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Crashing crude may blow a $1.6 trillion hole in the global oil sector, annually

Dec 14, 2014 9:36 a.m. ET

NEW YORK (MarketWatch)—Talk about an oil spill. The spectacular unhinging of crude oil prices over the past six months is weighing mightily on the U.S. stock market.

And while it may be too early to abandon all hope that the market will stage a year-end Santa rally, it appears that if Father Christmas comes, there’s a good chance his sleigh will be driven by polar bears, instead of gift-laden reindeer.

Wall Street’s gift: a major stock correction.

Indeed, the Dow Jones Industrial Average DJIA, -1.79%  already endured a bludgeoning, registering its second-worst weekly loss in 2014, shedding 570 points, or 3.2%, on Friday. That’s just shy of the 579 points that the Dow lost during the week ending Jan. 24, earlier this year. It’s also the second worst week for the S&P 500 this year SPX, -1.62% which was down about 58 points, over the past five trading days, or 2.83%, compared to a cumulative weekly loss of 61.7 points, or 3.14%, during the week concluding Oct. 10.

But all that carnage is nothing compared to what may be in store for the oil sector as crude oil tumbles to new gut-wrenching lows on an almost daily basis. On the New York Mercantile exchange light, sweet crude oil for January delivery settled at $57.81 on Friday, its lowest settlement since May 15, 2009.

Moreover, the largest energy exchange traded fund, the energy SPDR XLE, -1.86% is off by 14% over the past month and has lost a quarter of its value since mid-June.

The real damage, however, is yet to come. By some estimates the wreckage, particularly for the oil-services companies, may add up to a stunning $1.6 trillion annual loss, at oil’s current $57 low, predicts Eric Lascelles, RBC Global Asset Management chief economist.

Since it’s a zero-sum game, that translates into a big windfall for everyone else outside of oil players.

In his calculation, Lascelles includes the cumulative decline in oil prices since July and current supply estimates of 93 million barrels a day. It’s a fairly simplistic tally, but it gets the point across that the energy sector is facing a serious oil leak. Here’s a look at a graphic illustrating the zero-sum, wealth redistribution playing out as oil craters: Source and more

U.S.-Iran Talks: Set Up To Crash And Burn


The U.S. ultimatum to Iran: Surrender or Die.

April 10, 2012

The United States and Iran will meet in Istanbul on Saturday, April 14, to discuss Iran’s nuclear program and other issues.

But don’t hold your breath. The likelihood of a compromise from both sides is very low. Many informed analysts believe that the list of demands by the Obama administration to Iran are deliberately high and unrealistic so as to make Iran look like the one who is spoiling the good vibes and unwilling to commit to peace.

Paul R. Pillar, a former CIA official, summed up the nature of the talks by saying:

The Western message to Tehran seems pretty clear: we might be willing to tolerate some sort of Iranian nuclear program, but only one consisting of facilities that would suffer significant damage if we, or the Israelis, later decide to bomb it. In other words, we insist on holding Iranian nuclear facilities hostage to armed attack. Not the sort of formula that inspires trust among Iranian leaders and gives them much incentive to move toward an agreement.

If the goal is to further the deadlock between Iran and the West then the Obama administration’s strategy of high demands will succeed, and pave the way for war. Trita Parsi, the director of the National Iranian American Council, says: “The problem is not necessarily the demands, but the imbalance between what is demanded and what is offered.”

America is taking the Godfather’s approach to diplomacy, making offers that amount to: surrender, or die. That is not statesmanship; that is thuggery. Is the whole world supposed to be afraid of the Big Bad America and collapse at its feet of clay like slaves? Death is a better option.

The U.S. stand-off against Iran is so crazy because Iran already compromised, twice, but the U.S. rejected Iran both times. In 2003, shortly after the U.S. invasion of Iraq, Iran offered America the “Grand Bargain” but the Bush administration spat in the face of Iran and told it to go to hell.

The second time was in May 2010, when Brazil and Turkey reached an agreement with Iran on its nuclear program after President Obama specifically requested that they get together and strike a deal. But President Obama quickly turned his back on the deal and decided instead to impose sanctions on Iran. That is why Obama is known as a two-faced rat.

Obama and his masters always wanted to bomb Iran. The peace talks is just a stalling tactic. How can anyone trust two-faced rats like Obama and Netanyahu to sit down like gentlemen and make peace? They have no respect for Iran or for any nation. Like Bush and Cheney, Obama deserves the death penalty, not a Nobel peace prize.

Posted by Saman Mohammadi at 3:43 PM


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