The decline in energy prices has increasingly become important for consumers, investors, and policy makers. Here are nine essays I have written in recent weeks that analyze what is going on; integrating political and economic analysis, geopolitics and game theory. These series of essays also illustrate how my thinking has evolved through the analysis and subsequent developments.
1. Oil Supply This note from October 9th begins the series of recent essays. I argue against those who were arguing that the decline in oil prices was a function of the strong dollar. I instead focus on supply issues, and warn that a break of $73 could quickly see $64 a barrel. I saw that low level is key.
2. Saudi's Master Stroke On October 18, more than a month before the OPEC meeting, I argue that Saudi Arabia's decision not to act as a swing producer and cut production was a strategically savvy move on its part. It dealt a blow to all of its adversaries, including Russia, Iran and the US (shale producers).
3. Saudi's Cut Prices After increasing discounts to Asia and the US in October, Saudi Arabia reduced the discounts to Asia in November. Two points seems to stick out in my analysis. The decline in oil prices was more a function of supply than demand. The Saudis have their own reasons to pursuing market share and were not attempting to do the US some political favor.
4. US Oil Exports I continue to develop these themes, and explore the non-homogeneous characteristic of the oil market. Gasoline appears to be more linked to Brent than WTI. I discuss the possibility that a Republican Congress may move forward on relaxing rule that prevent (or dramatically curb) US crude exports.
5. Speculative Positioning Some argued that oil prices were being driven lower by speculators. I took a look at the speculative positioning in the futures market. I was surprised to see that speculators on a net basis were still very long light sweet oil futures. In this piece, I also begin focusing more on the positive economic impact of the drop in oil prices.
