One of my patients runs a travel section for one of the oil industry majors located in the San Francisco Bay Area. She was complaining about her vision while traveling on the plane. She contemplated that since she doesn't fly business anymore, maybe it's not that big of deal. Her company was cutting back on expenses.
I found myself wanting to articulate 'the real' (paper-trading) cause for the oil price drop, but then I stopped. I realized in that moment how the view that futures trading and participant positioning as the central tenets of price discovery is such an abstract concept for most people.
Instead, most of us fall victim to the rationalizations after the fact. The ones that fit a narrative or preferred world view, until we are completely disconnected from anything useful.
She quickly noted that the price decline was 'all about' Saudi Arabia. She may be right.
But no matter the primary reason, in the beginning...
It's all very much a paper derivative wagging the dog of price discovery. This occurs in every market to a degreee. Onlt silver more so.
Who got the orders to get the oil price decline moving late last summer? That's anyone’s guess, and a thousand rationalizations follow.
But whatever the reason for the orders, they started in the pits, not in anything close to a organic market. Nothing trades on fundamentals anymore. And everything trades to the the advantage of the elite – a financial or political concentration of power that cannot be held accountable to the letter or even the flavor of the law.
Until the whole unsustainable house of cards unravels, then implodes. We can see manifestations of this today.
Take this the story of the unions.
10% of US Refining Capacity Offline After US Oil Workers Stage Largest National Strike Since 1980
"It's not exactly the same as if Wall Street were to unionize and demand higher wages, but when U.S. energy workers - supposedly the best paid profession away from those who BTFD or BTFATH for a living - go on strike. It is time to pay attention, which is precisely what happened yesterday afternoon, when U.S. union leaders launched a large-scale strike at nine refineries after failing to agree on a new national contract with major oil companies. It marks the first nationwide walkout since 1980 and impacts plants that, together, account for more than 10% of US refining capacity. The United Steelworkers Union (USW) began the strike on Sunday, after their current contract expired and no deal was reached despite five proposals."
It's a futile effort to strike when the economy is under the graviation force of deflationary cycle. The unions are maneuvering now that the oil companies are in retreat mode.
At first, it seems rather counter-intuitive that the unions would demand wage increases as the industry is falling, but it may simply be a natural posturing.
The unions - and especially those which are more or less strategic or outright government sponsored - are powerful enough to maneuver themselves into the most advantageous position as the currency begins to fail. This collective advantage works directly counter to the more isolated professional class.
In the midst of a hyperinflation, which is in many ways the flip-side to the deflationary spiral in a Keynesian monetary system, these groups can demand higher and higher wages paid in an ever declining currency. This actually happened in Weimer Germany, as Adam Ferguson outlined in his book, "When Money Dies".
Large enough unions can paralyze the nation if they don't get paid. Of course, all the while, leaders get paid in stronger overseas currencies, or simply gold and silver (backed) money.