Rouhani: Countries Behind The Oil Price Drop Will Suffer

No nation or company has control over the price of oil. Neither Saudi Arabia nor ExxonMobil nor Halliburton nor Goldman Sachs have anything but the slightest influence over how high or how low the prices go. This is because the price of oil is the result of two factors of which one is not controlled by any single entity and the other is only observable in retrospect. These are supply and demand.

The additional 3 million barrels per day (mbpd)of production that the United States has brought online in the last 5 years probably has more to do with the collapse of the price of oil in the last six months than any other factor with the exception of global demand stagnation.

In the last decade, Saudi Arabia’s exports have only fluctuated between about 7 and 8 mbpd. Look at the extreme volatility in the global price of oil over that period. To believe that Saudi Aramco and Saudi Arabia have any control is delusional.

At $100/barrel Saudi brings in about $280 Billion/year. At $45/barrel figuring an arbitrary lifting cost of $10/barrel, Saudi brings in only $108 Billion/year, or one third the cash.

The CIA’s World Factbook shows Saudi’s GDP as $718 billion with a budget in 2013 of $302 billion in revenues and $258 billion in expenditures – basically in line with their oil revenues. A drop to $108 billion will cause pain, how much and to whom is arguable.
Saudi could cut its production by 2 mbpd as it has done in the past. However there is no guarantee this in itself would push the price of oil back to $70 or $80/barrel. It would, however, guarantee a 25% drop in Saudi oil revenue to $75 billion/year. Pain.

Iran, on the other hand, has been suffering under sanctions for years already. They have a GDP of $987 Billion with a baseline export market only a quarter of Saudi’s. They also have a government budget of only $47 billion in revenue and $67 billion in expenditures.

Rouhani is basically correct.

A Little Bit Of Oil Speculation
Jan 8th, 2015

As for American foreign policy makers? To assume that they have thought further out ahead than their itineraries, is to demonstrate a severe lack of rationalism. If there is one thing that the US has proven during its 20 years of global benevolent US hegemony, it’s that no US policy will ever be successful at achieving any of its stated goals, with the exception of lining the pockets of the military industrial complex and the state bureaucratic apparatus. As we have seen, there has been no shortage of that recently, so all is well in Washington.

Lower Oil Prices Will Not Turn Producers into Pushovers


119 Replies to “2015”

  1. Orlov recently made the observation that when push goes to shove over oil prices and revenues, Russia will just chill as the world watches Saudi Arabia implode over lack of demand. If that happens, all sorts of economies go ricocheting around.

  2. “We don’t have much time to fix our problems. In the timeframe we are looking at, the only other solution would seem to be a religious one. I don’t know exactly what it would be; I am not a believer in The Rapture. There is great order underlying our current system. If the universe was formed in a big bang, there was no doubt a plan behind it. We don’t know exactly what the plan for the future is. Perhaps what we are encountering is some sort of change or transformation that is in the best interests of mankind and the planet. More reading of religious scriptures might be in order. We truly live in interesting times!”

    good gawd… Tverberg.

    or how about all the so-called smart monkeys are going to die? how about that?

  3. “Perhaps what we are encountering is some sort of change or transformation that is in the best interests of mankind and the planet.”

    A. rapture
    B. singularity
    C. Darwinian evolution
    D. other

    What say ye?

  4. yeah, gt makes a very convincing argument. all i can say as a (small time) speculator, the second that oil hits $125 again, if it ever does, but i think it will, but i really don’t know, i’m bailing out of every type of paper that i might have. it’s land and goats for me boys…not that there’s any guarantees there either.

    eh, fucked if you do and fucked if you don’t. that’s life. i guess.


  5. yeah, i can see oil at $20 in 2015-2016. but i can also (still) see it at $200 in 2018. i’ll be the first to admit that i could be very wrong. but ya gotta put your bets someplace. i guess. leave your $ in the bank and wait for the bail in’s to start? buy land and watch it get confiscated for not paying the taxes?

    eh, like i said…fucked if you do and fucked if you don’t…i guess.

  6. “it’s land and goats for me boys…”

    there’s a lot of accumulated wisdom in that move. goats can and do eat just about anything. i’ve seen them eat the paper labels off cans. let’s hope to gawd we don’t have to resort to that level of nutrition.

  7. the one thing i’ve learned in my life is that timing is everything and that you can’t time the markets…maybe that’s two things…not sure.

  8. the second thing i know for a fact is that sooner or later, everything goes to shit…getting the timing right…

  9. dave you said it upthread – it’s timing. You’ve got state actors involved and a shitload of misconceptions and frankly, mythology. I agree with you in the broad strokes, oil can easily get cheaper than $40-$50 a barrel and jump to $200 a barrel, certainly, even *cough* inflation adjusted *cough*. Virtually every commodity out there is going through this turmoil and I don’t see and end to it (turmoil) until something big breaks.

    In another time line, faith in fiat would have broken long ago. This levitation act makes Houdini blush. There is no way in hell any of the debt printed will ever be repaid – ever. I don’t think anyone even knows how to spell “price discovery” anymore, much less describe the concept.

    And JR’s post is right on, Putin is not a pushover and to a lesser extent neither is the house of Saud, goat fuckers that they are. And this time we’re dancing on the nuclear precipice in Chinese knock-off Nikes.

    On an unrelated note, the wind is whipping across the plains out of the north and putting a windchill worth a -10 degrees on an already sub-freezing day. It’s reminding me I need to replace the windows is this house. Brrr.

    I’d prefer not to remember what it is like living that far north and with snow. Many a cold night on the flight line in Ohio. It’s never a good sign when you check-in to a new base and they issue you artic wear. I am at heart a desert rat.

  10. “What the fuck makes you guys post what you post? So random.”

    The zen of ZK. You just can’t read it/watch it – you have to feel it, man.

  11. oldie but goodie joke:

    A crowded Virgin flight was cancelled after Virgin’s 767s had been withdrawn from service. A single attendant was rebooking a long line of inconvenienced travelers. Suddenly an angry passenger pushed his way to the desk. He slapped his ticket down on the counter and said, ‘I HAVE to be on this flight and it HAS to be FIRST CLASS’.

    The attendant replied, ‘I’m sorry, sir. I’ll be happy to try to help you, but I’ve got to help these people first, and I’m sure we’ll be able to work something out.’

    The passenger was unimpressed. He asked loudly, so that the passengers behind him could hear, ‘DO YOU HAVE ANY IDEA WHO I AM?’

    Without hesitating, the attendant smiled and grabbed her public address microphone: ‘May I have your attention please, may I have your attention please,’ she began – her voice heard clearly throughout the terminal.

    ‘We have a passenger here at Gate number 14 WHO DOES NOT KNOW WHO HE IS. If any of you can help him find his identity, please come to Gate 14.’

    With the folks behind him in line laughing hysterically, the man glared at the Virgin attendant, gritted his teeth and said, ‘F*** You!!!’

    Without flinching, she smiled and said, ‘I’m sorry, sir, but you’ll have to get in line for that too!!!

  12. ur, i guess that the bottom line is that the dissolution of the world industrial economy is going to create a lot of chaos in a lot of different places, and in a lot of different ways.

  13. A man was stopped by the police around 3 am. The officer asked him where he was going at that time of night.

    The man replied, “I’m on my way to a lecture about alcohol abuse and the effects it has on the human body, as well as smoking and staying out late.”

    The officer then asked, “Really? Who’s giving that lecture at this time of night?”

    The man replied, “That would be my wife.”

  14. the problem with oil is buying certificates puts your money in promises to be upheld by others, buying the physical stuff is too much of a good thing, and the refined stuff won’t store long-term without some extra care. buy gold or diamonds and the stuff’s so concentrated that folks will kill you for owning a little bit.

    hedging: buy silver coin, good land with trees on it, lead in bullet form with tiny packages of explosive propellent attached, and high-quality bullet launchers. first-aid kits, mil-spec., hand tools, etc.

  15. Yarra, that was indeed quite well done. as one who has spent some time on ships, high-tension wire loose on the ship is always a concern…for parts.

  16. i saw the ghost ship movie. the problem with an opening like that one is it’s a hard act to follow. i honestly don’t recall what happened next.

  17. you know, instead of feeding us constant updates on the Paris terrorists for the past, what?, week now, with headlines smeared all over, why can’t some in depth reporting on the Malaysian airliner that was shot down over Ukraine last fall be aired?

    i’d like to know why there apparently has been no discussion of the Dutch FAA report, with evidence suggesting that the plane was downed by aircraft and not by some air-to-ground missle, as was originally broadcast. why the silence? does someone have something to hide? humm?

  18. also, glad to learn that the “Boston marathon terrorist” (suspect) is finally going to get a trial. that should be interesting. amazing lock-up, err, city you live in, JR. lots of glorious history turning to shit there.

  19. nice summary of US situation, from OFW comments:

    theedrich says:
    January 8, 2015 at 6:38 am

    Money is a bearer of information about goods and services. Inflation is a form of lying about their decreasing value, pretending that they retain the same value as yesterday but in reality cheating the producers.“ In [a] money-measured system which is growing, the lying is kept to a minimum. But with exponential growth of demand and inexorable decline in supply (diminishing returns), the entire system must eventually break down, regardless of how much lying there is.

    Our system is now desperately dependent on lies, otherwise called “faith in the economy.” The neurotic demigods in the U.S. government have apparently decided that global conquest is the answer to their dilemma. This decision has now led to the chaos in Iraq, Libya and — yet to come — Afghanistan, with Ukraine a major question mark. With a great many of tatooed, drug-addicted youth now engaging in “gender studies” as an excuse for serious intellectual or useful work, the population is consigning itself to its own dissolution. So eventually the government will probably “busy giddy minds with foreign quarrels” (Shakespeare, King Henry IV, Part II, Act IV Scene V). That seems to be a favorite way to exit history.

  20. well, it’s real hard to deny that there is a war going on between between the largely secularized west and islam as embodied by various, mostly middle eastern, counties. it’s also pretty obvious that islam acts as at least one unifying factor, similar to the way christianly and the belief in secular “progress” serve to unify the west, for various “terrorist”, so called, groups. i think.

  21. Jake Gittes: “You can follow the action, which gets you good pictures. You can follow your instincts, which’ll probably get you in trouble. Or, you can follow the money, which nine times out of ten will get you closer to the truth.”

  22. on dave’s video above, it’s true that one of the best ways to relieve pain in one part of the body is to introduce it to another part of the body. in that particular case, though, there was a risk of broken leg bones.

  23. I need to watch Chinatown again and I’ve never seen “The Two Jakes” – at least I don’t think I have.


    1. Do not walk behind me, for I may not lead. Do not walk ahead of me, for I may not follow. Do not walk beside me for the path is narrow. In fact, just piss off and leave me alone.

    2. Sex is like air. It’s not that important unless you aren’t getting any.

    3. No one is listening until you pass wind.

    4. Always remember you’re unique. Just like everyone else.

    5. Never test the depth of the water with both feet.

    6. If you think nobody cares whether you’re alive or dead, try missing a couple of mortgage payments.

    7. Before you criticize someone, you should walk a mile in their shoes. That way, when you criticize them, you’re a mile away and you have their shoes.

    8.If at first you don’t succeed, skydiving is not for you.

    9. Give a man a fish and he will eat for a day. Teach him how to fish, and he will sit in a boat and drink beer all day.

    10. If you lend someone $20 and never see that person again, it was probably well worth it.

    11. If you tell the truth, you don’t have to remember anything.

    12. Some days you are the dog, some days you are the tree.

    13. Don’t worry; it only seems kinky the first time.

    14. Good judgment comes from bad experience … and most of that comes from bad judgment.

    15. A closed mouth gathers no foot.

    16. There are two excellent theories for arguing with women. Neither one works.

    17. Generally speaking, you aren’t learning much when your lips are moving.

    18. Experience is something you don’t get until just after you need it.

    19. We are born naked, wet and hungry, and get slapped on our ass and then things just keep getting worse.

    20. Never under any circumstances take a sleeping pill and a laxative on the same night.

  25. yeah, the more i hear different assholes saying that oil will never see $100 again, the more i believe in $200 oil in 2 years.

  26. had to make a correction to Dmitry’s latest post over at the club:

    Dr. Doom said…
    Dmitry, in the forth paragraph, concerning depleted metals used in Iraq (and elsewhere?) by the US military, it is and was depleted uranium, not plutonium. It is mostly U-238 that has had the fissile U-235 isotope removed, hence it is depleted of that isotope. All plutonium isotopes are fissile, and would be too precious (and radioactive) [for] “DU”. It nevertheless has the long-term health hazards you mention. What were they thinking, or not?

    Sunday, January 11, 2015 at 2:30:00 PM EST

  27. dave, yes I was and yes, killing the A-10 Warthog is one of the most dumb-ass decisions the brass has made. It is a cost-effective, proven, efficient and safe (for the pilot) ground-support and anti-armor aircraft. War nerd hits the nail on the head. It is truly a limp-dick move.

    IIRC dave, you were navy.

  28. yes, i was 03 when i got out. when i first joined the officer corps i given the standard line that the primary duty of the officer corps was to: “protect the interests of the usa, etc., etc., blah blah blah…”. i remember thinking to myself, even at that young age (26ish) “yeah sure, the primary duty of the officer corps is to protect the interests of the officer corps.”. eh…why should it be otherwise?….

  29. when i think of plutonium, i think of that scientist that saved the manhatten project and los alamos by jamming a big screwdriver between two hemispheres of the stuff that were sliding together by accident.

    i think they had to bury his body in a thick cement coffin. admittedly fussy on the details. was it leo slizard? they made a movie about it.

  30. my understanding is that now they make complete subcritical spheres of Pu that they get to fission by compressing the sphere. that would be moron efficient.

  31. if i ever get a tattoo, it will be this warning statement, maybe written across my forehead:

    “The first principle is that you must not fool yourself – and you are the easiest person to fool.”
    ~ Richard Feynman

  32. no, i was in from ’81 till ’86. both of my last 2 co’s told me to my face that they wanted to court martial me, mostly for insubordination type issues (way too many details), but they couldn’t come up with the right charges. i had become a expert at subverting the rules, without breaking them. it had become a game to me of sorts…anyways, i had to get out, and was glad to leave. i always say to myself, “the navy, they were the best of times, they were the worst of times.” something like that.

    did you enjoy your time in the usaf?

  33. the “corruption” is so integrated into the system that most people involved don’t view it, at all, as corruption. their collective conscience is absolutely clear, as it should be. in my early years i would sit in judgement…no more.

  34. dave, your navy experience pretty much syncs up with mine, except I was enlisted. I refused an unlawful order, it stepped on a lot of toes and my military career pretty much peaked.I learned an awful lot about myself. I got out in ’72 and hit the college scene on the VA’s dime. That really wasn’t an improvement either. The nookie was better tho.

  35. one of the most important take-aways from my military stint is that I have a very low tolerance for bullshit.

  36. yeah, my tolerance for hive mind type bullshit has always been, and remains, very low. not that that’s a good thing or a bad thing…just is. needless to say, that trait doesn’t work well in the military…

  37. That trait doesn’t work well for a significant majority of modern society. It’s a big reason I’ve worked for myself or for companies I owned a majority of.

  38. Huh. I am in the process of repurposing an unused computer at a clients office for internal IT use and just upgraded a program called “Notepad++”. I open it and the following types out on the screen-

    “Freedom of expression is like the air we breathe, we don’t feel it, until people take it away from us.

    For this reason, Je suis Charlie, not because I endorse everything they published, but because I cherish the right to speak out freely without risk even when it offends others.
    And no, you cannot just take someone’s life for whatever he/she expressed.

    Hence this “Je suis Charlie” edition.
    – #JeSuisCharlie”


    FFS people, can you leave geopolitics OUT of the server room?

  39. seems to me if you go about offending folk’s culture and religion on a regular basis, publically and for profit, you risk getting harmed in some way by those who take offense. i would call that payback, which can be a bitch sometimes.

    je non suis Charlie.

  40. wow, maybe that’s why obummer and kerry didn’t attend the international rally in paris. they knew the fix was in?

    On 11/01/2015, Alexander Carpenter wrote:

    “When ideology-retards (or even just helpful innocents) have been duped into being the fall-guys for a false-flag event, they can’t let them live lest the /whole/ story be revealed. They /must/ be killed ASAP. On the surface, this makes the disincentives stronger, but it increases the attractiveness of “martyrdom” through participation in such events.

    Other indicators:

    * Extremely unlikely reveals of their identities (passports “miraculously found undamaged,” ID cards “left behind,” “instant” pre-scripted news analysis, …).
    * Designated perps killed during the event, and, best of all, in or by the event, making it a “suicide attack.”
    * “News” blackouts and lockdowns until the crime scene can be sanitized and early rumors and observations (such as off-script “third parties”) countered by “official” accounts
    * Later leaks that the perps had “relationships” with government agencies.
    * Confiscations of unauthorized media and citizen-journalist and bystander documentation.
    * Confiscation of CCTV records, and later release of highly redacted versions (if at all).
    * Just-prior or simultaneous multi-agency “training exercises” in the area of the event.
    * Later leaks that the perps had attended “training camps” provided by organizations that have semi-covert ties with government agencies.
    * Justification for totalitarian tactics by militarized police, and city-wide lockdowns during the “search” for the designated perps, using the “emergency” to desensitize citizens to the loss of civil rights.
    * Whatever. (I bet we can fill in several more blanks here…)

    This is becoming an all-too-familiar pattern to be recognizedby anyone with even just shreds of remaining intelligence and common sense.”

    looks like a euro version of the boston marathon bombing in the making.

  41. god doom…do you really have to jerk off to every conspiracy out there, in public? keep it in your pants…as they say.

  42. people are always looking for a handy excuse to kill other people, that’s what they (we) do fer christsakes…

  43. All the organs of the body were having a meeting, trying to decide who was the one in charge.

    “I should be in charge,” said the brain, “Because I run all the body’s systems, so without me nothing would happen.”

    “I should be in charge,” said the blood , “because I circulate oxygen all over so without me you’d all waste away.”

    “I should be in charge,” said the stomach , “because I process food and give all of you energy.”

    “I should be in charge,” said the legs , “because I carry the body wherever it needs to go.”

    “I should be in charge,” said the eyes, “Because I allow the body to see where it goes.”

    “I should be in charge,” said the rectum , “Because I’m responsible for waste removal.”

    All the other body parts laughed at the rectum and insulted him, so in a huff, he shut down tight.

    Within a few days, the brain had a terrible headache, the stomach was bloated, the legs got wobbly, the eyes got watery, and the blood was toxic. They all decided that the rectum should be the boss.

    The Moral of the story?

    The ass hole is usually in charge!

  44. Well, I had a big ol’ long reply to doom and when I clicked on “post comment”, it went into the ether, never to be seen again. Page never refreshed – just blank – nada, zip, zilch.

    [cue Twilight Zone music]

    Allah (SAW) clearly did not want that post to see the light of day.

  45. that’s right dave. i see a voluptuous, big brested, writhing, sexy conspiracy, and i wanna hold it, and lick it, and, and, you know, maybe go “all de way” with it, and afterwards, lie there all exhausted and sweaty, and maybe share a big cubano with it and stare at the ceiling for awhile, wondering where exactly i took off my clothes.

  46. This link and comment from ClubOrlov.wordpress.com comments section.

    “The preliminary report on the crash is now out:

    Figures 9 and 10 clearly show that the cockpit (which broke from the airframe first) was hit by high-energy particles entering from outside the aircraft. Importantly, the report shows that the these entered the cockpit from above the level of the cockpit floor (Fig 10), and through the cockpit roof (Fig 9).

    This firing position above the MH17 airframe seems to me to be much more likely to be that assumed by a fighter aircraft, than by a rising ground to air missile.”

    hard to argue with the facts, IMHO. maybe that explains the silence.

  47. doom, that flying “saucer” was actually pretty cool. I see they went with the Kazakstan stop for landing as well. Makes sense to copy the Russian program – the Russians can still get into space.

  48. thanks UR. i actually dove to the ocean floor in the South Pacific by going in a spiral, as a guest scientist within the French manned submersible Cyana. their logic was the spiral will average out any currents in route, so as to keep you on target, which it did, as we landed within a few meters of our objective. i dove in a lot of American subs, and often we’d end up far from the dive target, even with mid-course corrrections, which also used up precious battery power, limiting your dive duration.

  49. wouldn’t a spiral also use more battery? A few meters on the scale of the ocean floor is pretty good.

  50. no, because it’s a controlled fall through the water. it’s bascially a gravity drop–they all use drop weights. they can slow the descent with ballast, i think. never thought to ask, and i was on one of the last diving expeditions with that sub. the French use Nautile almost exclusively now, which simply drops or glides to the bottom, with power assists to the target.

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