Global Economy Shrugs At Massive OPEC, Fed Cuts

Reuters:

The global economic slowdown trumped even the biggest OPEC output cut ever on Wednesday as the measure aimed at boosting oil prices instead deepened the gloom over slumping world demand, sparking a sharp drop to a four-year low.

Euphoria the day before from the U.S. Federal Reserve's dramatic rate cut to near zero wore off even as several other countries from Europe to Asia followed suit by cutting rates.

Read the whole story: Reuters

Comments

[NeoStar9]

Here's the thing. Our energy supply is a national issue. We should be able to supply ourselves. What if tomorrow we wake up the the rest of the world has declared war on us? It might be improbable but not impossible. Because we do not have a domestic energy play or supply we would be pretty much doomed from the get go. The US needs to find a way to supply itself that isn't oil based and fast. Money has to be pushed to the side for the time being I feel in this regard since the issue is far to important.

[WorkingClass]

We are approaching universal bankruptcy. Its like Noah's flood only its raining monopoly money. Watch the birds. Whatever they eat is safe for humans. Its also safe to eat birds.

[EinChicago]

The cut from 1% to 0.25 percent is pretty unprecedented and will take time to filter through teh markest; either for good or bad. The OPEC cut of course is being shrugged off. For one thing, nobody believes OPEC will stick to this. Venezueala and Iran haven''t even implemented the cuts that took place back in October let alone these new cuts. The way in which OPEC tends to operate is to announce cuts, and then every member except Kuwait and KSA continues pumping teh same amount hoping Kuwait and KSA will take the hit for them.

Plus, the cuts actually undermine price support, they don't help prop it up. Nobody was that concerned with supply even during the bubble, the market psychology was focused on capacity; i.e., that "supply" couldn't keep up with demand growth because the oil producing nations did not have the capacity to produce more. After these cuts, the oil producing nations now have at the very least almost 25% spare capacity just to ramp back up to September 2008 levels.

Yes, the dumb may bleat about "it's a conspiracy to hide diminishing capacity, bleat bleat" but they do so with no evidence or support other than paranoia. So the market looks at the facts it knows. And the facts are that as of a few month sago, OPEC was producing 29 million bpd, now it aims for 24 bpd, so by its own figures, it has at least 25-30% spare capacity.

[KillTheMessenger]

As soon as demand outstrips supply you will see serious price increases, excess capacity or not. KSA was quite successful in the 1970s to raise the price of oil. They just haven't been serious about it since then. If they are now, they will drive the price up, no doubt about it.

KSA's spare capacity is a white elephant, anyway. Ghawar is dying and they have nothing to replace it with over the long term. Moreover, their own consumption is growing extremely fast. Outside of OPEC almost every other producer has peaked, with Mexico being closest to out heart. US oil production will not increase because "drill, baby, drill" has been canceled due to low oil prices. Ask you Republican Senators or Congressmen about what happened and listen to the deafening silence.

:-)

[EinChicago]

yeah. because you have credibility ofn this issue. Mr "Oil wil never go below $100 again"

How's your used Toyota lot doing?

[rkimball]

russia is working close with opec & venezuela & iran. they want a two tier pricing sytem. western nations will pay $600 a barrel for oil & third world nations $150 a barrel. russia has been warning the west over two years ago that $600 oil will be comming.

the politicians still sit on their behinds. still no energy policy despite russia giving us time to prepare for one. pelosi may even block off shore drilling once bush is gone.

[netzwerg]

American big oil is also working closely with OPEC, Russia, Venezuela and Iran.
Low prices are bad for business.

[NeoStar9]

Off shore drilling is pointless no matter what. The US simply doesn't have the supply needed to put dent in the amount of oil we as a nation use everyday. I don't see why people don't get that. When you 25% (I believe that's the number) of something and can only supply yourself with 3% of that thing you still need to get the other 22% from someplace else. So you can drill all your want it doesn't matter. It isn't going to affect the price. The only real solution is to get off oil completely. 100% free of it might not be possible any time soon but dropping it to the single digits is possible I feel.

You have to bite the bullet and accept no one is going to make any money in the transition to something else. However it's a long term investment and you have to pay the price now or the price later would be insane.

[Vinca]

I HEARD A MAN CALL C-SPAN , AND SAY< ALL HE WANTED IS TO GO TO WORK EVERY< GET A PAYDAY ON FRIDAY, AND GO AND BUY SOMETHING

[KillTheMessenger]

Buy something? Unless you have a couple of years worth of savings, I say put the money on your bank account and keep it there.

[ForObamaInDallas]

The point is, if that man, or people in general, have a job with money coming in on a regular basis, they will be able to buy something and continue to pump money back in to the economy.

Read beyond your own self.

[KillTheMessenger]

So why would I care about the price of oil, again? I spend between $10 and $20 per week on gasoline. That's less than what I make in half an hour. And what exactly does 0% interest rate mean to me? I still won't get money from the bank for less than 3.5-4% or so.

[djthedj]

Do you ever buy anything that was hauled in a truck or a train or has parts that were? Do you fly or use electricity? Do you eat food that was grown on a farm and trucked to market? Do you use anything made with synthetic parts...like maybe your computer? Right, oil prices will have no effect on you.