Although I’ve only recently started dabbling in investing, I’ve followed Wall Street enough my whole life to be surprised at the sudden association of low oil prices with tanking stocks. It turns out this is a relatively new phenomenon.
As someone who drives a ridiculous amount, few things make me happier than cheap gas. If I can spend $30 on gas a week versus $50, it almost feels like I’m making money. I have more to spend on necessities, such as groceries and shoes. The start of the Shale boom has hugely benefited the average consumer and made the U.S. more energy independent. Of course, whether or not the benefits of tracking out way the cons, is a highly contentious subject that I don’t feel like elaborating on this morning. I still haven’t even finished my coffee.
Unfortunately, it turns out that the Sierra club and similar environmentalist groups aren’t the only ones who have a problem with the Shale Boom. OPEC doesn’t like the competition either. Instead of cutting back production as U.S. Oil started entering the market, the Saudis decided to start flooding the market, driving oil prices down. Thanks to John Kerry and the Iran Deal, Iran can also now join in on the fun. The reason these low prices are hurting the stock market is largely due to the fact that U.S. investors and companies bet big on American Oil. The Saudis tactic is effectively working to drive U.S. Oil companies out of business and hurt our energy industry. Many Oil analysts failed to predict this because they wrongly believed that OPEC was already outputting its maximum amount.
Part of the explanation for the Saudis fearlessly flooding the market, lies in the fact that they are preparing for the end of the oil age by 2050. In a revelation that will make hippies happy, oil producing countries sense an end to the industry, and have concluded that oil, “Not produced today may never be produced.” Farther complicating the issue is the relationship between the United States, Saudi Arabia and the fight against ISIS. ISIS made millions of dollars smuggling oil mainly produced in Syria. The United States feels that the Saudi government has not done enough to combat the growing threat of ISIS in their backyard.