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Title: The Petrodollar Is in Trouble
Source: [None]
URL Source: https://www.bing.com/news/search?qp ... tp%3a%2f%2frt.com%2f&FORM=EWRE
Published: Jun 19, 2017
Author: Steve St. Angelo
Post Date: 2017-06-19 08:56:51 by Tatarewicz
Keywords: None
Views: 68

RT... The U.S. PetroDollar system is in serious trouble as the Middle East’s largest oil producer continues to suffer as the low oil price devastates its financial bottom line. Saudi Arabia, the key player in the PetroDollar system, continues to liquidate its foreign exchange reserves as the current price of oil is not covering the cost to produce oil as well as finance its national budget.

The PetroDollar system was started in the early 1970’s, after Nixon dropped the Gold-Dollar peg, by exchanging Saudi Oil for U.S. Dollars. The agreement was for the Saudi’s only to take U.S. Dollars for their oil and reinvest the surpluses in U.S. Treasuries. Thus, this allowed the U.S. Empire to continue for another 46 years, as it ran up its ENERGY CREDIT CARD.

And run up its Energy Credit Card it most certainly did. According to the most recent statistics, the total cumulative U.S. Trade Deficit since 1971, is approximately $10.5 trillion. Now, considering the amount of U.S. net oil imports since 1971, I calculated that a little less than half of that $10.5 trillion cumulative trade deficit was for oil. So, that is one heck of a large ENERGY CREDIT CARD BALANCE.

Regardless… the PetroDollar system works when an oil exporting country has a “SURPLUS” to reinvest into U.S. Treasuries. And this is exactly what Saudi Arabia has done up until 2014, when it was forced to liquidate its foreign exchange reserves (mostly U.S. Treasuries) when the price of oil fell below $100.

advertisement So, as the price of oil continued to decline from the mid 2014 to the latter part of 2016, Saudi Arabia sold off 27% of its foreign exchange reserves. However, as the oil price recovered at the end of 2016 and into 2017, this wasn’t enough to curtail the continued selling of Saudi’s foreign exchange reserves. The Kingdom liquidated another $36 billion of its foreign exchange reserves in 2017:

Saudi Arabia Foreign Exchange Reserves

According to the Zerohedge article, Economists Puzzled By Unexpected Plunge In Saudi Foreign Exchange Reserves:

The stabilization of oil prices in the $50-60/bbl range was meant to have one particular, material impact on Saudi finances: it was expected to stem the accelerating bleeding of Saudi Arabian reserves. However, according to the latest data from Saudi Arabia’s central bank, aka the Saudi Arabian Monetary Authority, that has not happened and net foreign assets inexplicably tumbled below $500 billion in April for the first time since 2011 even after accounting for the $9 billion raised from the Kingdom’s first international sale of Islamic bonds.

….. Whatever the reason, one thing is becoming clear: if Saudi Arabia is unable to stem the reserve bleeding with oil in the critical $50-60 zone, any further declines in oil would have dire consequences on Saudi government finances. In fact, according to a presentation by Sushant Gupta of Wood Mackenzie, despite the extension of the OPEC oil production cut, the market will be unable to absorb growth in shale production and returning volumes from OPEC producers after cuts until the second half of 2018. Specifically, the oil consultancy warns that due to seasonal weakness in Q1 for global oil demand, the market will soften just as cuts are set to expire in March 2018.

advertisement The Saudi’s have two serious problems:

As the Saudi’s cut their oil production due to the OPEC agreement, the U.S. shale energy companies ramp up production because they are able to produce oil by shifting any losses to Brain-Dead investors looking for a higher yield. This destroys the ability for OPEC to drain global oil inventories, so the oil price continues to trend lower. Which means the Saudi’s may have to liquidate even more foreign exchange reserves in the future on lower oil prices. Rinse and Repeat. The Saudis are planning a 5% IPO – Initial Public Offering in 2018 of their estimated $2 trillion of their oil reserves and are hoping to get $200 billion. However, energy analysts Wood Mackenzie estimates that the value of the reserves are more like $400 billion, not $2 trillion. This is due to all the costs, royalties and 85% income tax to support the Saudi Government and the 15,000 members of the Royal Saudi Family. Thus, Wood Mackenzie doesn’t believe there will be much in the way of dividends left over.

That being said, I highly doubt the Saudi’s have the 266 billion barrels of oil reserves stated in the new 2016 BP Statistical Review. The Saudi’s produce about 4.5 billion barrels of total oil liquids per year. Thus, their reserves should last them nearly 60 years.

Now… why on earth would Saudi Arabia sell a percentage of its oil reserves if it has 60 more years of oil production in the future???? Something just doesn’t pass the smell test. Is it worried about lower oil prices, or maybe it may not have all the reserves that it states?

Either way… it is quite interesting that Saudi Arabia continued to liquidate its foreign exchange reserves in April even though the price of oil was above $53 for the majority of the month. I believe the Kingdom of Saud is in BIG TROUBLE. That is why they are trying to sell an IPO to raise much needed funds.

As Saudi Arabia continues to liquidate more of its foreign exchange reserves, it means serious trouble for the PetroDollar system. Again… without “SURPLUS” funds, the Saudi’s can’t purchase U.S. Treasuries. Actually, for the past three years, Saudi Arabia has been selling a lot of its U.S. Treasuries (foreign exchange reserves) to supplement the shortfall in oil revenues.

If the oil price continues to trend lower, and I believe it will, Saudi Arabia and the PetroDollar system will be in more trouble. The collapse of the PetroDollar system would mean the end of the U.S. Dollar supremacy and with it, the end of gold market intervention.

Source: SRSrocco Report


Poster Comment:

inmyop Vtran • Qatar seems to be too much anti Israeli and that is the main reason why the US no longer likes this country. There is no place for such behavior in the Middle East. Al Jazeera must change its attitude about Israeli issues. Qatar is also the biggest producer of LNG, a competitor for American shale gas... Regarding the petrodollar system I think this is not so important nowadays. The new Holy Grail for the global cabal is ARTIFICIAL INTELLIGENCE. +2

Russ Russell Vtran • Good grief, Vtran. Qatar has been using the Chinese renminbi or yuan for roughly the past 18 months. In fact, the UAE trades more on the renminbi than does Qatar and no one is threatening the UAE

Vtran TBrites • Similar ... Libya and a number of "african" nations wanted a Gold Backed Currency for Oil / Gaz ... -

Now the Libyan Gold is Gone; Qaddafi is dead; Libya the country may only recover if it Breaks Up and U$ americans think they are the "good guys" and Libyans, just like First Nations are the Bad Guys ,,,,

Mark Vtran • How did I miss that?? Of course, you're right - in fact, Qatar entered into an agreement in 2014 to be China's Middle-East clearing hub for the yuan. <;p> http://www.reuters.com/arti...

Thanks for that; it was very educational, and a few more puzzle pieces clicked into place. In exchange, something else you may not know, which I learned here - the Saudis now own outright the largest oil refinery in the USA, at Port Arthur, in Texas.

http://money.cnn.com/2017/0...

Aramco also acquired 100% control of 24 distribution terminals in the USA, as well as the exclusive right to sell Shell-branded gasoline in Georgia, North Carolina, South Carolina, Virginia, Maryland, the eastern half of Texas and the majority of Florida.

Actually, Saudi Arabia and Russia are becoming progressively more chummy, and their production-cap deal seems almost purpose-built to lure the United States into doing something stupid, like increasing its own production. http://www.cnbc.com/2017/05... As this article points out, lavish welfare handouts in exchange for not working have long been the means by which Saudi Arabia staves off social unrest with monarchist policies. It needs oil revenues to continue handing out the lolly. If it can't deliver, simmering tensions may boil over. http://www.cnbc.com/2016/01...

Vtran Mark • Agree U$ american shale producers will fill the void, thus oil prices will come down once again ...

John Tosh • The Dollar is dead, nothing you or I can do anything about. The US had a good run, we need to move on instead of hanging on to a dead carcass. One thing the US needs to do is shed dead weight. The investment in war and the CIA programs are not as profitable as once thought. Very few people buy US weapons which means the billions of Dollars wasted in the arms industry needs to be trimmed. Trim the waste of US Dollars in war enterprises. Its too expensive and very little in return. Not even US dominance is helped by wars. The US power in the past was wealth which everyone on the globe knew. Now without money the wars and military adventures are a waste. +4

Serg Derbst John Tosh • The best would be a currency reform. Or at least put all the money wasted on the military-security-surveillance-prison complex into building up infrastructure and education. Both is direly needed. Also, if the US would move away from oil, coal, and nuclear to clean energy, it would boost the economy - and the US totally has the means to do it. In theory at least...

Russell A Wilson Russ Russell • The petro dollar cannot last another 100-150 years. It was created to fleece everyone of there wealth. In 1970 I could by 10 loaves of bread for one dollar or four gallons of gasoline. You could buy a brand new car for under 2000 dollars. Minimum wage in my area was $1.65 per hour. 46 years later one loaf of bread is around $3.00 a gallon of gas is over $4.00 and brand new car is hard to find under $20,000.00. Yet wages did not increase as It went from $1.65 per hour around $12.00 per hour. Or six times 1970 wages everything else cost more than 10 times 1970 prices and some cases thirty times. So your labour does not buy as much as it did in the past and that is why it takes two income earners in stead of one to try and keep up with the same standard of living as 1970. At this rate another 46 years the Dollar will not be able to purchase anything unless you have astronomical amounts of it. The only thing that will preserve your wealth monetarily is precious metals Certainly not the dollar or crypto currencies as they are based on faith and nothing else.

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