Mark Collins – OPEC: Venezuela–and others–Screwed by The Kingdom (with some fracking help)

The hydrocarbon future is not pretty grim for Canada alone:

Saudis, shale and the high costs of cheap oil

A little more than a year ago, Saudi Arabia, the effective leader of OPEC, the 13-country cartel that pumps about a third of the world’s oil, decided that enough was enough.

The global market was drowning in oil, thanks to the American shale-oil miracle, and the Saudis were losing market share. They went on the offensive.

Production cuts by the Organization of Petroleum Exporting Countries (OPEC) to keep the price up would be ruled out; the market would find its own level…

The Saudis’ damn-the-torpedoes strategy has triggered economic hell in Venezuela, Libya, Algeria and Nigeria, the OPEC countries whose economies live and die on energy exports.

The International Monetary Fund predicts that the Venezuelan economy will shrink by 10 per cent this year and an additional 6 per cent in 2016 – and the Greeks thought they had it bad. The bolivar – the Venezuelan currency – has become wallpaper. Inflation is running at several hundred per cent a year and could rise to 1,000 per cent or more. Yet Venezuela’s pleas for help are being ignored by the Saudis and their open-the-spigots allies within OPEC.

So much for OPEC’s all-for-one-and-one-for-all founding philosophy. This strife is internecine and could turn Venezuela into at best a bailout candidate, at worst a failed state, as if the world needs another.

…only the most courageous, or most ill-informed, market guru would predict a quick bounce back. That’s because U.S. shale-oil production is proving remarkably resilient even though the oil price has fallen by more than half since mid-2014. In September, U.S. oil production was 9.4 million barrels a day, down only 260,000 barrels since its April peak and still more than one million barrels higher than its early-2014 level…

And now there’s Venezuela’s parliamentary election December 6:

Venezuela’s Socialist Party Risks Unprecedented Defeat

Venezuela’s Socialists at risk in tense legislative vote

Meanwhile someone’s being seizing opportunities:

China Buys Venezuela, Part 2


7 thoughts on “Mark Collins – OPEC: Venezuela–and others–Screwed by The Kingdom (with some fracking help)”

  1. The one part of Canadas economy that is still doing OKish is new home construction. I don’t have th link right now but a week or two ago CMHC predicted that if oil dropped to $35/bl and stayed there for 5 years there would be a 25% correction in Canadian home prices. With the economy inflated by “home owner lines of credit” based on artificial values in homes I would regard that as the largest threat to Canada currently.

    I worry that if things should move in that direction procurement for the forces …, there aren’t even words.

    Which brings us to another problem. Ottawa has done a fabulous job in selling Canadians on the idea that you can have tax cuts every election forever. But that miracle was based on government borrowing getting cheaper and cheaper every year as zero percent interest rates became the norm. As interest rates begin to rise that trend is going to be reversed which will have a very negative effect on government finances. That is going to become a major hurtle for procurement as well.

    There seems to be a perfect storm coming and it looks like the best thing to ever happen to the CPC was loosing the last election.

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