We are living in interesting times. We are facing a pandemic, an economic crisis, a stock market brouhaha, and an oil bust.
Today, we focus on the oil bust. In case you haven’t been following things, the Russians and the Saudis got into a pissing contest as to the level of oil output by the OPEC + bunch.
OPEC + is the Organization of Petroleum Exporting Countries which has been around since 1960 and is in the oil pricing manipulation business. The + means Russia is in the talks.
The result of the Saudi Arabia v Russia pissing contest — the Russians would not agree to reduce production levels — was a collapse in global oil prices with some incredibly low prices — 1950s prices — which then translated into lower gasoline prices.
This, of course, decimated the oil industry, something that from an American economic perspective is not a welcome development in the middle of a pandemic, an economic crisis, and a stock market brouhaha.
So, what happpens, Big Red Car?
What happens, dear readers, is that President Donald J Trump spoke to both the Saudis (in the person of the murderous MBS — Mohammed bin Salman, the de facto ruler of Saudi Arabia) and the Russians (Vladimir Putin, who took his shirt off for the call).
President Trump then trumpets the call saying words to the effect that his pals the Saudis and the Russians are going to reduce production to the tune of 10,000,000 barrels a day.
OK, bottom line it, Big Red Car
Well, herein lies the problem, dear readers.
The Saudis produce 12,000,000 barrels a day.
The Russians produce 11,000,000 barrels a day.
There is no way on God’s green earth that they are going to cut 10,000,000 barrels a day. Not. Going. To. Happen.
However, the oil markets — who apparently cannot do simple math — then drive the price of oil up approximately 25% in celebration of the news. [OK, dead cat bounce, maybe. Still 25%.]
This is how Presidents move markets even when they say stuff that is totally wrong.
Does anybody do any research anymore?