OPEC: Another public hoax

OPEC meets on December 10 in Vienna. World oil output to be curtailed.

My career was as a CPA serving oil and gas clients, among other things. The industry has had a shakeout these last couple of years, and many individual investors have sold their holdings, fulfilling the market dictum for all unsophisticated non-insiders:

Buy high, sell low.

Standard advice for people holding oil and gas interests is that recovery is going to be slow, and that due to a glut of supply prices will remain low for the foreseeable future. Some are saying no recovery is in sight until at least 2020.

My advice would be quite different.

  • There is no connection between supplies and prices. The current “glut” is only a visible glut, as we have always had more oil and gas than we need for the foreseeable future.
  • So don’t worry when you read that we have a hundred year supply of natural gas, or that new discoveries have flooded the oil market. So what? Nothing has changed.
  • We recently read that OPEC met and will be curtailing supplies to the world market in the coming months. That is a signal.
  • OPEC is a false front, a paper tiger, and always has been. Its sole purpose is to deflect attention from the real controllers oil the world energy markets, the international oil cartel. This concludes Exxon/Mobil, Conoco/Phillips, British Petroleum, Royal Dutch Shell, Saudi Aramco … they are all interconnected and act as one enterprise. These companies abide by the maxim of all large corporations:

    Customers are our enemy, competitors are our friends.

  • These companies are the real power behind “OPEC,” their sock puppet. When we read that OPEC met and made decisions, we can easily translate: The oil cartel has decided to end the current supply glut and to raise prices.

Here is how I read the regime of low prices these past couple of years:  It is “SOP”, or Standard Operating Procedure, so to speak. If this were 1920 instead of 2016, we would have seen the same thing. Back then John D. Rockefeller and Standard Oil routinely crashed the oil market to drive competitors out of business. While others were busy selling low, Rockefeller was busy gobbling them up. The supposed breakup of Standard Oil was, like OPEC, just another bit of theater. All the world is a stage.

That’s all that is going on now, another shakeout. I thought for quite a while that the glut was aimed at punishing Venezuela and Russia, two large oil producing countries, and that may possibly be true regarding Russia, as it depends to a large degree on oil for foreign currency. But I have a hard time believing that Venezuela is really a rogue country. More like Cuba, Venezuela is probably another controlled state that is allowed to appear independent for sake of its own people, who tend to be hard to control.

bakken

Bakken Oil Production Map

Another objective of the glut, clearly, is that area in the northern US and Saskatchewan known as the “Bakken” formation, shown in orange on this map. There are said to be between 3-4 billion barrels of recoverable oil there, and the area has been booming, with hundreds of companies in play. But it is expensive oil to produce, and could not be sustained with oil prices in the $40 range. Consequently there has been a huge shakeout, with those hundreds of smaller companies going bust. Who do you suppose is there to clean up?

So I expect in the coming year prices will recover, we will return to $3-4.00 gasoline, and all talk of a glut will end.

The world is flooded with diamonds, enough that we could all wear big shiny rocks. But monopoly supply and pricing keeps it all under control. Oil and gas are no different. Supply and demand is for economics classes in colleges and high school, but does not apply to the real world.

About Mark Tokarski

Just a man who likes to read, argue, and occasionally be surprised.
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10 Responses to OPEC: Another public hoax

  1. 01stevekelly says:

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  2. mbutterfield says:

    Interesting coincidence that you would post this now. I just finished reading that the cartel has cut off all supplies to Mexico without warning. Headline: America suddenly stopped all fuel supplies to Mexico, and it has created a crisis, at Jimstone.is. He says it must be because a big war is brewing, but your explanation is more plausible, namely a supply squeeze/shakeout to generate higher prices. http://82.221.129.208.

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  3. Vexman says:

    Thrilling read, Mark. Economics, that’s a real joke, isn’t it? I agree with almost everything you’ve said and noticed, with just one dilemma in my thought. As you’ve mentioned Russia and how it seems as the glut was installed to punish them as well as Venezuelans, I had similar thoughts about it. But then, as I developed my thought, weren’t the Russians “conquered” long ago as early as in 1917 by the banking/ruling families? If you consider it as a fact, there is no one to be punished actually, it is all (I apologize for rudeness following) a mind-fuck game to have another divide option available. And it is a very strong position to maintain, this alleged punishment of Russia’s independency to produce large Oil income with low oil prices is just as much of bollocks as it is urgently needed to maintain tensions towards Russians. It’s as much a threat to anybody around as NATO’s war games in Poland, just another play performed by the scriptwriters. For sure, one reason for the last glut is to take over Bakken treasure from busted companies there, but globally ? I’d suggest something a bit outrageous – as much as the 2008 economic crisis was planned and deliberately triggered , I believe they underestimated the consequences and time needed to get to the recovery of world’s economy and trade to its original 2008-and-before values, figuring this out not before 2014 (2015). If you look at the oil prices from 2008 to 2016 (https://www.statista.com/statistics/262858/change-in-opec-crude-oil-prices-since-1960/ ), you can notice the correction in the graph. As well, you can notice that 2000 dotCom crisis was not handled in any similar way, with low oil prices not being a part of that era’s recovery scenario.

    If I may add to your predictions, the oil prices will slightly rise but certainly not to 2008 values, it’s yet to early in the morning for such an obvious steal .

    I remembered the story of De Beers from high school English class (imagine that), the family with monopoly over diamond production worldwide. I had to go and re-read, but this time I really laughed out loud. With everything we know now, it’s just hilarious : https://en.wikipedia.org/wiki/De_Beers . (Notice the Rhodes family, with Cecil as the founder in 1888).

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    • Yeah, I tend to agree and disagree about Russia, as it could be like the Cubans and Venezuelans, that the government is in the pocket of TPTB, but that the population is still unruly and able to mount resistance. But I don’t know. It could be just make believe because we need enemies.

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  4. John in Texas says:

    Yesterday, here in Galveston, Texas I just saw regular unleaded go above $2…$2.02 to be exact. It has been way under $2 here for a long time. Funny you bringing this up because my Conspiracy/Truth journey started with the now long gone LATOC website (Life After The Oil Crash). Those guys had cornered the market on Doom and I remember reading stuff that just scared the shit out of me at the time. Of course, they were operating under the premise that oil came from dead T Rex’s and we were going to run out. Now that I know dinosaurs were also a hoax and oil is abiotic I sleep better at night.

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  5. calgacus says:

    Mark, I want to know if you believe that OPEC will end the petrodollar. I believe this scenario is true and it has to do with a possible Saudi Arabia and 9/11 connections drama. Of course they say that Iran accepts euros for their oil already, but Iran is another fake drama. Nonetheless a crisis in Saudi Arabia can be used to increase the oil price. The timeline can be set to achieve maximum profits.
    Another relevant thing is that in 2016 the 40 year US ban to export oil has ended. This was probably done in preparation to this Saudi drama in my opinion (and other world transitions).

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    • I watch the drama unfold just like you, not knowing the future. Allowing 9/11 families to sue Saudi Arabia is high comedy, and they all know it, nothing but theater meant to insult them. Snubbing Obama too is similar, as they know he is a sock puppet.

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      • John in Texas says:

        Reports circulating on the interwebs right now about major gasoline shortage in northern Mexico which began yesterday. I can’t find anything about it on mainstream media but reports appearing on fringe sites.

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