To be clear, this is another piece of speculation on the dramatic oil game that Saudi Arabia is playing. Given that their crashing of oil prices will have major and unpredictable effects in various countries (see this, for example) throughout the world, it is imperative that we try to understand this phenomenon. I think that this could very well be a world changing event.
I’d like to address the outright crash of the oil market this past week. The hope was the Saudis would cut back on production to stabilize prices somewhere in the $80+ range. This was not to be as Saudi Arabia announced no cutback whatsoever …oil then fell over 10% in one day on Friday and actually traded to a $65 handle. First and most importantly, oil is THE biggest and most widely used commodity on the planet. For a market of this importance to outright crash or rise over 10% in one day, unintended consequences not seen or anticipated can be expected at some point.
