Saturday, September 26, 2015


Supposedly the low oil prices were brought on by a deal between the US and Saudi Arabia designed to bankrupt the Soviet Union, unintended  consequences was the destruction of the US fracking operations. The fracker's have a very high cost of production approaching 70 to 80 dollars a barrel so at 40+ they are going broke very fast.  Unable to gain financing to keep on going they have to fold.

The original story of a deal with Saudi smells a little as would the US prompt the Saudi knowing that prices that low would destroy US fracking.  The thought crossing my mind is perhaps they knew that and actually wanted to destroy them to limit the negative effects of fracking.

If the game was to destroy Russian oil operation they blew it big time as Russia's cost of production is only $4/barrel.  Although it crimps their budget they are just pumping more to make up the difference.

Now the news if filtering out that Saudi and are making a compact to control the oil markets even suggesting that Russia might join OPEC.

What ever the reason it happened the end result was hugely mistaken.

Applying sanctions did not achieve the desired effect they thought it would bring.  Russian response was to apply  sanctions of their own causing havoc in the EU.  Agricultural products from the EU were cut off and guess what the Russian response was.  They began funding small farmers backed by large chunks of money.  Along with banning GMO crops the program has caused 100's of new small farming operations mostly organic farms.

So with one desired effect of the sanctions not happening one would have to count this another foreign policy mistake one of many during the Obama administration.

1 comment:

  1. What a huge backfire.
    Let's show them and fund 1000's of organic farms in the U.S. : ) Wouldn't it be a wonderful shift. ~Heidi