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I Googled this yesterday thinking the same thing, but the real increases in production came from Iraq (nearly doubling yearly output) and the extra US productio
by irq-1 11y ago
I Googled this yesterday thinking the same thing, but the real increases in production came from Iraq (nearly doubling yearly output) and the extra US production. Saudi Arabia didn't seem to have any substantial change in production. Maybe I'm wrong, but that's what I found.
Politically, if Saudi Arabia can't be counted on to fix prices when faced with a threat like Russia and Ukraine, then why does the US keep them as an ally, since they're clearly involved with terrorism?
- adventured 11y agoSaudi Arabia has only added about a million barrels per day during the supposed attempt to weaken US frackers. By contrast, the US added about three million barrels per day in three years ('12,'13,'14). Most of the oil price damage was caused by the dollar. Oil had been running at significant global oversupply for years before the dollar began to crash the price back in June/July 2014. That same dollar effect threw Canada into a recession, cut Australia's growth rate in half, and crushed emerging markets including Brazil. Long before Saudi Arabia boosted production, the dollar took off on its greatest run in decades. Oil immediately began to crash from there forward. The USSR also collapsed due to the strong dollar 30 years ago, which dropped the price of oil substantially. Oil went from $140 inflation adjusted, for three years, to plunging off a cliff to $35 or so, courtesy of Volcker's strong dollar move. And then again Russia nearly imploded during the cheap oil days of 1997-2000, also caused by an extremely strong dollar (gold hit around ~$250).
- JTon 11y agoHow exactly does a strong USD decrease the price of oil?
- ci5er 11y agoOil contracts and futures are priced in USD. This is what the phrase "Petro-dollar" refers to. And this is why everyone needs a big slug of dollars in their respective reserves - to buy oil. This scheme as been pretty good for the US, but other players are not quite so enamored with it. When the dollar is strong, it takes fewer of them to buy a barrel of oil. ITT there is a lot of talk about the production side of the equation, but the effect of the strong dollar and weaker Chinese demand have played a role too. China is talking with Russia, Saudi Arabia and Iran about RMB denominated contracts, so that'll be fun. Currency risk will have to factored into contract prices.
- falsestprophet 11y ago"And this is why everyone needs a big slug of dollars in their respective reserves - to buy oil." This petrodollar conspiracy is baffling. Countries don't hold dollars solely to buy oil. The oil and gas industry is only about 4.6% to 6.5% of the global economy. Countries hold reserve currencies to manage the exchange rate of their currency. Petrodollar conspiracists would be well served by learning about foreign exchange reserves: https://en.wikipedia.org/wiki/Foreign-exchange_reserves https://en.wikipedia.org/wiki/Foreign-exchange_reserves And in any case, only 65% of foreign currency reserves are in the USD.
- ci5er 11y agoOK. So let's just truncate all of that and directly answer the question by saying that when the dollar is strong it takes fewer of them to buy any particular amount of a commodity that is priced in dollars.
- hueving 11y agoThe dollar didn't more than double in value like it would be required to halve the price of oil.
- fredgrott 11y agobut that is only due to one important thing... The US defense of Saudi Arabia has a requirement that Saudi sell oil in US dollars..