Oil

The Truth About What Is Happening To The Petrodollar

This month, rumors about the petrodollar have spread like wildfire all over the Internet.  Some of what is being said is true, and some of what is being said is false.  When other sources were reporting on “the death of the petrodollar”, I was asked why I was not writing about it.  Well, the truth is that I was not writing about it because the petrodollar is not dead.  It is certainly in trouble, but it is not dead.  Today, most oil continues to be sold in U.S. dollars, and most global trade continues to be conducted in U.S. dollars.  But that could change as other countries lose faith in our currency.  In particular, we will want to carefully watch what the BRICS nations choose to do.  45 percent of the world’s inhabitants live in the BRICS nations, and they have been implementing strategies that are designed to promote their own currencies and reduce dependence on the U.S. dollar.  As U.S. relations with leading BRICS nations continue to deteriorate, I would expect that trend to accelerate.

So I am not optimistic about the future of the petrodollar at all.

But what some other sources reported about the petrodollar earlier this month was simply not accurate.

Let me start at the beginning.  According to Investopedia, petrodollars are “simply U.S. dollars accepted as payment by an oil exporter”…

Petrodollars are oil export revenues denominated in U.S. dollars. Petrodollars are not a distinct currency; they are simply U.S. dollars accepted as payment by an oil exporter.

Global crude oil exports averaged approximately 88.4 million barrels per day in 2020. That pace would generate annual global petrodollar supply of more than $3.2 trillion a year, assuming an average price of $100 per barrel.

Petrodollars are the primary source of revenue and wealth for many members of the Organization of Petroleum Exporting Countries (OPEC) as well as non-OPEC oil and gas exporters including Russia, Qatar, and Norway.

The fact that so many other countries all over the globe use the U.S. dollar to buy and sell oil is a major advantage to us.

Earlier this month, there was a flood of reports that the “50 year petrodollar agreement” between the United States and Saudi Arabia had expired and that the petrodollar was now dead.

But that wasn’t true.

As Peter C. Earle has accurately pointed out, there never was a formal treaty, there never was a formal expiration date, and Saudi Arabia has been trading oil for other currencies for a very long time…

Last week several reports suggested the termination of a US-Saudi petrodollar agreement, and speculated a Saudi Arabian move to sell oil on world markets in various currencies, including the Chinese yuan. The accounts were rife with inaccuracies: the Saudis’ have transacted in non-dollar currencies for decades, and there has never been a formal treaty, much less with a specified expiration date, governing the loose arrangement that has come to be called the ‘petrodollar system.’

Unfortunately, many of the false reports went viral, and Google searches for “petrodollar” spiked to unprecedented levels…

Almost immediately, Google searches for the term “petrodollar” spiked to the highest level on record dating back to 2004, according to Google Trends data.

But as speculation about an imminent end to the U.S. dollar’s global dominance intensified, several Wall Street and foreign-policy experts emerged to point out a fatal flaw in this logic: The agreement itself never existed.

At least, not in the way it was being described in the posts that had gone viral on social media.

This is why I take my time and do my research before I report something.

It is so easy to be wrong, but it takes real work to develop a reputation for accuracy.

According to UBS Global Wealth Management chief economist Paul Donovan, the false story about the expiration of the petrodollar agreement “seems to have started in the crypto world”…

Paul Donovan, the chief economist at UBS Global Wealth Management, in a blog post said that the story had gained unexpected traction, serving as yet another example of the dangers of “confirmation bias.”

“The story seems to have started in the crypto world. Many crypto speculators desperately want to believe in the dollar’s demise,” said Donovan.

It is true that a “Joint Commission on Economic Cooperation” was established in 1974.

Originally it was only supposed to last for five years, but it was “repeatedly extended”…

The agreement referred to by Donovan is the United States-Saudi Arabian Joint Commission on Economic Cooperation. It was formally established on June 8, 1974, by a joint statement issued and signed by Henry Kissinger, the U.S. secretary of state at the time, and Prince Fahd, the second deputy prime minister (and later king and prime minister) of Saudi Arabia, according to a report found on the Government Accountability Office’s website.

The agreement, as initially envisioned, was intended to last five years, although it was repeatedly extended. The rationale for such a deal was pretty straightforward: Coming on the heels of the 1973 OPEC oil embargo, both the U.S. and Saudi Arabia were eager to flesh out a more formal arrangement that would ensure each side got more of what it wanted from the other.

At that time, the U.S. and Saudi Arabia very much needed one another.

Today, circumstances are quite different.

The U.S. is now much less dependent on foreign oil, and the Chinese have become one of the primary purchasers of oil from the Middle East.

Over time, more oil will be bought and sold in other currencies, but for the moment it is pretty much business as usual…

Oil has always traded in non-dollar currencies. In January 2023, Saudi indicated it was happy to negotiate oil sales in other currencies. The possibility changes little for financial markets. Saudi Arabia’s riyal remains pegged to the dollar, and its stock of financial assets are dollar focused. The dollar’s reserve status depends on how money is stored, not how transactions are denominated.

However, as I noted earlier in this article, we need to keep a very close eye on what the BRICS nations are doing.

Saudi Arabia has been deepening relationships with China, Russia and India, and that is definitely bad news for the U.S. dollar…

Owing to the US and Western Europe’s increasingly entangled alliances, and its own efforts to diversify away from dependence upon energy exports, Saudi Arabia has been increasing its diplomatic and economic engagements with China, Iran, Russia, nations considered primary US foreign policy adversaries. Recent moves toward accepting non-dollar currencies reflects broader geopolitical shifts away from US currency hegemony.

Of course the truth is that if we want to find the biggest enemy of the U.S. dollar all we need to do is to look at ourselves.

The rest of the world is rapidly losing faith in our currency because of what are own leaders are doing to it.

The U.S. dollar is no longer a stable currency.  We are creating, borrowing and spending trillions upon trillions of dollars, and if we continue to act with such extreme irresponsibility everyone else will eventually be forced to switch to new reserve currencies.

According to USdebtclock.org, our national debt will hit 46 trillion dollars on this day in 2028 if we continue to borrow money at the rate we are right now.

That is madness.

We are literally committing economic suicide, but most of the U.S. population is not interested in such warnings.

They just want our leaders to keep flooding the system with more money so that the party can continue.

Yes, the party will continue for a little while longer, but once the lights are finally turned off nobody will ever be able to turn them back on again.

Michael’s new  book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.

About the Author: Michael Snyder’s extremely controversial new  book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com. He has also written seven other  books that are available on Amazon.com including “End Times”, “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”.  When you purchase any of Michael’s  books you help to support the work that he is doing.  You can also get his articles by email as soon as he publishes them by subscribing to his Substack newsletter.  Michael has published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and he always freely and happily allows others to republish those articles on their own websites.  These are such troubled times, and people need hope.  John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.”  If you have not already done so, we strongly urge you to invite Jesus Christ to be your Lord and Savior today.

Are You Ready For The Great Depression Of The 2020s?

For those of you that were expecting just a “deep recession”, I am afraid that you are going to be very disappointed.  It took years for the U.S. economy to fully unravel in the 1930s, but now we have witnessed a similar level of economic devastation in just a matter of weeks.  More than 26 million Americans have already lost their jobs, economic activity has come to a standstill, people are lining up for miles at food banks all over the nation, and businesses are being permanently shuttered at a staggering pace.  But the good news is that some states will attempt to “reopen” their economies in the weeks ahead.  In most instances, there will be several stages before all of the restrictions are finally lifted, and that means that economic suffering will be stretched out for an extended period of time.  And of course if cases and deaths start spiking again we could see another wave of strict lockdowns all over the country, and needless to say that would greatly escalate this economic downturn.

At this moment, so many hard working people all over America are deeply hurting.

I personally know people that have lost their jobs, and you probably do too.  And because virtually nobody is hiring right now, it is going to be exceedingly difficult for newly unemployed workers to find other jobs.

Because it has an economy that is so dependent on the entertainment industry, Nevada is being hit particularly hard by this downturn.  The New York Times spoke to one Nevada resident named Valicia Anderson, and she hardly knows anyone that is still actually working…

When Valicia Anderson starts to count the people she knows in Las Vegas who have lost their jobs, she runs out of fingers fast.

Her husband, the breadwinner of her family and a restaurant worker in the Rio casino. All 25 of his co-workers. Her grown son, in a temp agency. The technician who does her nails. The barber who cuts her husband’s hair. Her best friend, a waitress. The three servers and a manager at the TGI Friday’s that is her family’s favorite treat.

It has been estimated that the current unemployment rate in the state is “about 25 percent”, and that number is almost certainly going to go higher in the months ahead.

Down in Texas, they are also dealing with an oil crash at the same time that they are wrestling with this coronavirus pandemic, and this has created the worst budget crisis that the city of Houston has ever seen…

On the same day that the price for U.S. crude oil fell to about $30 below zero — a mind-bending concept and the first time oil prices had ever turned negative — Mayor Sylvester Turner of Houston, the self-proclaimed energy capital of the world, stood before reporters. His words were grim and muffled by the black mask covering his face.

The mayor announced that city employees would soon be furloughed, but he declined to say how many. The Houston Zoo, he said, could expect to see funding deferred under what he called “the worst budget that the city will deal with in its history.”

The high paying energy industry jobs that fueled an incredible real estate boom in Texas are now disappearing by the thousands, and it is being reported that many of those that are being laid off are learning the news “during painful Zoom sessions from home”…

Thousands of energy workers, some of whom only lately moved to the region to take advantage of the recent prosperity, have been laid off. Many of them were told the bad news during painful Zoom sessions from home.

Warning letters from energy companies have been flooding the Texas Workforce Commission about layoffs and furloughs: 3,500 at Halliburton, 223 at Tenaris, 184 at Baker Hughes, 102 at Diamond Offshore Drilling, 95 at Energy Transfer.

By the way, when did Zoom become such a big thing?

It seems like so many people are using it now, and I don’t understand why it is so popular.

Perhaps my readers will help me to understand this.

Getting back to the economy, at this point even the Trump administration is admitting that the unemployment rate will soon be approaching levels that “we saw during the Great Depression”…

White House senior advisor Kevin Hassett says US economy is in “grave situation” and the unemployment rate could be hitting the same numbers seen during the Great Depression due to the Covid-19 pandemic.

“We’re going to be looking at an unemployment rate that approaches rates that I think we saw during the Great Depression,” Hassett told ABC’ ‘The Week’ on Sunday.

Let’s put that into perspective for a moment.

During the last recession, we thought that things were really, really bad when the unemployment rate got up to about 10 percent.

But back in 1933 the unemployment rate peaked at 25 percent, and now we are being told that we should expect something similar here in 2020.

Wow.

And of course low income Americans are being hit harder than anyone else.  Just check out these numbers…

Most Americans support stay-at-home restrictions to protect public health. And yet the burden of the country’s shutdown is disproportionately falling on those least prepared to handle it: About 52 percent of low-income Americans say they or someone in their household has experienced job upheaval, compared to 43 percent of the broader adult population, the Pew Research Center found. Only 23 percent of low-income Americans say they have enough emergency funds to last them three months.

Hopefully as some states attempt “reopenings” it will help to slow down this enormous tsunami of unemployment.

But as I pointed out the other day, millions of Americans are now making much more money being unemployed than they did when they were working, and so that is going to provide an incentive for millions of Americans to stay unemployed for the foreseeable future.

And even if all of the coronavirus restrictions in the entire country were lifted tomorrow, fear of the coronavirus would cause economic activity to be greatly depressed for many months to come.

As I discussed yesterday, the meat processing industry is a perfect example of this.  Meat processing facilities are being shut down all over the nation, and one expert just told NBC News that we should expect shortages of meat in our grocery stores “around May 1″…

Beef, chicken and pork could be as scarce as toilet paper soon because so many meat processing plants have been temporarily shut down amid the coronavirus pandemic, industry experts are warning.

“We’ve just completed our third week of reduced slaughter and production,” Dennis Smith, a commodity broker/livestock analyst with Archer Financial Services in Chicago, said. “My guess is that about one week out, perhaps around May 1, shortages will begin developing at retail meat counters.”

So many of the things that we have been warning about for a long time are starting to happen, but most Americans still do not grasp the seriousness of this crisis.

All of the economic dominoes are starting to fall, and even if the remainder of this pandemic goes much more smoothly than anticipated, it will not fundamentally alter our current economic trajectory.

The “Everything Bubble” lasted far longer than it should have, but now that it has burst the pain is going to be absolutely immense.

And it is those at the bottom of the economic food chain that are going to be hit the hardest.

About the Author: I am a voice crying out for change in a society that generally seems content to stay asleep. My name is Michael Snyder and I am the publisher of The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I have written four books that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing those books you help to support my work. I always freely and happily allow others to republish my articles on their own websites, but due to government regulations I need those that republish my articles to include this “About the Author” section with each article. In order to comply with those government regulations, I need to tell you that the controversial opinions in this article are mine alone and do not necessarily reflect the views of the websites where my work is republished. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. Those responding to this article by making comments are solely responsible for their viewpoints, and those viewpoints do not necessarily represent the viewpoints of Michael Snyder or the operators of the websites where my work is republished. I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.  During these very challenging times, people will need hope more than ever before, and it is our goal to share the gospel of Jesus Christ with all many people as we possibly can.

The Oil Price Collapse Is Yet Another Sign That Economic Activity Is Crashing Dramatically All Over The World

The insanity that we are currently witnessing in the financial markets is difficult to believe.  Personally, even though I operate a website called “The Economic Collapse Blog” and I write about these things every day, when someone told me that the price of oil had fallen below minus 30 dollars a barrel on Monday I initially didn’t think that it could possibly be true.  Yes, I always knew that it was theoretically possible that the price of oil could go into negative territory, but we had never seen such a thing actually happen before.  And I knew that a crunch was coming as futures contracts expired, but I certainly did not expect the extreme carnage that we witnessed on Monday …

West Texas Intermediate crude for May delivery fell more than 100% to settle at negative $37.63 per barrel, meaning producers would pay traders to take the oil off their hands.

This negative price has never happened before for an oil futures contract. Futures contracts trade by the month. The June WTI contract, which expires on May 19, fell about 18% to settle at $20.43 per barrel. This contract, which was more actively traded, is a better reflection of the reality in the oil market. The July contract was roughly 11% lower at $26.18 per barrel.

When global economic activity is rising, that usually creates an increased demand for oil.

And when global economy activity is declining, the demand for oil also tends to drop.

Thanks to the coronavirus lockdowns, global demand for oil has dropped to levels that are absolutely unprecedented.  The amount of oil that is being produced is far, far greater than the amount that the world can use right now, and storage space has been rapidly running out.

Speculators that found themselves stuck with oil contracts that they were not able to resell went into panic mode on Monday, and that created the most memorable day for oil trading in history.

I would like to share what a couple of experts are saying about this absolutely crazy oil price crash.  This first comment comes from Wolf Richter…

It seems some oil trading firms and hedge funds were caught on the wrong side of heavily leveraged bets, and couldn’t roll over their contracts due to a liquidity crunch and horrible market conditions in that space. But if they can’t sell the contracts by tomorrow, they’ll have to take delivery of the physical oil at the delivery point for NYMEX futures, namely in Cushing, Oklahoma.

The delivery time is in May. But storage in Cushing for May seems to have been spoken for, and now these traders see that they have no place to go with this oil that they might have to take delivery of in May.

And this next comment comes from Roger Diwan…

What is happening today is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.

This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.

The contract roll and liquidity crunch that made the extreme sell-off today possible but it DOESN’T necessarily represent futures market conditions: NYMEX June settled today at $21.13.

Last week, Russia, Saudi Arabia and other major oil producers cut a deal to significantly reduce global oil production, but it wasn’t nearly enough to match the nightmarish decline in global economic activity that we have been witnessing.

So right now oil producers are pumping far more oil than the world can currently use, and that has become a massive problem.

And if things don’t turn around quickly, we could soon see hundreds of bankruptcies in the energy industry…

Many oil companies took on too much debt during the good times. Some of them won’t be able to survive this historic downturn.

In a $20 oil environment, 533 US oil exploration and production companies will file for bankruptcy by the end of 2021, according to Rystad Energy. At $10, there would be more than 1,100 bankruptcies, Rystad estimates.

In the short-term, what the energy industry desperately needs is for the lockdowns to end and for people to resume their normal economic patterns.

But as one analyst has pointed out, getting people to do that would be extremely difficult even if all of the lockdowns were lifted immediately…

“The government can declare whatever they want in terms of encouraging people to get out and do stuff,” said Willie Delwiche, investment strategist at Baird. “Whether or not broad swaths of society do that remains to be seen. It’s going to take seeing people start to get out and do stuff again. That will be the necessary positive development, not just declaring getting things open.”

In the long run, the good news for the energy industry is that there are several reasons why the price of oil will eventually be going back up to higher levels.

First of all, economic activity will rise as lockdowns are lifted all over the world, and hopefully all of the lockdowns will be over by the end of this calendar year.

Secondly, central banks and national governments around the globe are flooding the system with massive amounts of fresh money, and this will eventually cause very painful inflation.  But for the energy industry this will actually turn out to be a good thing because it will cause upward pressure on oil prices.

Thirdly, it is just a matter of time before a major war erupts in the Middle East, and once that happens the price of oil will immediately shoot into the stratosphere.

So the truth is that this is just a temporary downturn for the energy industry, but a lot of energy companies are so deep in debt that they may not be able to ride this storm out.

For the U.S. economy as a whole, it is critical for all of us to understand that things are never going to go back to exactly the way they were before COVID-19 came along.  All of the financial dominoes are starting to tumble, all of the economic momentum is heading in the wrong direction, and there will be many more challenges that we will have to face after this current pandemic is over.

There will be a lot more wild ups and downs in the months ahead, but this is what an economic collapse looks like, and it is just getting started.

About the Author: I am a voice crying out for change in a society that generally seems content to stay asleep. My name is Michael Snyder and I am the publisher of The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I have written four books that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing those books you help to support my work. I always freely and happily allow others to republish my articles on their own websites, but due to government regulations I need those that republish my articles to include this “About the Author” section with each article. In order to comply with those government regulations, I need to tell you that the controversial opinions in this article are mine alone and do not necessarily reflect the views of the websites where my work is republished. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. Those responding to this article by making comments are solely responsible for their viewpoints, and those viewpoints do not necessarily represent the viewpoints of Michael Snyder or the operators of the websites where my work is republished. I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.  During these very challenging times, people will need hope more than ever before, and it is our goal to share the gospel of Jesus Christ with all many people as we possibly can.

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.

If You Think The Price Of Oil Is Skyrocketing Now, Just Wait Until The War Starts…

In the aftermath of the most dramatic attack on Saudi oil facilities that we have ever seen, the price of oil has exploded higher.  The Wall Street Journal is calling this attack “the Big One”, and President Trump appears to be indicating that some sort of military retaliation is coming.  Needless to say, a direct military strike on Iran could spark a major war in the Middle East, and that would be absolutely devastating for the entire global economy.  Just about everything that we buy has to be moved, and moving stuff takes energy.  When the price of oil gets really high, that tends to create inflation because the price of oil is a factor in virtually everything that we buy.  In addition, a really high price for oil also tends to slow down economic activity, and this is something that we witnessed just prior to the financial crisis of 2008.  And if this crisis in the Middle East stretches over an extended period of time, it could ultimately result in a phenomenon known as “stagflation” where we have rapidly rising prices and weaker economic activity simultaneously.  The last time we experienced such a thing was in the 1970s, and nobody really remembers the U.S. economy of the 1970s favorably.

The damage caused by the “drone attacks” in Saudi Arabia was immense.  According to the Daily Mail, “huge plumes of black smoke” could be seen pouring out of a key Saudi oil facility…

Infernos raged at the plant in Abqaiq, Bugayg, and the country’s second largest oilfield in Khurais yesterday morning after Tehran-backed Houthi rebels in Yemen fired a flurry of rockets.

Huge plumes of black smoke could be seen coming from the oil facility.

Houthi rebels in Yemen have publicly taken responsibility for the attacks, but they may or may not be telling the truth.

At this point, U.S. Secretary of State Mike Pompeo is completely rejecting that explanation, and he is claiming that there is “no evidence the strikes had come from Yemen”…

Secretary of State Mike Pompeo blamed Iran for coordinated strikes on the heart of Saudi Arabia’s oil industry, saying they marked an unprecedented attack on the world’s energy supply.

The strikes shut down half of the kingdom’s crude production on Saturday, potentially roiling petroleum prices and demonstrating the power of Iran’s proxies.

Iran-allied Houthi rebels in neighboring Yemen claimed credit for the attack, saying they sent 10 drones to strike at important facilities in Saudi Arabia’s oil-rich Eastern Province. But Mr. Pompeo said there was no evidence the strikes had come from Yemen.

And according to Reuters, another unnamed “U.S. official” told them that the attacks came from “west-northwest of the targets”…

The U.S. official, who asked not to be named, said there were 19 points of impact in the attack on Saudi facilities and that evidence showed the launch area was west-northwest of the targets – the direction of Iran – not south from Yemen.

The official added that Saudi officials had indicated they had seen signs that cruise missiles were used in the attack, which is inconsistent with the Iran-aligned Houthi group’s claim that it conducted the attack with 10 drones.

Of course drones don’t have to travel in a straight line, and cruise missiles don’t either, and so we may never know for sure where the attacks originated.

But we do know that the Houthi rebels in Yemen are being backed by Iran, and we also know that the Shia militias in Iraq are also being backed by Iran.

So whether the attacks originated in Yemen, southern Iraq or Iran itself, it is not going to be too difficult for U.S. officials to place the blame on the Iranians, and we should expect some sort of military response.

In fact, President Trump posted the following message to Twitter just a little while ago…

Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!

Of course U.S. airstrikes against Iran itself could ultimately spark World War 3, and most Americans are completely clueless that we could literally be on the precipice of a major war.

According to the Saudis, the equivalent of 5.7 million barrels a day of oil production were affected by the attacks.  Saudi Arabia typically produces about 9.8 million barrels a day, and so that is a really big deal.

When the markets reopened on Sunday night, oil futures exploded higher.  In fact, according to Zero Hedge this was the biggest jump ever…

With traders in a state of near-frenzy, with a subset of fintwit scrambling (and failing) to calculate what the limit move in oil would be (hint: there is none for Brent), moments ago brent reopened for trading in the aftermath of Saturday’s attack on the “world’s most important oil processing plant“, and exploded some 20% higher, to a high of $71.95 from the Friday $60.22 close, its biggest jump since futures started trading in 1988.

As I write this article, the price of Brent crude is currently sitting at $66.89, although at least one analyst is warning that the price of oil could soon shoot up to “as high as $100 per barrel” if the Saudis are not able to quickly resume their previous level of production…

The oil market will rally by $5-10 per barrel when it opens on Monday and may spike to as high as $100 per barrel if Saudi Arabia fails to quickly resume oil supply lost after attacks over the weekend, traders and analysts said.

Saudi officials have already told us that they anticipate that a third of the lost oil output will be restored on Monday.

But because of the extensive damage that has been done, restoring the remainder of the lost output could take “weeks” or even “months”.

In the short-term, President Trump has “authorized the release of oil from the Strategic Petroleum Reserve“, and that should help stabilize prices somewhat.

However, if a full-blown war with Iran erupts, nothing is going to be able to calm the markets.  In such a scenario, the price of oil could easily explode to a level that is four or five times higher than it is today, and that would essentially be the equivalent of slamming a baseball bat into the knees of the global economy.

The times that we are living in are about to become a whole lot more serious, but most Americans are not even paying attention to these absolutely critical global events.

In fact, even the mainstream media seems to believe that the new allegations against Supreme Court Justice Brett Kavanaugh are more important.

That is because they don’t understand what is really happening.

Trust me, keep a close eye on the Middle East, because things are about to start breaking loose there in a major way.

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.

Do You Remember The Oil Crisis And “Stagflation” Of The 1970s? In Many Ways, 2019 Is Starting To Look A Lot Like 1973…

The price of gasoline is rapidly rising, economic activity is slowing down, the Middle East appears to be on the brink of war, and Democrats are trying to find a way to remove a Republican president from office.  In many ways, 2019 is starting to look a lot like 1973.  For many Americans, the 1970s represent a rather depressing chapter in U.S. history that they would just like to forget, but the truth is that if we do not learn from history it is much more likely that we will repeat our mistakes.  And without a doubt, right now a lot of things are starting to move in a very ominous direction.

“Stagflation” was a term that was made popular in the 1970s, and it occurs when there is a high rate of inflation but economic growth is declining or stagnant.

The U.S. hasn’t had a serious bout with stagflation in quite a while, but it appears that we may be moving in that direction.

Let’s talk about the slowdown in the economy first.  On Monday, we learned that sales of existing homes in the U.S. were way down in March…

Home sales are struggling to rebound after slumping in the second half of last year, when a jump in mortgage rates to nearly 5% discouraged many would-be buyers. Spring buying is so far running behind last year’s healthy gains: Sales were 5.4% below where they were a year earlier.

On a year over year basis, existing home sales have now fallen for 13 months in a row.

That is terrible, and there is no way to “spin” that fact to make it look good.

We also learned on Monday that Office Depot is closing 50 stores.  Of course this is just the continuation of a trend that The Economic Collapse Blog has been tracking for quite some time.

Overall, U.S. retailers have already announced more store closings in 2019 than they did all of last year, and we are on pace for the worst year for store closings in all of U.S. history.

Ouch.

I could go on and on listing more numbers that indicate that the U.S. economy has been slowing down, but I don’t want to repeat much of what I have already shared over the past several weeks.

Meanwhile, inflation is starting to rise significantly in some pretty key areas.  Previously I have explained why food prices are beginning to move up aggressively, and now gas prices are starting to make national headlines once again.

For example, the price of gas in the state of California just hit the highest level in nearly five years…

California’s gas prices continued to climb Wednesday, hitting the highest levels in almost five years.

Motorists throughout the Golden State are paying an average of $4.01 for a gallon of regular gasoline, by far the highest in the country and well above the national average of $2.83, according to a news release from AAA.

The primary factor driving up the price of oil is geopolitical wrangling in the Middle East.  According to CNBC, President Trump intends to stop Iran from exporting any oil at all…

Oil prices surged about 3% at midday on Monday, hitting fresh 2019 highs, after the Trump administration announced that all oil buyers will have to end imports from Iran in just over a week or be subject to U.S. sanctions.

The administration said the State Department will cease granting sanctions waivers to any country still importing Iranian crude or condensate, an ultra-light form of crude oil, after May 2.

If President Trump is successful, it will eliminate approximately a million barrels of oil per day from the global marketplace.

That is a big deal.

And this comes at a time when oil prices have already been steadily rising.

Unfortunately, Iran doesn’t plan to take this move lying down, and their response could potentially spark a full-blown oil crisis.

According to Bloomberg, Iran is actually threatening to close the Strait of Hormuz for all commerce…

Iran will close the Strait of Hormuz, a waterway vital for global oil shipments, if the country is prevented from using it, a senior military official said on Monday in what appears to be a response to the U.S. plan to end waivers on Iranian oil exports.

“If we are prevented from using it, we will close it,” the state-run Fars news agency reported, citing Alireza Tangsiri, head of the Revolutionary Guard Corps navy force. “In the event of any threats, we will not have the slightest hesitation to protect and defend Iran’s waterway.”

If Iran did such a thing, it would throw global oil markets into a state of tremendous turmoil, and it would bring us much, much closer to war with Iran.

In recent days the Iranians and the Trump administration have been trading very angry words, and it certainly doesn’t help that the Iranians just appointed a certified hothead as the leader of the Republican Guards…

Salami has frequently vowed to destroy Israel and “break America.” Iran was “planning to break America, Israel, and their partners and allies. Our ground forces should cleanse the planet from the filth of their existence,” Salami said in February. The previous month, he vowed to wipe Israel off the “global political map,” and to unleash an “inferno” on the Jewish state.

He also said “Iran has warned the Zionist regime not to play with fire, because they will be destroyed before the US helps them.” Any new war, he said, “will result in Israel’s defeat within three days, in a way that they will not find enough graves to bury their dead.”

Hossein Salami is a complete and total nutjob, and I am entirely convinced that he actually wants a war with the United States and Israel.

For a long time I have been warning that we need to watch the Middle East, and a major regional war could potentially erupt at any time.

Let us hope that cooler heads prevail, because a full-blown war involving Iran, Israel and the United States would mean an immense amount of death and destruction.

For the moment, things are relatively calm in the United States, but most Americans don’t realize that we are actually in a very precarious position.

It isn’t going to take much for global events to reach a tipping point, and once they do there will be no going back.

Get Prepared NowAbout 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.

3 Things That Happened Just Before The Crisis Of 2008 That Are Happening Again Right Now

Real estate, oil and the employment numbers are all telling us the same thing, and that is really bad news for the U.S. economy.  It really does appear that economic activity is starting to slow down significantly, but just like in 2008 those that are running things don’t want to admit the reality of what we are facing.  Back then, Fed Chair Ben Bernanke insisted that the U.S. economy was not heading into a recession, and we later learned that a recession had already begun when he made that statement.  And as you will see at the end of this article, current Fed Chair Jerome Powell says that he is “very happy” with how the U.S. economy is performing, but he shouldn’t be so thrilled.  Signs of trouble are everywhere, and we just got several more pieces of troubling news.

Thanks to aggressive rate hikes by the Federal Reserve, the average rate on a 30 year mortgage is now up to about 4.8 percent.  Just like in 2008, that is killing the housing market and it has us on the precipice of another real estate meltdown.

And some of the markets that were once the hottest in the entire country are leading the way down.  For example, just check out what is happening in Manhattan…

In the third quarter, the median price for a one-bedroom Manhattan home was $815,000, down 4% from the same period in 2017. The volume of sales fell 12.7%.

Of course things are even worse at the high end of the market.  Some Manhattan townhouses are selling for millions of dollars less than what they were originally listed for.

Sadly, Manhattan is far from alone.  Pending home sales are down all over the nation.  In October, U.S. pending home sales were down 4.6 percent on a year over year basis, and that was the tenth month in a row that we have seen a decline…

Hope was high for a rebound (after new-home-sales slumped), but that was dashed as pending home sales plunged 2.6% MoM in October (well below the expected 0.5% MoM bounce).

Additionally, Pending Home Sales fell 4.6% YoY – the 10th consecutive month of annual declines…

When something happens for 10 months in a row, I think that you can safely say that a trend has started.

Sales of new homes continue to plummet as well.  In fact, we just witnessed a 12 percent year over year decline for sales of new single family houses last month…

Sales of new single-family houses plunged 12% in October, compared to a year ago, to a seasonally adjusted annual rate of 544,000 houses, according to estimates by the Census Bureau and the Department of Housing and Urban Development.

With an inventory of new houses for sale at 336,000 (seasonally adjusted), the supply at the current rate of sales spiked to 7.4 months, from 6.5 months’ supply in September, and from 5.6 months’ supply a year ago.

If all of this sounds eerily similar to 2008, that is because it is eerily similar to what happened just before and during the last financial crisis.

Up until now, at least the economic optimists could point to the employment numbers as a reason for hope, but not anymore.

In fact, initial claims for unemployment benefits have now risen for three weeks in a row…

The number of Americans filing applications for jobless benefits increased to a six-month high last week, which could raise concerns that the labor market could be slowing.

Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 234,000 for the week ended Nov. 24, the highest level since the mid-May, the Labor Department said on Thursday. Claims have now risen for three straight weeks.

This is also similar to what we witnessed back in 2008.  Jobless claims started to creep up, and then when the crisis fully erupted there was an avalanche of job losses.

And just like 10 years ago, we are starting to see a lot of big corporations start to announce major layoffs.

General Motors greatly upset President Trump when they announced that they were cutting 14,000 jobs just before the holidays, but GM is far from alone.  For a list of some of the large firms that have just announced layoffs, please see my previous article entitled “U.S. Job Losses Accelerate: Here Are 10 Big Companies That Are Cutting Jobs Or Laying Off Workers”.

A third parallel to 2008 is what is happening to the price of oil.

In 2008, the price of oil shot up to a record high before falling precipitously.

Well, now a similar thing has happened.  Earlier this year the price of oil shot up to $76 a barrel, but this week it slid beneath the all-important $50 barrier…

Oil’s recent slide has shaved more than a third off its price. Crude fell more than 1% Thursday to as low as $49.41 a barrel. The last time oil closed below $50 was in October 4, 2017. By mid morning the price had climbed back to above $51.

Concerns about oversupply have sent oil prices into a virtual freefall: Crude hit a four-year high above $76 a barrel less than two months ago.

When economists are asked why the price of oil is falling, the primary answer they give is because global economic activity is softening.

And that is definitely the case.  In fact, we just learned that economic confidence in the eurozone has declined for the 11th month in a row…

Euro-area economic confidence slipped for an 11th straight month, further damping expectations that the currency bloc will rebound from a sharp growth slowdown and complicating the European Central Bank’s plans to pare back stimulus.

In addition, we just got news that the Swiss and Swedish economies had negative growth in the third quarter.

The economic news is bad across the board, and it appears to be undeniable that a global economic downturn has begun.

But current Fed Chair Jerome Powell insists that he is “very happy about the state of the economy”…

Jerome H. Powell, the Federal Reserve’s chairman, has also taken an optimistic line, declaring in Texas recently that he was “very happy about the state of the economy.”

That is just great.  He can be as happy as he wants, and he can continue raising interest rates as he sticks his head in the sand, but nothing is going to change economic reality.

Every single Fed rate hiking cycle in history has ended in a market crash and/or a recession, and this time won’t be any different.

The Federal Reserve created the “boom” that we witnessed in recent years, but we must also hold them responsible for the “bust” that is about to happen.

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

“The Outlook For The Global Economy Has Deteriorated”: Oil, Copper And Lumber Are All Telling Us The Next Economic Downturn Is Here

Oil, copper and lumber are all telling us the exact same thing, and it isn’t good news for the global economy.  When economic activity is booming, demand for commodities such as oil, copper and lumber goes up and that generally causes prices to rise.  But when economic activity is slowing down, demand for such commodities falls and that generally causes prices to decline.  In recent weeks, we have witnessed a decline in commodity prices unlike anything that we have witnessed in years, and many are concerned that this is a very clear indication that hard times are ahead for the global economy.

Let’s talk about oil first.  The price of oil peaked in early October, but since that time it has fallen more than 25 percent, and the IEA is warning of “relatively weak” demand out of Asia and Europe…

The International Energy Agency said on Wednesday that while US demand for oil has been “very robust,” demand in Europe and developed Asian countries “continues to be relatively weak.” The IEA also warned of a “slowdown” in demand in developing nations such as India, Brazil and Argentina caused by high oil prices, weak currencies and deteriorating economic activity.

“The outlook for the global economy has deteriorated,” the IEA wrote.

Meanwhile, the price of copper has been declining for quite some time now.  The price of copper also fell substantially just before the last recession, and many analysts are pointing out that “Dr. Copper” is now waving a red flag once again…

The message of weakening demand on the oil front was reinforced by the falling price of copper. The base metal is often referred to as “Dr. Copper” on its presumed ability to forecast the peaks and troughs of business cycles since it is used in different areas of the economy such as homes, factories and electricity generation. Copper has served as a leading indicator of both recessions and economic booms.

The price of lumber is a “third witness” that indicates that big trouble is looming.

Last month, lumber dropped more than 10 percent, and that was the biggest monthly drop that we have seen in more than 7 years…

In October, prices for softwood lumber in the U.S. dropped 10.3% – the largest decline since May 2011, according to the Producer Price Index (PPI) release by the Bureau of Labor Statistics. The producer price index for softwood lumber has fallen 21.2% since setting the cycle and all-time high in June.

If oil, copper and lumber are all telling us the same thing simultaneously, don’t you think that we should be listening?

At this point, even Bloomberg is admitting that the global economy is heading toward “a generalized slowdown”…

These developments suggest the synchronized growth that the global economy has enjoyed in recent years is likely to be replaced by a generalized slowdown. Just take a look at the data out of Japan and Germany this week, which showed the world’s third- and fourth-largest economies contracted in the third quarter.

How many signs is it going to take before people start understanding what is happening?

Wells Fargo just notified about 1,000 employees that they will be laid off.  Job losses are starting to mount, and it is likely that we will start to see these sorts of news stories on an almost daily basis now.

And as the shaking on Wall Street accelerates, we are going to see more financial firms get into trouble.  In fact, we just witnessed the total collapse of OptionSellers.com.  The following comes from a notice that they sent to investors informing them that they lost all their money and that the firm is being liquidated…

I am writing to give you an update on the situation here with your account.

We have spent the week unwinding our short natural gas call position as expediently as possible.

Today which was to be the final day of liquidation, the market flared as prices appear to have been caught in a “short squeeze.”

The speed at which it took place is truly beyond anything I have seen in my career. It overran our risk control systems and left us at the mercy of the market.

In short, it was a rogue wave and it overwhelmed us.

Unfortunately, this has resulted in a catastrophic loss.

Our clearing firm, FC Stone now requires us to liquidate all positions. We hoped to have this done today. If not, it will be completed tomorrow.

Your account could potentially be facing a debit balance as of tomorrow. OptionSellers.com will be processing fee credits over the course of the coming days to help alleviate debit balances. What these will be will be determined after all positions are cleared.

This has in effect, crippled the firm. At this point, our brokers at FC Stone have been assisting us in liquidation.

Our offices will remain open and we will all still be here to answer your questions and process account closings. We will do everything in our power to ease what discomfort we can.

I am truly sorry this has happened.

I will be updating you again via memo in 24 hours.

Regards,

OptionSellers.com

Those investors are among the first to be completely wiped out, but they certainly won’t be the last.

The ironic thing is that Americans are less concerned about another crisis than they have been at any point since 2008 at a time when they should be more focused on getting prepared than ever.

You know that it is really late in the game when even Jim Cramer of CNBC is saying that the U.S. economy is really slowing down.  A few of my readers wrote me after that article because they didn’t like the fact that I had quoted Jim Cramer.  But I don’t think that they really got my point.  I was not endorsing Jim Cramer as some sort of financial guru.  Rather, I was pointing out that even mainstream media celebrities that were previously cheerleaders for the economy are now recognizing the reality of what we are facing.

Global economic activity is slowing down, and things are shifting very rapidly now.  The weather is already getting very cold, the mood of the nation is very dark, and it would only take a very small push to send us completely tumbling over the edge.

About the author: Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

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