OIL – oil oil everywhere and nary a barrel to pare…glut

What happened to real supply and demand economics? It used to be the determinant of price, but subsidies, price fixing, and output fixing have changed that simplistic concept and created a completely false market. And we accept it – in fact we embrace it.

There is too much oil. Go figure. There is so much oil that a group of countries want to control global output so that the price will rise and economies that were/are dependent on oil can try and recoup the losses they have sustained. The price would be artificial – so the effect would be as well.  Right?

Subsidized farming. In the 1930’s the US government stepped into the farming industry to help farmers who may have been devastated by weather conditions out of their control. The aim was to protect the rural small farmer, but today that little act of kindness now costs taxpayers $20 billion annually. It got so out of hand that farmers were paid to NOT grow, were given water rations in drought struck California to NOT grow, and were rewarded for their NON – efforts and NON production. A lucrative business – doing nothing.

It reminds me of weather modification. Changing the natural course without knowing the consequences or the long term radicalization these actions will reap.  Artificially manipulating supple and demand  without considering the long term effects creates communism in a capitalist venue.

An economy bludgeoned by being too reliant on one commodity needs to realign its economy.  Hello?  When an individual puts all his money into one pocket and that pocket wears down and a hole develops as the material frays, do you put more money in the pocket, do you sew it up, or do you start putting the money in another pocket?

Seems like common sense, but we don’t operate on common sense, we operate on false and artificial logic.

Of course the people paying for the price fixing is always the consumer as the initial model becomes the agenda that is never repealed – as in farm subsidies, as in Obamacare. But isn’t ‘output fixing’ the same as ‘price fixing’ which is illegal?   One creates the other. Not to mention the fact that The People are not a part of this determination – as in voters. Our leaders have decided that we are just too stupid to get involved – as though we were all in elementary school while they are degreed scholars. Personally, I find that rather arrogant, and borderline dictatorial.

Instead, our wunderbar college graduates are deciding whether to eliminate gender bathrooms and deface property, and whiteout past presidents they deem racial, and hold protests for more safe places to cry – and other such obscenely ridiculous agendas. Perhaps they need to be educated on economies and economics – because soon – they will be our leaders. It is almost comical to imagine the next generation of leaders…if it wasn’t so scary.

I digress.

The Saudi economy is nearly 100% oil based accounting for 92%-95% of all revenues. Their biggest export partners include China, US, Japan, India and South Korea. Their economy is currently operating at a severe deficit and can not withstand this continuation. Their unemployment rate is high and their petroleum industry is nearly completely reliant on foreign workers because the few nationals that actually get a college degree aren’t qualified and feel working is beneath them…

Ultimately, the Saudi’s will do whatever the heck they want. They are the bully on the playground allowed to unilaterally bomb and destroy without consequence. Propping up the price of oil would only generate more revenue for them, and while they may be too short-sighted or daft to recognize this fact, allowing their economy to implode on itself given their lack of educated citizens, high unemployment (some figures estimate the number to be 30-50%), will only create a real market of supply and demand.

Realigning partnerships and realigning industries to match demand, would seem a better economic strategy. For example; with Europe being the target for terrorist attacks and with the massive influx of immigrants, where oh where can we find a place where tourism could prosper and business is open to investment….ummmm –

CHILE!

While Soros has busily bought up portions of Argentina and Brazil, he is ‘less invested’ in Chile.  Hotels are his investment of choice which would indicate 1)  tourism,  2) business conferences.

Oil?  While the tourism in Mecca is being sought for additional revenue, a mass exodus in European tourism could create new bubbles elsewhere.