Saudi Arabia On March 11 Send The Price Of Oil Into Unprecedented Territory?

The Economic Collapse ^ | 03/09/2011 | Michael Snyder

[SeekAndFind]

The price of oil is shaping up to be the number one economic story of 2011, and right now the eyes of the investing world are closely watching the developing situation in Saudi Arabia. All of the other recent Middle East revolutions have been organized on the Internet, and now all over Facebook and Twitter there are calls for a "Day of Rage" in Saudi Arabia on March 11. The Saudi monarchy is attempting to head off any protests by promising to give $37 billion in "benefits" to the people and by publicly proclaiming that all political demonstrations are specifically banned. In addition, the Saudi government is stationing thousands of security forces at various potential "hot spots" around the country. So far similar measures have not done much to quell unrest in other nations in the Middle East, but Saudi Arabia will be a true test of the revolutionary fervor that is sweeping the region. The Saudis have a long history of brutally repressing their own people. They simply do not mess around. So a revolution in Saudi Arabia will not be nearly as "easy" as it was in Tunisia, Egypt or Libya. However, if a revolution does sweep across Saudi Arabia, it is going to send the price of oil into unprecedented territory. Saudi Arabia is the number one exporter of oil in the world, and if their oil fields get shut down even for a little while it is going to have a dramatic effect on the global economy. With the world already on the verge of a major sovereign debt crisis, the last thing it needs is for the price of oil to start soaring into the stratosphere.

Right now the investing world is not sure what to think about all of this, and financial markets do not like uncertainty. One piece of really bad news could send markets all over the globe crashing down.

Speculation in oil futures is absolutely rampant. A recent report on CNN noted the following....

The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it.

In particular, the number of investors that are betting that a revolution in Saudi Arabia is going to send the price of oil up to $200 a barrel has exploded in recent days.

$200 a barrel?

Are people actually betting that is going to happen?

The all-time record is only $147 a barrel. Just a few months ago it was absolutely unthinkable to most economists that we could potentially see $200 oil in 2011.

But it would be a mistake to assume that a full-blown revolution is guaranteed to break out in Saudi Arabia. Remember, this is a nation that has a very, very long history of denying even the most basic freedoms to the people.

For example, in Saudi Arabia the practice of any religion other than Islam is strictly forbidden. By law, citizens of Saudi Arabia are not permitted to change religion. Even foreign visitors are forbidden to openly practice any other religion. It is a whole different world. You cannot go to the store and buy a Bible in Saudi Arabia. In fact, if you try to pass out Bibles in Saudi Arabia you will be thrown into prison.

Beheadings and other brutal public executions still happen in Saudi Arabia to this day.

So if you plan of being a revolutionary in Saudi Arabia you had better put your big boy pants on, because the Saudis play hardball.

Much of the rest of the globe is desperately hoping that a revolution does not happen in Saudi Arabia because the global economic situation is precarious at best.

In Europe, if the price of oil causes a significant economic slowdown right now it could have global implications. Moody’s Investors Service just slashed Greece’s debt rating three levels all the way down to B1. But Greece is far from alone. Several European governments are finding it much more expensive to finance their debts these days. We are right on the edge of a major European sovereign debt crisis and the chaos in the Middle East could potentially be just the thing to spark a panic.

The United States could feel a rise in the price of oil even more than Europe because the U.S. economy is so spread out and it is so dependent on products from overseas.

Did you know that in 1960 only 8 percent of the things Americans bought were made overseas but that today 60 percent of the things Americans buy are made overseas?

It's true.

So what would happen if the cost of transporting all of those products suddenly doubled? All of the products we buy must be transported somehow, and a rise in transportation costs will be passed on to U.S. consumers.

But the truth is that the pain is already here. Already, millions of American families are starting to feel some very real financial pain from the chaos in the Middle East.

From February 18th to March 4th, the average price of gasoline in the United States rose 33 cents. That was the biggest two week increase ever recorded.

Ouch.

The rise in the price of oil has some broader economic implications as well.

The more the price of oil goes up the bigger our trade deficit is going become. As the trade deficit gets bigger, that means that more money is going out of the country and less money is going to support American businesses and American workers. When American workers lose jobs, that means that they aren't producing wealth anymore and they aren't paying taxes anymore. Instead, they become a drain on the system as they start receiving government handouts.

When millions of Americans go from being productive, taxpaying workers to unemployed welfare cases it causes our federal budget deficit to become even larger.

Most Americans do not understand how connected our trade deficit and our federal budget deficit really are. One feeds right into the other.

Unfortunately, the Federal Reserve seems to think that the solution to any economic problem these days is to print more money.

According to Atlanta Fed President Dennis Lockhart, if the price of oil goes up high enough, it could force the Federal Reserve to do even more quantitative easing.

Really?

One of the reasons why the price of oil and other commodities has been going up over the last six months is because of all of this reckless money printing.

Now Lockhart is saying that because of the oil price increases they may have to do more money printing?

How bizarre is that?

Unfortunately, several other top Fed officials have dropped hints about a possible "QE3" lately. It just seems like the insanity never stops.

Let us hope that the Fed does not go there because the U.S. dollar is falling apart fast enough already.

In any event, the rest of 2011 is certainly going to be very interesting to watch.

Even if a revolution does not happen in Saudi Arabia, the price of oil will most likely continue to slowly move higher just as it has been doing for months.

But if a full-blown revolution does happen in Saudi Arabia, it could literally change the global economy almost overnight. The entire world financial system would be thrown into a state of chaos.

Oil is the lifeblood of the world economy. Without a continuous supply of very inexpensive oil, life as we know it would dramatically change. Most of us just assumed that we would always live in a world where we would always have an endless supply of very cheap oil.

Well, the times they are a changing.

You had better buckle up because it is going to be a bumpy ride.

[Bigtigermike]

Yes it will......probably closer to the $200 mark.....many people are betting on this to happening

[junta]

I’ll promise not to “rage” if the king sends me enough money.

[Frantzie]

Take em out - take out the Saudi royals aka House of Saud.

Let oil get to $200 a barrell. The USA has 4 times the saudis reserves in oil. Maybe the american pubic will turn off Obama Tv and wake up. I am not holding my breath.

[OB1kNOb]

Thanks for the reminder to top off my gastank tonight on the way home. I’m betting that gas prices will jump at least another 10 cents a gallon overnight.

[Eric in the Ozarks]

If “Day of Rage” fizzles, crude will drop past $95. If there is a lot of trouble, count on $125 in a week.

[SeekAndFind]

RE: Yes it will......probably closer to the $200 mark.....many people are betting on this to happening

---

WEll, if this is so, better buy the Crude Oil ETF now. No sense in becoming a victim when you can make money out of this. I’m logging on to Scottrade now...

[2 Kool 2 Be 4-Gotten]

For example, in Saudi Arabia the practice of any religion other than Islam is strictly forbidden. By law, citizens of Saudi Arabia are not permitted to change religion. Even foreign visitors are forbidden to openly practice any other religion. It is a whole different world. You cannot go to the store and buy a Bible in Saudi Arabia. In fact, if you try to pass out Bibles in Saudi Arabia you will be thrown into prison.

Beheadings and other brutal public executions still happen in Saudi Arabia to this day.

So if you plan of being a revolutionary in Saudi Arabia you had better put your big boy pants on, because the Saudis play hardball.

---

And big girl panties too - especially big girl panties.

[Frantzie]

I say ****** bring it on. Our kids are over there getting killed mainly to keep the Shia and Sunni from killing each other.

We have the energy here and offshore. Sadly the house of saud controls the w**te hut. Bring it on.

The best way to deal with Islam is let the Sunni and Shia fight each other to the death and get out of the way. They will keep shipping oil. F em.

[Eric in the Ozarks]

It's a world market. A blip in Saudi begets a ping in Cushing.

[liberalh8ter]

Actually, if we play our cards right, we can start a price war on that oil. Whomever lowers the price enough sells more oil and in turn, gets to buy arms with which to kill their opponent. Win/win for us.

[OB1kNOb]

If “Day of Rage” fizzles,

I'm hoping it turns out to be just a "Day of Frumpiness". ;-)

[kcvl]

Attack on Iraq pipeline halt oil exports...

A government spokesman says a bomb has hit Iraq’s largest oil pipeline, halting exports to Turkey in an insurgent strike that could lead to millions of dollars in losses.

Oil Ministry spokesman Asim Jihad said gunmen planted the bomb on the Beiji pipeline Wednesday evening near the town of Shurqat, 155 miles (250 kilometers) northwest of Baghdad.

Jihad said the blast stopped the oil from being pumped, and the pipeline would be shut down for at least three days for repairs.

He said the pipeline generally pumps about 400,000 barrels of oil each day.

http://www.cnbc.com/id/41991561

[Aleya2Fairlie]

Another psuedo Facebook and Google powered revolution? Has anyone kept appraised of what wonders that has worked in Egypt? Chaos presently reigns there and the Military is going to have to practice some of that despicable “violence” that has been so abhorred by American pundits before any kind of order will be restored there.

I wonder how long it will be before someone realizes that an internet revolution is worth about as much as the air it is transmitted across. In Libya, a revolution was begun by worldwide web support. However, the actual(as opposed to virtual) warriors against the Dictator are now screaming for someone(which is always America) to destroy Quadafi’s airforce and to enforce a no-fly zone, since none of the “Revolutionaries” has even the rudimentary knowledge of how to fire the (two?) anti-aircraft guns they have managed to get hold of.

How many so-called “fights for freedom from oppression” does anyone think the United States can participate in or finance?

I’m waiting to see how long it takes for reality to set in.
I’m waiting to see how long it takes those poor people who actually have to face down enemy forces to realize that armchair, Facebook and Google warriors don’t share the danger and risk of death along with them and have no skin in the game other than the ability to watch them kill themselves. The Facebook crowd is kind of like Romans watching carnage in the arena; its entertainment.

Hows about holding up on the “revolutions” until a clear alternative has been thought out. There aren’t enough concessions, deals, perks or individual rights that will ever satisfy any mob of anarchists with no clear objective, and certainly no bloodless way to restore order once it’s trampled by a mob.

[kcvl]

Attack on Iraq pipeline halt oil exports...

A government spokesman says a bomb has hit Iraq’s largest oil pipeline, halting exports to Turkey in an insurgent strike that could lead to millions of dollars in losses.

Oil Ministry spokesman Asim Jihad said gunmen planted the bomb on the Beiji pipeline Wednesday evening near the town of Shurqat, 155 miles (250 kilometers) northwest of Baghdad.

Jihad said the blast stopped the oil from being pumped, and the pipeline would be shut down for at least three days for repairs.

He said the pipeline generally pumps about 400,000 barrels of oil each day.

http://www.cnbc.com/id/41991561

[kcvl]

Attack on Iraq pipeline halt oil exports...

A government spokesman says a bomb has hit Iraq’s largest oil pipeline, halting exports to Turkey in an insurgent strike that could lead to millions of dollars in losses.

Oil Ministry spokesman Asim Jihad said gunmen planted the bomb on the Beiji pipeline Wednesday evening near the town of Shurqat, 155 miles (250 kilometers) northwest of Baghdad.

Jihad said the blast stopped the oil from being pumped, and the pipeline would be shut down for at least three days for repairs.

He said the pipeline generally pumps about 400,000 barrels of oil each day.

http://www.cnbc.com/id/41991561

[Levante]

“...in Saudi Arabia the practice of any religion other than Islam is strictly forbidden. By law, citizens of Saudi Arabia are not permitted to change religion. Even foreign visitors are forbidden to openly practice any other religion. It is a whole different world. You cannot go to the store and buy a Bible in Saudi Arabia. In fact, if you try to pass out Bibles in Saudi Arabia you will be thrown into prison.”

And these are the pieces of sh!t our troops died to defend in Desert Storm.

[TYVets]

Thanks for the reminder to top off my gastank tonight on the way home. I’m betting that gas prices will jump at least another 10 cents a gallon overnight.

Here in SW Missouri gasoline jumped to $3.30 last week. Then an erosion set in and some prices fell back to about $3.26.

Today retail prices have firmed up with stations at $3.30 and a few at $3.40.

Disclaimer:

I only report what I see on the price signs. It is your money, you takes your chances.

[OB1kNOb]

Yeah, here in central Arkansas gas prices jumped Monday night from $3.35 to $3.45. I see a few $3.44 and one at $3.49. The last few weeks it’s been climbing in increments of 10 - 13 cents a pop, but when it drops, it drops in just 1-3 cent increments.

[2 Kool 2 Be 4-Gotten]

Ah but the Saudis are our friends! /sarc