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The problem, Pete, is that no-one may take enough US dollars to fill demand. That’s the best case problem.

I think that the current oil price manipulation has the purpose of preventing capital from ever flowing back into the oil patch, or at least, not fast enough. Recall that the IEA warned that oil/gas investment had to exceed $1.5T per annum to maintain supply. That is no longer happening. When investment is sufficiently low, it will cripple production for many years, possibly forever. That, I think, is the plan.

Of course, whether that really is the plan is unknown. If it is the plan, whether it will work is unknown. And the state of our financial system in the future is unknown – will it be sufficiently robust to support international trade?
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    sprawlcapital February 23, 2015 at 9:05 pm #

    Sauer–This all makes sense, but it begs the question: whose plan is it? Saudi Arabia’s? Exxon’s?
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        sauerkraut February 24, 2015 at 12:23 am #

        I suspect that the Saudis helped Obama to think of it for himself. When approached, they held out for, and got, a commitment to throw the frackers under the bus. Big Oil stands to gain at the expense of Little Oil, and Wall Street gets a chance to profit from instability. USA gets to weaken Russia with low oil prices, just like 1980. UK, of course, is the deck of a willing aircraft carrier.

        Russia gets to watch Wall Street’s towers shake (and maybe fall), her oligarchs get to squeeze the oligarchs from the 1990’s, and she positions herself to lead a new international financial system. China gets lower oil prices for a time, just about until her own investments in central Asian oil pay off. In the meantime China buys gold and plays a very long game.

        Of course, Saudi gets much higher oil prices sometime soon, and gets leverage which might lead to a pipeline straight into Europe. They also make it impossible for anyone but a nation state to do real oil exploration, so while the majors are off gobbling up the minors, the majors are losing the future.

        Everybody THINKS he wins. Soon we find out who is playing chess and who is playing snap.

        Just my thoughts. Could well be wrong. I welcome a deeper analysis.