In one of the last messages posted at the 2016 Presidential Election thread, we looked at the possibility of higher inflation in the US for 2016.
Now, an even more challenging issue: the price of oil.
Most analysts have declared that the low price of oil is here to stay, even predicting that it will reach some $20/barrel.
They base this kind of reasoning on these arguments:
-Iran will hit the market with a new supply of oil
-Economic slow-down will reduce demand
-Low prices are needed to damage the economies of Russia and Iran
-Higher rates = dollar strength = lower oil prices
However, the oil market has seen high prices irrespective of the dollar’s strength.
Also, there is the geo-political factor which is very important.
If there is panic and risk aversion, the price of oil will rise very fast again.
Let us look at a 20 year chart for oil prices:
(the blue vertical lines that occur every 83 months – about every 7 years; the last two important lows were late 2001 and late 2008)
And there are unexpected developments: Russia to launch its own crude benchmark in 2016.
"Our goal is to take a place among the major indicators. Currently, the pricing for most of our oil exports which as well determines our budget, is in the hands of our partners.”
SPIMEX advisor Segey Kvartalnov
The West's biggest long-range fear is that Russia and China will increasingly back their currencies with gold rather than U.S. dollars, which would make them independent currencies rather than the dollar satellites they are at present.