6 Of The Last 8 U.S. Recessions Were Preceded By Oil Price Spikes – Damage To Saudi Oil Industry Could Take “Months” To Repair

When the price of oil rises dramatically, that tends to be really bad for the U.S. economy.  Because we are so spread out and goods are transported over such vast distances, our economy is particularly vulnerable to oil price shocks, and that is one reason why the events that we just witnessed in the Middle East are so alarming.  According to an article that was published by the Federal Reserve Bank of San Francisco in 2007, five of the last seven U.S. recessions that had occurred up to that time “were preceded by considerable increases in oil prices”.  Since that article was published in 2007, the recession that began in 2008 hadn’t happened yet, and of course that recession was immediately preceded by the largest oil price spike in history.  So that means that six of the last eight U.S. recessions were preceded by oil price spikes, and now we may be facing another one.  It is being reported that it may take “months” for Saudi Arabia to fully repair the damage that was done to their oil industry, and that could fundamentally alter the balance of supply and demand in the global marketplace.

Yesterday, I discussed why high oil prices are so bad for our economy.  When the price of oil is too high, it can cause inflation and hurt economic growth simultaneously.  The article from the Federal Reserve Bank of San Francisco that I mentioned in the last paragraph tried to explain why this happens in very basic economic terms

Oil price increases are generally thought to increase inflation and reduce economic growth. In terms of inflation, oil prices directly affect the prices of goods made with petroleum products. As mentioned above, oil prices indirectly affect costs such as transportation, manufacturing, and heating. The increase in these costs can in turn affect the prices of a variety of goods and services, as producers may pass production costs on to consumers. The extent to which oil price increases lead to consumption price increases depends on how important oil is for the production of a given type of good or service.

Oil price increases can also stifle the growth of the economy through their effect on the supply and demand for goods other than oil. Increases in oil prices can depress the supply of other goods because they increase the costs of producing them. In economics terminology, high oil prices can shift up the supply curve for the goods and services for which oil is an input.

Needless to say, the unprecedented attack on Saudi oil production facilities was going to cause the price of oil to rise substantially.  In fact, when global markets opened up on Sunday evening we witnessed quite a dramatic spike

In an extraordinary trading day, London’s Brent crude leaped almost $12 in the seconds after the open, the most in dollar terms since their launch in 1988. Prices subsequently pulled back some of that initial gain of almost 20%, but rallied again as traders waited in vain for an Aramco statement clarifying the scale of damage.

So where is the price of oil going from here?

One analyst quoted by Oilprice.com believes that we could soon see it hit $80 a barrel, and others believe that it could move up toward $100 a barrel not too long from now.

In the days ahead, global markets will be watching Saudi Arabia very carefully.  The longer it takes them to resume normal production levels, the higher the price of oil will go.

According to Bloomberg, one analyst is already publicly admitting that “full resumption could be weeks or even months away”…

All eyes are on how fast the kingdom can recover from the devastating strike, which knocked out roughly 5% of global supply and triggered a record surge in oil prices. Initially, it was said that significant volumes of crude could begin to flow again within days. While Aramco is still assessing the state of the plant and the scope of repairs, it currently believes less than half of the plant’s capacity can be restored quickly, said people familiar with the matter, asking not to be identified because the information isn’t public.

”Damage to the Abqaiq facility is more severe than previously thought,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd. “While we still believe up to 50% of the 5.7 million barrels a day of output that has been disrupted could return fairly swiftly, full resumption could be weeks or even months away.”

That is really bad news, and that is assuming that there won’t be any more attacks like we just witnessed.

If there are more attacks, Saudi oil production could be far lower than normal for an extended period of time, and that would be catastrophic for the global economy.

Most Americans don’t realize this, but a lot of Saudi oil actually gets shipped to the west coast.  The following comes from Fox Business

Drivers in California, however, could be hit the hardest. Nearly half of what Saudi Arabia exports to the U.S. is sent to the West Coast, as reported by Reuters. In the year that ended in June, the West Coast imported an average of about 11.4 million barrels of Saudi crude every month – much of which went to California refineries.

The Golden State already has among the highest average gasoline prices in the country – at $3.63 per gallon as of Monday.

We are going to see higher gasoline prices right away, but in the short-term we should be able to handle them okay.

But if there are more attacks like the one we just saw, or if a major war breaks out in the Middle East, the price of gasoline could easily spike to levels that we have never seen in this country before.

The U.S. economy was already deeply struggling even before the attack in Saudi Arabia, and so this could definitely push us over the edge.  We should all be getting prepared for an extended economic downturn, because it looks like that is precisely what we could be facing.

Hopefully we won’t see any more attacks on oil production facilities, but the attack on Saturday clearly demonstrated how extremely vulnerable such facilities are to terror attacks.  And with Middle East tensions currently at an all-time high, USA Today is warning that our future “may well get much rockier soon”…

The new threat is tension among nations in the region, as well as the ability to attack based on new and relatively simple technology. Drones can be flown long distances carrying weapons just powerful enough to attack oil facilities. Middle East tensions are severe enough that attempts at similar attacks are not over.

Oil futures do not trade based on the present. They trade on forecasts about oil supply and demand in the future. The future looks rocky and may well get much rockier soon.

We are truly in uncharted territory, and we desperately need peace and calm to prevail in the Middle East.

Sadly, that is not likely to happen, and every new wave of violence is going to mean more economic pain for all of us.

About the author: Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The End and Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.

World War 3 Could Very Easily Turn Into The Very First Nuclear War In The Middle East

Nuclear War - Public DomainSaudi Arabia already has nukes, Iran probably does, and the Russians are one of the two great nuclear powers on the entire planet.  So if Saudi Arabia, Turkey and their Sunni allies do decide to conduct a full-blown ground invasion of Syria, could someone ultimately decide to use nuclear weapons when their backs get pushed up against a wall?  As you read this article, there are thousands of military vehicles and hundreds of thousands of troops massed along the southern border of Turkey and the northern border of Saudi Arabia.  If the command is given and those forces start streaming toward Damascus, it is inevitable that the Syrians, the Iranians, Hezbollah and the Russians would fight back.  It would literally be the start of World War 3, and the Saudis and the Turks are trying very hard to convince the United States to be involved.  But the truth is that we don’t want any part of this conflict, because it could very easily become the very first nuclear war in the history of the Middle East.

Perhaps you didn’t know that the Saudis already have nukes.  Of course the official position is that they don’t, but it is a fact that they were the ones that funded the development of Pakistan’s nuclear program.  It is an open secret that the Saudis have the bomb, but nobody is really supposed to talk about it.

That is why it was so alarming what Saudi political analyst Dahham Al-‘Anzi told RT just recently

Earlier this week a Saudi political analyst told RT’s Arab network the kingdom has a nuclear weapon.

Dahham Al-‘Anzi made the claim while saying Saudi Arabia is engaged in an effort to “minimize the Iranian threat in the Levant and Syria.”

Although Saudi Arabia has officially denied it has a nuclear weapons program and has publicly stated it opposes nuclear weapons in the Middle East, it has funded a military nuclear program and received scientific assistance from the United States and Pakistan.

You can watch video of this exchange right here

If you don’t want to believe him, perhaps you will believe the former director of the CIA counter-terrorism operations center.  He told Fox Business that everyone in the intelligence world knows the Saudis have nukes

If the fur started flying in Syria and Russia and Iran decided to start bombing Saudi airbases, would Saudi Arabia resort to using their nukes?

Let’s hope not.

In the event of a massive ground invasion by Saudi Arabia, Turkey and their allies, it is actually more likely that Russia may decide to be the first one to use nukes.  An invasion force of hundreds of thousands of troops would vastly outnumber the relatively small Russian force that is already inside Syria, and so the Russians may feel that the only way that they can keep the Sunni powers out of Damascus is to use tactical nukes.

Russia has more tactical nukes that anyone else in the world by far, and there are some reports that indicate that Russia may be prepared to use them in Syria.  For example, former Associated Press reporter Robert Parry, the author of America’s Stolen Narrative, says that a source has told him that the Russians have already warned Turkey that this could potentially happen

If Turkey (with hundreds of thousands of troops massed near the Syrian border) and Saudi Arabia (with its sophisticated air force) follow through on threats and intervene militarily to save their rebel clients, who include Al Qaeda’s Nusra Front, from a powerful Russian-backed Syrian government offensive, then Russia will have to decide what to do to protect its 20,000 or so military personnel inside Syria.

A source close to Russian President Vladimir Putin told me that the Russians have warned Turkish President Recep Tayyip Erdogan that Moscow is prepared to use tactical nuclear weapons if necessary to save their troops in the face of a Turkish-Saudi onslaught. Since Turkey is a member of NATO, any such conflict could quickly escalate into a full-scale nuclear confrontation.

Given Erdogan’s megalomania or mental instability and the aggressiveness and inexperience of Saudi Prince Mohammad bin Salman (defense minister and son of King Salman), the only person who probably can stop a Turkish-Saudi invasion is President Obama. But I’m told that he has been unwilling to flatly prohibit such an intervention, though he has sought to calm Erdogan down and made clear that the U.S. military would not join the invasion.

Are you starting to understand how serious this is?

With all of the talk of a potential invasion in recent days, the Russians are on high alert and are rapidly preparing for a direct conflict with both Saudi Arabia and Turkey.  The following comes from Infowars

Still, the Russians are taking no chances and they have put all their forces into high alert. They have very publicly dispatched a Tu-214r – her most advanced ISR (Intelligence Surveillance Reconnaissance) aircraft. You can think of the Tu-214R as an “AWACS for the ground”, the kind of aircraft you use to monitor a major ground battle (the regular Russian A-50Ms are already monitoring the Syrian airspace). In southern Russia, the Aerospace forces have organized large-scale exercises involving a large number of aircraft which would be used in a war against Turkey: SU-34s. The Airborne Forces are ready. The naval task forces off the Syrian coast is being augmented. The delivery of weapons has accelerated. The bottom line is simple and obvious: the Russians are not making any threats – they are preparing for war. In fact, by now they are ready.

In addition, it is important to remember that it is quite likely that the Iranians have nuclear weapons as well.

Of course the U.S. government and the Iranian government both insist that Iran does not have nukes, but many of those in the know insist otherwise.

For instance, you may want to consider what retired U.S. Army Major General Paul Vallely and U.S. Air Force Lt. Col. Dennis B. Haney are saying.  The following comes from an article that was authored by Jerome Corsi of WND

In a joint statement, Vallely and Haney say an accumulation of available evidence shows a coalition of Russia, China and North Korea have assisted Iran since 1979 in achieving a nuclear weapon, despite sanctions, under the guise of a domestic nuclear energy program.

Vallely explained to WND that he and Haney have taken a systematic approach to evaluating each component needed to deliver a nuclear weapon, from the development and testing of a ballistic missile system, to the design of a nuclear weapons warhead, to the development of the weapons-grade uranium needed to produce a bomb.

“To come to our conclusion that Iran is a nuclear weapons power right now, we supplemented publicly available research, plus information from intelligence sources, including Iranian resistance groups such as the National Council of Resistance of IRAN, NCRI,” Vallely explained.

I happen to agree with Vallely and Haney.  I cannot prove it, but all of the intel that I have received indicates that Iran already has nukes.

Hopefully I will not be proven accurate any time soon.

It had been hoped that a cease-fire could be negotiated that would at least temporarily defuse tensions in Syria.  Unfortunately, it does not look like the shooting is going to stop, and this is going to put immense pressure on both Saudi Arabia and Turkey to do something to rescue the radical Sunni militants that are on the verge of defeat.  The Saudis, the Turks and their allies have poured enormous amounts of money and resources into this war over the past five years, and now they are faced with the choice of either accepting defeat or directly intervening in this conflict themselves.

But in order to conduct a full-fledged ground invasion, they are going to need justification for doing so.  There are some that are suggesting that we could soon see a false flag attack that would provide that justification, so that is something to watch out for.

I can’t remember a time when our planet has been so close to World War 3 potentially beginning.

And if it does break out, I believe that it is quite likely that nuclear weapons will be used.

So what do you think?

Do you agree with me?

Please feel free to share your thoughts by posting a comment below…

In Yemen, It’s The Bad Guys Vs. The Bad Guys

Yemen - Photo by Addicted04Saudi Arabia and Egypt stand poised to conduct a massive ground invasion of Yemen, and the western media will be full of tales about how “Operation Decisive Storm” is liberating that country from the evil Iranian-backed Houthi rebels.  And without a doubt, the Houthis are bad guys and so are their Iranian benefactors.  But don’t be fooled into thinking that the war in Yemen is a battle of good vs. evil.  The truth is that the conflict in Yemen is actually a proxy war between two sets of bad guys that both ultimately plan for Islam to take over the entire planet.  On one side, the Iranians are very honest about the fact that they view us as an enemy, and they plan to impose their version of radical Shia Islam worldwide as soon as they can.  On the other side, the Saudis pretend to be our friends, but they don’t hide the fact that they believe that their version of Sunni Islam will eventually rule the world.  And their version of Sunni Islam includes constant beheadings, the destruction of all churches and the death penalty for anyone caught smuggling a Bible into Saudi territory.  At the end of the day, there is very little difference between the Saudis and ISIS.  In fact, ISIS gets a lot of funding from Saudi sources, and there is more support for ISIS on Twitter from Saudi Arabia than from anywhere else.  Saudi Arabia is a horribly repressive regime where women are treated like dirt, where the secret police conduct a never ending reign of terror and where even a minor deviation from sharia law can mean the loss of a limb.  But because our politicians and the mainstream media constantly tell us that they are “our friends”, we cheer them on.

It is being reported that the Saudis have mobilized 150,000 troops for a ground invasion of Yemen, and Egypt says that it is ready to contribute a very large force as well.  The Saudis simply were not going to just sit back and watch as pro-Iranian forces took total control of their neighbor.  The following is how the Telegraph recently described what the Iranians have been up to in Yemen for the past several years…

For the past four years the Quds force of Iran’s Revolutionary Guards have been smuggling weapons to the Houthis, as well as providing expert military training, with the result that the Shia Houthi militia finally succeeded in seizing control of the capital Sana’a last year, forcing the Western-backed president, Abed Rabbo Mansour Hadi, to seek refuge in Aden.

Last week it was claimed that Tehran was increasing its support for the Houthis with the delivery of a 185 ton shipment of weapons and other military equipment.

This is how Iran likes to fight wars.  They like to fund and arm proxy organizations that will do their fighting for them.  That way they don’t have to get their hands messy or risk direct retaliation.  Hezbollah is a prime example of this.

And the Iranians were winning in Yemen.  In fact, they were on the verge of complete and total victory.

So the Saudis felt forced to step in.  The Saudis don’t like to fight their own wars either, but in this instance they felt there was no other choice.

But let there be no misunderstanding.  This is not a conflict between Saudi Arabia and some rebel group in Yemen.  This is part of an ongoing war between Saudi Arabia and Iran, and at this point relations between the two nations are at an all-time low

“The Saudis were caught off guard by how quick and aggressive the Houthi offensive was and felt they needed a sharp and immediate response,” geopolitical expert Ian Bremmer, president of Eurasia group, told Business Insider over email. “They didn’t want Iran to think they needed Egypt or anyone else to come rescue the Kingdom. This is the worst tension we’ve seen between Iran and Saudi Arabia, period.”

And of course Yemen is far from the only front in this war.

For instance, Saudi-backed fighters “are poised for a massive battle” with Iranian-backed Hezbollah fighters on the Syria-Lebanon border…

Islamist forces armed and aided by Saudi Arabia are poised for a massive battle in the coming days targeting the Syrian regime and the Iranian-backed Hezbollah organization, according to Egyptian security officials speaking to WND.

The officials said the Saudis have directed the Islamist forces, including the Al Nusra Front, to lead an imminent counterinsurgency focusing on the Syria-Lebanon border, with particular emphasis on the Qalamoun region.

Qalamoun is a strategic site that serves as a supply line to Damascus from Lebanon. Control of the area would give the rebels a base of operations to target Damascus.

In the western media, this ongoing conflict is being characterized as a conflict between “good” Saudi Arabia and “evil” Iran.

But should we really be cheering on Saudi Arabia?

As I mentioned above, more funding for ISIS comes out of Saudi Arabia than anywhere else.

And ISIS also gets more support on social networks such as Twitter from Saudi Arabia than anywhere else

Part of ISIS’s success is its adoption of social media as a way to spread the group’s messages and find new members. A study by The Independent analyzed the origin of posts supporting ISIS on Twitter, and found that Saudi Arabia provides by far the most.

If you believe that ISIS is wrong for beheading people, you should keep in mind that there is a beheading in Saudi Arabia every four days.

The truth is that ISIS is simply just copying what the Saudis have been doing for centuries.

And for writing what I just did, I could be sentenced to 1,000 lashes if I was living in Saudi Arabia.  In fact, that is exactly what happened to one Saudi blogger.  Another Saudi man was recently sentenced to death for renouncing Islam.

The Saudis don’t believe that it will happen tomorrow, but they are fully convinced that their version of Islam will eventually dominate every inch of our planet.

Are you ready to live like the Saudis do?  In Saudi Arabia, women are not allowed to drive, religious police can drag you away at any time for any reason, and the penalty for smuggling a Bible is death.

If you are tempted to think that the Saudis do not plan to impose their rules on the rest of the world, you should consider what the top religious leader in the entire country recently had to say.  Earlier this month, he declared that every single church on the entire Arabian Peninsula (not just Saudi Arabia) must be destroyed

Saudi Arabia’s top Muslim cleric called on Tuesday for the destruction of all churches in the Arabian Peninsula after legislators in the Gulf state of Kuwait moved to pass laws banning the construction of religious sites associated with Christianity.

Speaking to a delegation in Kuwait, Sheikh Abdul Aziz bin Abdullah, who serves as the grand mufti of Saudi Arabia, said the destruction of churches was absolutely necessary and is required by Islamic law, Arabic media reported.

These are the “good guys”?

The truth is that the Saudis are not our friends.  They like our money and they like our military might, and we make a convenient ally for them right now.

But what the Saudis stand for is the antithesis of everything that the United States is supposed to stand for.  It is a brutally oppressive regime that is promoting tyranny all over the planet.  Barack Obama may be comfortable with such “friends”, but the American people should not be.

So what do you think?  Please feel free to share your thoughts by posting a comment below…

 

Who Is Behind The Oil War, And How Low Will The Price Of Crude Go In 2015?

War Peace Sign - Public DomainWho is to blame for the staggering collapse of the price of oil?  Is it the Saudis?  Is it the United States?  Are Saudi Arabia and the U.S. government working together to hurt Russia?  And if this oil war continues, how far will the price of oil end up falling in 2015?  As you will see below, some analysts believe that it could ultimately go below 20 dollars a barrel.  If we see anything even close to that, the U.S. economy could lose millions of good paying jobs, billions of dollars of energy bonds could default and we could see trillions of dollars of derivatives related to the energy industry implode.  The global financial system is already extremely vulnerable, and purposely causing the price of oil to crash is one of the most deflationary things that you could possibly do.  Whoever is behind this oil war is playing with fire, and by the end of this coming year the entire planet could be dealing with the consequences.

Ever since the price of oil started falling, people have been pointing fingers at the Saudis.  And without a doubt, the Saudis have manipulated the price of oil before in order to achieve geopolitical goals.  The following is an excerpt from a recent article by Andrew Topf

We don’t have to look too far back in history to see Saudi Arabia, the world’s largest oil exporter and producer, using the oil price to achieve its foreign policy objectives. In 1973, Egyptian President Anwar Sadat convinced Saudi King Faisal to cut production and raise prices, then to go as far as embargoing oil exports, all with the goal of punishing the United States for supporting Israel against the Arab states. It worked. The “oil price shock” quadrupled prices.

It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously, and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved from $25 to $12, Russia defaulted on its debt.

The Saudis and other OPEC members have, of course, used the oil price for the obverse effect, that is, suppressing production to keep prices artificially high and member states swimming in “petrodollars”. In 2008, oil peaked at $147 a barrel.

Turning to the current price drop, the Saudis and OPEC have a vested interest in taking out higher-cost competitors, such as US shale oil producers, who will certainly be hurt by the lower price. Even before the price drop, the Saudis were selling their oil to China at a discount. OPEC’s refusal on Nov. 27 to cut production seemed like the baldest evidence yet that the oil price drop was really an oil price war between Saudi Arabia and the US.

If the Saudis wanted to stabilize the price of oil, they could do that immediately by announcing a production cutback.

The fact that they have chosen not to do this says volumes.

In addition to wanting to harm U.S. shale producers, some believe that the Saudis are determined to crush Iran.  This next excerpt comes from a recent Daily Mail article

Above all, Saudi Arabia and its Gulf allies see Iran — a bitter religious and political opponent — as their main regional adversary.

They know that Iran, dominated by the Shia Muslim sect, supports a resentful underclass of more than a million under-privileged and angry Shia people living in the gulf peninsula — a potential uprising waiting to happen against the Saudi regime.

The Saudis, who are overwhelmingly Sunni Muslims, also loathe the way Iran supports President Assad’s regime in Syria — with which the Iranians have a religious affiliation. They also know that Iran, its economy plagued by corruption and crippled by Western sanctions, desperately needs the oil price to rise. And they have no intention of helping out.

The fact is that the Saudis remain in a strong position because oil is cheap to produce there, and the country has such vast reserves. It can withstand a year — or three — of low oil prices.

There are others out there that are fully convinced that the Saudis and the U.S. are actually colluding to drive down the price of oil, and that their real goal is to destroy Russia.

In fact, Venezuela’s President Nicolas Maduro openly promoted this theory during a recent speech on Venezuelan national television

“Did you know there’s an oil war? And the war has an objective: to destroy Russia,” he said in a speech to state businessmen carried live on state TV.

“It’s a strategically planned war … also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse,” he added, accusing the United States of trying to flood the market with shale oil.

Venezuela and Russia, which both have fractious ties with Washington, are widely considered the nations hardest hit by the global oil price fall.

And as I discussed just the other day, Russian President Vladimir Putin seems to agree with this theory…

“We all see the lowering of oil prices. There’s lots of talk about what’s causing it. Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.”

Without a doubt, Obama wants to “punish” Russia for what has been going on in Ukraine.  Going after oil is one of the best ways to do that.  And if the U.S. shale industry gets hurt in the process, that is a bonus for the radical environmentalists in Obama’s administration.

There are yet others that see this oil war as being even more complicated.

Marin Katusa believes that this is actually a three-way war between OPEC, Russia and the United States…

“It’s a three-way oil war between OPEC, Russia and North American shale,” says Marin Katusa, author of “The Colder War,” and chief energy investment strategist at Casey Research.

Katusa doesn’t see production slowing in 2015: “We know that OPEC will not be cutting back production. They’re going to increase it. Russia has increased production to all-time highs.” With Russia and OPEC refusing to give up market share how will the shale industry compete?

Katusa thinks the longevity and staying power of the shale industry will keep it viable and profitable. “The versatility and the survivability of a lot of these shale producers will surprise people. I don’t see that the shale sector is going to collapse over night,” he says. Shale sweet spots like North Dakota’s Bakken region and Texas’ Eagle Ford area will help keep production levels up and output steady.

Whatever the true motivation for this oil war is, it does not appear that it is going to end any time soon.

And so that means that the price of oil is going to go lower.

How much lower?

One analyst recently told CNN that we could see the price of oil dip into the $30s next year…

Few saw the energy meltdown coming. Now that it’s here, industry analysts warn another move lower is possible as the momentum remains firmly to the downside.

“If this doesn’t hold, we could go back to price levels in late 2008 and early 2009 — down in the $30s. There’s no reason why it couldn’t happen,” said Darin Newsom, senior analyst at Telvent DTN.

Others are even more pessimistic.  For instance, Jeremy Warner of the Sydney Morning Herald, who correctly predicted that the price of oil would fall below $80 this year, is now forecasting that the price of oil could fall all the way down to $20 next year…

Revisiting the past year’s predictions is, for most columnists a frequently humbling experience. The howlers tend to far outweigh the successes. Yet, for a change, I can genuinely claim to have got my main call for markets – that oil would sink to $US80 a barrel or less – spot on, and for the right reasons, too.

Just in case you think I’m making it up, this is what I said 12 months ago: “My big prediction is for $US80 oil, from which much of the rest of my outlook for the coming year flows. It’s hard to overstate the significance of a much lower oil price – Brent at, say, $US80 a barrel, or perhaps lower still – yet this is a surprisingly likely prospect, the implications of which have been largely missed by mainstream economic forecasters.”

If on to a good thing, you might as well stick with it; so for the coming year, I’m doubling up on this forecast. Far from bouncing back to the post crisis “normal” of something over $US100 a barrel, as many oil traders seem to expect, my view is that the oil price will remain low for a long time, sinking to perhaps as little as $US20 a barrel over the coming year before recovering a little.

But even Warner’s chilling prediction is not the most bearish.

A technical analyst named Abigail Doolittle recently told CNBC that under a worst case scenario the price of oil could fall as low as $14 a barrel…

No one really saw 2014’s dramatic plunge in oil price coming, so it’s probably fair to say that any predictions about where it’s going from here fall somewhere between educated guesses and picking a number out of a hat.

In that light, it’s less than shocking to see one analyst making a case—albeit in a pure outlier sense—for a drop all the way below $14 a barrel.

Abigail Doolittle, who does business under the name Peak Theories Research, posits that current chart trends point to the possibility that crude has three downside target areas where it could find support—$44, $35 and the nightmare scenario of, yes, $13.65.

But the truth is that none of those scenarios need to happen in order for this oil war to absolutely devastate the U.S. economy and the U.S. financial system.

There is a very strong correlation between the price of oil and the performance of energy stocks and energy bonds.  But over the past couple of weeks this correlation has been broken.  The following chart comes from Zero Hedge

Energy Stocks - Zero Hedge

It is inevitable that at some point we will see energy stocks and energy bonds come back into line with the price of crude oil.

And it isn’t just energy stocks and bonds that we need to be concerned about.  There is only one other time in all of history when the price of oil has crashed by more than 50 dollars in less than a year.  That was in 2008 – just before the great financial crisis that erupted in the fall of that year.  For much, much more on this, please see my previous article entitled “Guess What Happened The Last Time The Price Of Oil Crashed Like This?…

Whether the price of oil crashed or not, we were already on the verge of massive financial troubles.

But the fact that the price of oil has collapsed makes all of our potential problems much, much worse.

As we enter 2015, keep an eye on energy stocks, energy bonds and listen for any mention of problems with derivatives.  The next great financial crisis is right around the corner, but most people will never see it coming until they are blindsided by it.

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