy themselves! It reveals how hypocritical they are.

What really matters to the elites in the United States, Britain and other Western countries is not de­­mocracy but the perpetuation of their hegemonic power. Hegemony, not democracy, has always been their object of worship. 

By Chandra Muzaffar - The Star/Asia News Network
> Dr Chandra Muzaffar is president of the International Movement for a Just World (JUST). The views expressed are entirely the writer’s own.
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