The price of a barrel of oil has been cut in half over the course of 10 days (from $ 61 to less than $ 30). The cause of the Coronavirus epidemic, which paralyzes the Chinese economy whose consumption still represents 1/10 of world oil in normal times. But this is only the surface of things … A great geopolitical game is woven in the background. Shadow diplomacy that will eventually have an impact on gold and Bitcoin …
From Russia with love
WTI’s barrel price is back on 2016 low – at the height of the war in Syria – when Saudi Arabia tried to break the alliance between Damascus and Moscow by dropping prices to tap the Russians in the wallet (about 1/3 of the Russian state’s revenue comes from the sale of oil and gas). The confrontation ended with the kidnapping and racketeering of part of the Saudi royal family and a few wealthy Saudi businessmen to fill the coffers of the kingdom. The two heavyweights of oil finally found an agreement to stabilize the price of a barrel around $ 65.
2020, rebelote, the price of a barrel is back to the carpet again, except that it was this time not King Ben Salman who decided to collapse prices, but Russia. The latter refused to reduce its production and shattered a tacit understanding which had lasted for almost 4 years…
Faced with this end of refusal on the part of Russia, Saudi Arabia decided to redo the blackmail of scorched earth : “If you don’t reduce your production, then I WE shoots in the foot. “
” I do not understand how the Saudis could have supposed that this type of pressure could have any influence on Putin “Said a delegate from OPEC aware of the matter, reports the Wall Street Journal.
An even more surprising decision when you know that Saudi Arabia needs $ 80 a barrel of oil to balance its budget, against only $ 42 for Russia (IMF source)…
Certainly, 55% of its export earnings come from hydrocarbons, but the Russian ant has a sovereign fund and foreign exchange reserves together representing the equivalent of nearly $ 600 billion (I say “equivalent” because Russia recently got rid of all its dollars).
Besides, facing the ire (feigned?) Of Saudi Arabia, the russian energy minister hit the nail on the head saying that his country can collect a barrel at $ 25 for 6 to 10 years…
What geopolitical strategy is hidden behind this scuttling of the price of a barrel? It’s easy to get lost in guesswork in this shadow theater but we won’t go too far saying that the United States is the real enemy that Putin is trying to reach by refusing to bear the price of a barrel. If we observe these events through this geopolitical prism, 2020 presidential election must be in the crosshairs. What does the price of a barrel have to do with the US election? This is what we will see before we look at the murky case of the Saudi kingdom.
Not me. Us.
In view of the latest results from the Democratic primaries, it may be that Bernie Sanders wins (he’s neck and neck with Joe Biden). Gold, Bernie Sanders plans to end shale oil / gas extraction.
It’s very simple, since 2006, the shale oil “revolution” has allowed the United States to reduce net oil imports by 13 million barrels in 15 years. It means that hundreds of billions of dollars that previously plowed into the coffers of exporting countries like Venezuela, Russia and Saudi Arabia now remain in the US economy.
If Bernie becomes the 46th American president, Russia would regain market share for its gas exports and, by extension, more influence on the world market (as regards oil, Russia will cross its peak anyway of oil production in 2022, dixit Alexander Novak, the Russian Minister of Energy). It is therefore worth the effort for the Kremlin, who has not forgotten that Bernie Sanders spent her honeymoon in the USSR (1988) …
Putin and Xi Jinping Probably bet that the threat of a shale oil industry debt bubble burst and the stopping of the supply of the American multinationals will be enough to keep Wall Street in the red and prevent re-election of Mr. Make America Great Again. And to do that, you have to increase the pressure on the American shale oil industry which is already dying with a $ 60 barrel. So at $ 30…
Not to mention that the oil companies weigh very heavily in the stock market indices because they are the ones who pay a good part of the dividends ((Total for example, paid almost 1/5 of the CAC40 dividends in 2018). A very low price per barrel can only keep the stock markets down. It’s in this sense that the drop in the price of a barrel could help Bernie Sanders because the current financial crisis will tip the electoral balance in favor of the one who promised to go pocket the 1%. CQFD.
The S & P500 has already marked a drop of 20% since the high point at the end of February and the bloodbath continues despite the 1,500 billion injected by the FED. Will China, the workshop of the world, Russia’s ally, restart production, or let the situation rot to get rid of Trump? Suspense ..
The petrodollar, American Achilles heel
About 90% of the supply chain of all industrial products depends on the availability of oil. Without oil, nothing is built, nothing moves! Oil is the Achilles heel of the bulimic energy of an American empire which, since its own conventional oil peak (1970), monopolizes a large part of world oil production by issuing petrodollar debts. The United States owes more than $ 23.4 trillion in debt … another $ 1 trillion last year alone. It’s very simple, Americans are currently going into debt of $ 4 to generate $ 1 of GDP. Kafkaesque…
If the FED stops printing, the petrodollar system set up in 1974 by Henry Kissinger – by forcing Saudi Arabia to sell its black gold exclusively in dollars – collapses.
For the record, this year there – in 1974 therefore – the governor of the Saudi central bank Anwar Ali was found dead at the New York hotel Waldorf Astoria, and the Minister for Foreign Affairs Omar Saqqaf in Washington. Both were murdered the same day (November 14, 1974). What a coincidence for these two emissaries whose mission was to resist the demands of the Americans concerning the sale of their oil exclusively in dollars. same King Faisal will be murdered 4 months later. A dirty story … So, in the light of this little historical reminder, is it illegitimate to wonder if Saudi Arabia is not playing Russia’s game to give the Americans their change ? Wouldn’t it actually be a Double agent ?
On the other hand, now that the US is self-sufficient in oil, would Saudi Arabia not secretly dream of removing the exclusivity offered to the dollar in order to sell oil in yuan, the currency of now more the world’s largest importer of oil, China?
Because if there is something that is beginning to show, it is that US debt will never be repaid and the dollar is walking on hot coals. Recall that in September of last year, American banks suddenly stopped accepting debt from the US Treasury (supposedly the safest investment in the world …) as collateral for overnight loans called ‘‘Repurchase agreement”. The famous “REPO” crisis who forced the American central bank (EDF) to intervene between banks which no longer trust, neither in their counterparts, nor in the signing of the US Treasury … And while US debt has always served as a safe haven during crises, investors this time beware of the plague with an increase in borrowing rates from Uncle Sam in recent days.
To put it another way, the wick of a financial crisis is lit. The China and the Russia are using the pandemic to set fire to the powder with the ulterior objective of de-dollarization of the world to take away from the Americans the exorbitant privilege of buying oil on debt worth nothing. Finally, ” ulterior “.., the sino-russian axis has no longer concealed its hostility towards the greenback ! This is the real global geopolitical intrigue that the coronavirus has revived.
“The dollar is our currency, but that’s your problem”
… Declared in 1971 John Bowden Connally, US Secretary of the Treasury, facing a European delegation demanding accountability for the unilateral decision by the United States to stop trading dollars for gold. Three years later, the United States forced Saudi Arabia to sell its oil exclusively in dollars to maintain its global monetary hegemony … Even today, the reserves of all central banks are made up of more than 60% of the dollar because oil is by far the biggest chunk of international trade and you have to pay it in dollars.
The petrodollar did not explode in flight during the subprime crisis – which demonstrated the insolvency of the US economy – because the FED bought back the debts by printing several thousand billion. The FED is now virtually the owner of half of the American real estate market … But all this money injected into the economy obviously causes inflation. In other words, bubbles (stock market, real estate or student loans) that make more and more Americans live in their cars or crowded between 4 walls. This is the price to pay to prevent the debt / petrodollar pyramid from collapsing …
The United States got out of this quagmire by starting to produce a lot of shale oil, that is to say a very expensive oil to extract that would never have happened if the Fed had not flooded free money banks. Be aware that since 2005, about 70% of the increase in world oil production has come from American shale oil (whose peak production will nevertheless be reached in just 10 years) …
In the end, a simple question arises: how long will the United States be able to produce oil at a loss? About 200 oil companies have already gone bankrupt … What is certain is that from gold to oil via Bitcoin, no asset whatsoever will escape the turmoil including the current health crisis in coronavirus might be just a taste.
Gold Standard and Bitcoin Standard
Without energy (oil in particular), no economic growth, massive default and monetary reset.
When world oil production reaches its physical limits and begins to decrease (within 5 years according to the International Energy Agency and the ASPO), debt bubbles will burst just like the currencies on which they are backed.
“A paper currency, based solely on trust in the government that prints it, always ends up returning to its intrinsic value, that is, zero.”
Voltaire (1695 – 1778)
It is then that gold, a safe currency whose limited quantity gives it intrinsic value, will resume its letters of nobility. In this regard, note that Russia and China have been buying gold since 2008 (subprime crisis) and it is no coincidence that the price of the barbarian relic is currently at an all-time high.
Beijing and Moscow prepare to restore Gold Standard which will put the barbaric relic at the center of international trade, as was the case during the last two world wars. Nevertheless, the yellow metal has competition. Bitcoin is also a currency acting as a store of value since there will never be more than 21 million units. And while it is impossible to pay in gold dust, it is quite possible to pay something whose price is as low as 0.00000001 Bitcoin (unit which is called “satoshi” in honor of its Creator). The other advantage of Bitcoin is that you can transfer funds instantly to the other side of the world. Impossible with ingots.
The crisis that has just started is probably going to last because it is not the invisible hand of the market which is hidden behind the stock market panic. It is a titanic geopolitical standoff against the backdrop of peak oil that is woven behind the scenes. Like gold, Bitcoin will also benefit from the inevitable monetary reset. This is not yet seen on the graphs but patience. The digital golden hour will come, especially when we no longer have the means to pay anonymously …
Let it be said, the fight for monetary hegemony is always a fight to the death … and that is why 99% of Alt-coins will fall to zero, by the way …
Child of Satoshi, the alchemist who turned a cryptographic algorithm into gold.
I’m talking about monetary geopolitics, not shitcoins.