5 ms·

Incredible how the US has transformed into the largest producer of crude oil in the world in the matter of a few short years. It's definitely a geopolitical wea

Incredible how the US has transformed into the largest producer of crude oil in the world in the matter of a few short years. It's definitely a geopolitical weapon to attack those in the Middle East with, especially the Saudis, although it's not clear to me whether they are complicit or not with this current US policy of pumping and dumping oil. Now that ISIS is all but dismantled, maybe the other target is Syria and Iran or even Russia. In a similar way Reagan outspent the Soviet Union in nuclear arms race, this definitely feels like pumping so much oil and keeping oil prices low is in order to destabilize at least one or two of our political enemies that rely on oil revenues.

Phlarp 8y ago
But Saudi Arabia is our political _ally_
- curuinor 8y ago
  More a frenemy, really.
adventured 8y ago
Reagan didn't spend the USSR into disintegration. The USSR collapsed as it did due to the dramatic oil price drop caused by Paul Vocker's strengthening of the dollar in the 1980s. Oil is priced in dollars, so if you considerably increase the value of the dollar, you'll sink the price of oil, which will hammer most foreign oil producers. The dollar index went from ~80 to ~160, from roughly 1980 to 1986, by far the greatest dollar move in modern history. Oil moved inversely to the dollar gains. The USSR economy was heavily dependent on the price of oil staying as high as it was in the 1970s (oil went from ~$20 to $100+, levels it had never remotely seen before). Having gotten used to the price of oil being so high throughout the 1970s, their already weak system was unable to absorb the outsized shock of oil plunging from $100+ to $30 during ~1980-1988. In the 1950s the USSR barely had an oil economy at all. From 1960 to 1980 (they passed the US in oil production around 1975-76), their oil output had climbed by about seven fold, making them very dependent on that resource. Had oil remained high, the USSR could have continued to spend as necessary to try to keep their system together. For an economy as dependent on oil as theirs was by 1980, removing that much revenue by tanking oil from $100 to $30, is a deadly wound on top of an already shaky foundation. While very plausibly their system would have failed regardless eventually, a high oil price would have likely bought them more time. The dollar is what broke the USSR. It's also what threw Russia into a sudden and dramatic recession after Crimea and curtailed their pursuit of further territorial annexation (at least for a while). The US stopped QE and signaled the beginning of rate hikes, which sent the dollar soaring and took took oil from $105+ in June 2014 to under $28 in about 18 months (the global economy was growing fine and oil had been in oversupply for years; it was the dollar move that popped the market). Oil tanked immediately after the Russian Crimea events in July-August 2014.... The dollar is by far the greatest weapon in the US arsenal. If you want to restrain Russia, push the dollar high.
- gruez 8y ago
  >Oil is priced in dollars, so if you considerably increase the value of the dollar, you'll sink the price of oil, which will hammer most foreign oil producers. But isn't that only true if those countries are mostly buying US goods? If russia mainly buys stuff from europe and/or asia, and the US dollar goes up, it's true that absent other factors, oil prices will drop. It's also true that other countries' currencies will also drop, so as long as you're not buying from the US, the two will cancel each other out.
- nicholas73 8y ago
  Oil dropped in the 80's because of the OPEC embargo leading to a surge in production outside OPEC. Then Saudi Arabia realized they could no longer support the market and so flooded the market instead to cripple the competition (they are the lowest cost producers). They tried the same playbook in 2014, but shale is too short cycle to be knocked out long term. Further they were able to secure help from Russia so they cut production afterwards.
- pfarnsworth 8y ago
  Oil was never at $100 in the 80s, I have no idea what you're talking about. It's undeniable that Reagan's spending on the Cold War caused the collapse of the USSR.
- dreamcompiler 8y ago
  Their invasion of Afghanistan was another big factor in bankrupting the USSR. Of course the US helped by paying Osama bin Laden to fight them and keep dragging the war out.
- igravious 8y ago
  Utter rubbish. I recently saw a Werner Herzog feature-length interview documentary called "Meeting Gorbachev". In it Gorbachev describes in his own words how and why the USSR dissolves. The USSR was always an unequal political union with Russia as its command centre. The other republics were always jostling either for a more equal union and frequently nationalist sentiment overrode pan-Slavic sentiment. If the USSR had managed its internal economy better and if they weren't cut off from the outside world it could have survived indefinitely. In the end Gorbachev made a series of moves (perestroika and glasnost: anybody who lived through this period knows these terms and what they mean in practice) that brought about the impending dissolution. Garbachev would have been the leader of an independent leader of a now independent Russia but he was politically outflanked. It is typical US arrogance to think that they have their hands always and every time directly on the levers that make and break nations and political entities. It is a prime example of the mentality of US exceptionalism. Many many factors interweave and interplay in every geopolitical landscape: internal politics, internal economics, internal resource allocation, external pressure, military strength, alliances, the list goes on. Yes, oil/dollar moves may have had some impact. How much of an impact, that would be difficult to say. But it was in no way as impactful as you make it out to be and in now way as directly instrumental. And besides, when you look at the history of Federal Reserve policy you can see that US economic reasons (recession, interest rates) prompted Volcker's actions.
maxxxxx 8y ago
"destabilize at least one or two of our political enemies " I am not sure that's desirable.
- village-idiot 8y ago
  When Saudi Arabia finally blows up, and it will blow up, it is going to be the most messy thing we’ve seen in a century.
  - deleted 8y ago
    [deleted]

Phlarp 8y ago

But Saudi Arabia is our political _ally_

curuinor 8y ago
More a frenemy, really.

adventured 8y ago

Reagan didn't spend the USSR into disintegration. The USSR collapsed as it did due to the dramatic oil price drop caused by Paul Vocker's strengthening of the dollar in the 1980s. Oil is priced in dollars, so if you considerably increase the value of the dollar, you'll sink the price of oil, which will hammer most foreign oil producers. The dollar index went from ~80 to ~160, from roughly 1980 to 1986, by far the greatest dollar move in modern history. Oil moved inversely to the dollar gains. The USSR economy was heavily dependent on the price of oil staying as high as it was in the 1970s (oil went from ~$20 to $100+, levels it had never remotely seen before). Having gotten used to the price of oil being so high throughout the 1970s, their already weak system was unable to absorb the outsized shock of oil plunging from $100+ to $30 during ~1980-1988. In the 1950s the USSR barely had an oil economy at all. From 1960 to 1980 (they passed the US in oil production around 1975-76), their oil output had climbed by about seven fold, making them very dependent on that resource. Had oil remained high, the USSR could have continued to spend as necessary to try to keep their system together. For an economy as dependent on oil as theirs was by 1980, removing that much revenue by tanking oil from $100 to $30, is a deadly wound on top of an already shaky foundation. While very plausibly their system would have failed regardless eventually, a high oil price would have likely bought them more time. The dollar is what broke the USSR. It's also what threw Russia into a sudden and dramatic recession after Crimea and curtailed their pursuit of further territorial annexation (at least for a while). The US stopped QE and signaled the beginning of rate hikes, which sent the dollar soaring and took took oil from $105+ in June 2014 to under $28 in about 18 months (the global economy was growing fine and oil had been in oversupply for years; it was the dollar move that popped the market). Oil tanked immediately after the Russian Crimea events in July-August 2014.... The dollar is by far the greatest weapon in the US arsenal. If you want to restrain Russia, push the dollar high.

gruez 8y ago
>Oil is priced in dollars, so if you considerably increase the value of the dollar, you'll sink the price of oil, which will hammer most foreign oil producers. But isn't that only true if those countries are mostly buying US goods? If russia mainly buys stuff from europe and/or asia, and the US dollar goes up, it's true that absent other factors, oil prices will drop. It's also true that other countries' currencies will also drop, so as long as you're not buying from the US, the two will cancel each other out.
nicholas73 8y ago
Oil dropped in the 80's because of the OPEC embargo leading to a surge in production outside OPEC. Then Saudi Arabia realized they could no longer support the market and so flooded the market instead to cripple the competition (they are the lowest cost producers). They tried the same playbook in 2014, but shale is too short cycle to be knocked out long term. Further they were able to secure help from Russia so they cut production afterwards.
pfarnsworth 8y ago
Oil was never at $100 in the 80s, I have no idea what you're talking about. It's undeniable that Reagan's spending on the Cold War caused the collapse of the USSR.
dreamcompiler 8y ago
Their invasion of Afghanistan was another big factor in bankrupting the USSR. Of course the US helped by paying Osama bin Laden to fight them and keep dragging the war out.
igravious 8y ago
Utter rubbish. I recently saw a Werner Herzog feature-length interview documentary called "Meeting Gorbachev". In it Gorbachev describes in his own words how and why the USSR dissolves. The USSR was always an unequal political union with Russia as its command centre. The other republics were always jostling either for a more equal union and frequently nationalist sentiment overrode pan-Slavic sentiment. If the USSR had managed its internal economy better and if they weren't cut off from the outside world it could have survived indefinitely. In the end Gorbachev made a series of moves (perestroika and glasnost: anybody who lived through this period knows these terms and what they mean in practice) that brought about the impending dissolution. Garbachev would have been the leader of an independent leader of a now independent Russia but he was politically outflanked. It is typical US arrogance to think that they have their hands always and every time directly on the levers that make and break nations and political entities. It is a prime example of the mentality of US exceptionalism. Many many factors interweave and interplay in every geopolitical landscape: internal politics, internal economics, internal resource allocation, external pressure, military strength, alliances, the list goes on. Yes, oil/dollar moves may have had some impact. How much of an impact, that would be difficult to say. But it was in no way as impactful as you make it out to be and in now way as directly instrumental. And besides, when you look at the history of Federal Reserve policy you can see that US economic reasons (recession, interest rates) prompted Volcker's actions.

maxxxxx 8y ago

"destabilize at least one or two of our political enemies " I am not sure that's desirable.

village-idiot 8y ago
When Saudi Arabia finally blows up, and it will blow up, it is going to be the most messy thing we’ve seen in a century.
- deleted 8y ago
  [deleted]