Military Review

The fall in oil prices is the work of the United States

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The fall in oil prices is the work of the United StatesTo combat inflation, the US Fed has only this mechanism.

The cost of oil has fallen a little. The official price of WTI (Light Sweet) oil on the New York Mercantile Exchange (NYMEX) futures exchange in New York dropped $ 16 per barrel to 2011 in May 2,28. The official price of Brent crude on the InterContinental Exchange Futures Europe e-Commodity Exchange (ICE Futures Europe) dropped $ 97,37 to $ 1,1 a barrel. Note that over the past week, volatility in oil futures trading has sharply increased, which theoretically can be seen as an attempt by market makers to push the price down, while objective factors (the growth of “hot” dollars in the markets) are pushing it up. We will not consider this version in detail now, since there are other options, but let's talk about objective factors.

I have already written many times that the key issue in today's economic life is the emission programs of the US Federal Reserve System. The aggregate demand in this country (and therefore in the world) is falling, but in the USA it is partially compensated by various kinds of state subsidies, which allows one to pretend that consumer demand does not fall (no one does any view about real estate demand).

Why is consumer demand so important? From the point of view of the economy, it is he who “launches” the economic mechanism, all economic actors adapt to it, determining their strategy in the medium and long term. That is why the leadership of the Fed is so respectful of him, who really wants the long-term trend to increase this demand.

Here, however, there is one subtlety. In order to determine the trend change, you need to quickly and accurately determine statistical information. But the US monetary authorities have complicated the methods of measuring inflation so much (and with one goal only to reduce it as much as possible) that today they can get a not quite adequate result. And because the potential “growth” can include a fairly significant chunk of the very inflation that was missed, and because too “thin” methods begin to give a fairly large margin of error when the economic situation changes. And it is changing - at least in part of the substantial drift of the consumer basket towards cheaper goods.

There are problems with the methods by which the US monetary authorities want to achieve an increase in consumer demand. However, I have already explained this many times, so I will not repeat my logic, I would only note that the main element of this growth is the continuation of emission programs. And here the problem begins, since no matter how official propaganda explains that the reasons for the rise in consumer prices have nothing to do with emissions, no one believes them. And this growth has already reached very large values: nominal - 1% in March and 0,6% in April, taking into account "seasonal distortions" - 0,5 and 0,4%, respectively, and if you remove the "volatile" prices for oil products and food, then 0,3% for both months (the so-called "nuclear" inflation). This means almost 4% per year, i.e., twice as high as the standard established by the Fed itself. At the same time, we note that the "volatility" of oil prices does not prevent them from growing regularly, and the cost of food is growing almost continuously.

With such high inflation, there is almost no chance that the new emission stimulation program will be “punched”. And what should the Fed leadership do? Inflation is absolutely necessary to reduce. And it has three main components. The first is oil and petroleum products. The second is food. The third is the inflation of the costs of manufacturing companies, which for a very long time assumed the costs of rising commodity prices, but cannot do this anymore.

With food, apparently, nothing can be done. The costs are the same: they have already been accumulated, and since the economic cycle is rather long, their rapid decrease is impossible, which means that they can affect the selling prices very soon. And the key moment is 22 June, when it is desirable to make a decision about the start of a new issuing program, since the old one ends at the end of June.

It remains the price of oil (and, accordingly, energy and transportation). These prices can be dropped quickly and, most importantly, they will almost instantly affect the entire production chain, and in the cost of most goods, they constitute a quite tangible part. And from this there is a very strong desire to reduce the price of oil to values ​​that allow us to provide the optimum solution for the Fed management at the end of June. Since the main market makers in the oil futures market are closely related to the Fed's management, they are likely to meet, even if it contradicts market trends. And it is possible that it is this process that we are now seeing.

Another thing is that the meaning of this action is quite controversial, because, firstly, the effect will be very, very short-term, and the model itself, which lies at the heart of the Fed's argument, is also extremely controversial. But here a completely different logic is already beginning to work - not economic, but bureaucratic, and it makes no sense to argue with it. And if this hypothesis is correct, then in the coming weeks we will have an increasingly volatile oil market, the trend of which will be down. Another thing is that the question of whether this process will end up with those levels that are acceptable to US money authorities (somewhere around $ 60-70 per barrel), or the "hot" money, again, will drive the price up while it is open. However, the more interesting to watch the process. Some will probably even want to make money on it. Successes ... although the risk will be beyond.
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