The collapse in oil price has taken most people by surprise. Although some attribute it to Saudi Arabia’s openly declared war on shale oil, the truth is crude oil price began falling in June and OPEC’s announcements only began to plague the market several months later.

What I find interesting is every big gyration in oil price that we have seen in the past 30 years has been accompanied by a crisis, usually of a financial or economic nature. See chart below.

The puzzling thing is this most recent gyration hasn’t been accompanied by any big financial or economic crisis that is big enough to significantly affect the world.

At least not yet. I have a feeling that this coming crisis will happen in Russia.

David Fuller's view

Here is Bernard Tan’s Oil Report.

Russia is certainly in crisis but it is not alone.

Russia is the biggest worry but not just because it produces approximately 10m barrels of oil a day.  It has also been turned into a pariah state by a ruthless and insecure dictator, who controls a large military with enough nuclear weapons to destroy civilisation. 

Most other oil exporting nations are in some degree of crisis because their current oil revenue does not meet their liabilities.  They may be able to borrow for a while longer but then they will have to cut back on oil production because prices are unlikely to rally back to levels seen since September.  These oil producers are not prepared for cutbacks which will create unstable conditions in their countries.