Venezuela is leading a global campaign among producing countries to raise and support the prices of crude oil at $ 80 or so. What are the causes of his fall ?. Here we explain.
Since 2004, crude oil prices have been volatile, with a downward trend. Venezuela is leading a global campaign to gather wills between the members of the Organization of Petroleum Exporting Countries (OPEC) and other world producers, to try to raise it and maintain it.
Know the main causes that destabilize the global oil market:
Since 2002, major oil producers have experienced sabotage, invasions and military offensives by US and its allies.
.- Oil strike in Venezuela from 2002-2003 promoted by the United States after the failed coup of April of that year.
.- US invasion of Iraq in 2003, under the excuse of the alleged existence of weapons of mass destruction.
.- Sabotage the flow of oil in Nigeria.
.- Sanctions and threats against Iran by the governments of George Bush and Barack Obama.
.- Overthrow and murder of Libyan leader Muammar Gaddafi. NATO bombing and financing mercenary groups that dismembered Libya, which before the war was one of the largest oil producers in Africa.
.- Western support for terrorist groups in Syria with the aim to overthrow President Bashar al-Assad.
All these factors had a negative impact on the oil market, which initially undertook a rally after having remained for 16 years below $ 30 a barrel until 2002.
After invading Iraq in 2003, the Bush administration threatened to countries that did not follow their guidelines to be the next targets.
Not yielding to his pretensions, Washington sought to intimidate the producers (especially in the Middle East and the Persian Gulf) with carrier visits, maneuvers, contramaniobras, weapons deployment, military exercises, support for terrorist groups in Syria, Iraq and other area countries.
Why the Gulf? Because in that area much of the world’s oil (No. 1 producer with 10.3 million barrels per day Saudi Arabia) occurs. Most oil exports pass through the Straits of Hormuz, the only exit to the oceans.
Since 2014, the president of Venezuela, Nicolas Maduro , has warned about the method used by the United States for the production of oil, called “fracking”.
Maduro has reported that US oil flooded the world market with the aim of lowering oil prices, and destabilize the economies of the exporting countries, especially Venezuela and Russia.
“(Obama) recognizes the economic war against Russia, here we have it, we can read now, I read yesterday; recognizes war oil prices for the first time it recognizes the strategic line that is under development and it is behind it. Moreover, he says more seriously, to take effect this year, next year and the other, 2015 and 2016, oil war, war of prices, “the Venezuelan president in December 2014.
The so-called “fracking” is a technique for extracting oil and gas from underground. We proceed to fracture the rock hundreds of meters deep injecting between the cracks, water and other chemicals at high pressure.
See also → The fracking unbalanced the world oil market
The technique has served the United States to raise its oil production and at the same time to make them cheaper in the international market. This method poses serious health risks for the contamination of groundwater with the liquid mixture introduced underground during the process, in addition to affecting the global seismicity.
The Fact: The US is the largest oil consumer in the world with 18.2 million barrels per day (2014).
The oil market speculation is a factor that affects the price volatility.
The Secretary General of the Organization of Petroleum Exporting Countries (OPEC) , Abdullah al-Badri said the current state of the oil market does not justify the collapse in oil prices.
“We want to know the real reasons that led to such a fall in prices,” he said in Dubai on December 14.
Al Badri said that the production ceiling of OPEC “has not changed in the last 10 years (remaining) in about 30 million barrels” per day.
“Supply and demand were up -ligera- does not explain this drop 50 percent” since June 2014. If this continues, “speculation contributes greatly” to the collapse in prices, he added.
According to the American economist Jack Rasmus, there are at least three major potential impacts on global economic instability, following deflation of oil prices.
1- rapid appreciation of the US dollar, and the corresponding relative decline of the currencies of several emerging market economies (EME) – particularly those dependent on commodity exports, especially those for oil exports represent a significant percentage of total exports.
There is a long, documented historical relationship between the fall of oil prices and rising dollar.
2- Contribution to the general deflation in Europe and Japan economies are already in recession.
Despite the billions of dollars of liquidity injections by central banks, price levels still have been reduced to zero or less. Deflation oil added a deflationary drift significantly in Europe in general and in Japan.
This in turn is likely to lead to even more liquidity injections by central banks in the form of more quantitative easing (QE), further fueling the stock markets and bond asset bubbles.
3- The decrease in financial assets linked to oil could increase the trend to global financial instability.
Oil deflation can lead to widespread bankruptcies and defaults for various non-financial companies, which in turn precipitate financial instability events in banks linked to these companies.
The collapse of financial assets associated with oil may also have a “chain effect” later in other forms of financial assets and financial instability spreading to other credit markets.
President Maduro has insisted on a proposal for members and non-members of OPEC, which consists of two points:
1- Apply a mechanism of progressive cuts in oil production, in order to control prices.
2- Establish a first floor in oil prices at $ 70 and a ceiling of 100.