In the ninth circle of oil

[abomvubuso.livejournal.com]

Jihadists fighting fierce battles just a few kilometers from Baghdad and shelling the city with missiles. Nigeria being hit by the ebola epidemic, and crumbling under the pressure of Islamist extremists. Libya and Syria in chaos. Russia entangled in a civil war in Ukraine. Despite all these crises in countries that are major oil producers, the oil prices, which are usually so sensitive to any turbulence (or even to hints thereof), have not skyrocketed just yet as one might've expected. Just on the contrary, they've dropped by almost a quarter since their June peak when they were nearing 115 dollars per barrel. Now the oil prices are at a four-year record low. So what gives?

Although there are all sorts of conspiracy theories floating around about how the US and the Saudis have secretly made a pact for collapsing the oil prices in order to bring Russia and Iran to their knees, the more probable explanation is much more trivial and is hidden in the classic principle of supply and demand. The thing is, right now there's an excess of geopolitical risk, but an even greater excess of oil supply. If we add the lagging European, Chinese and Japanese economies and the respective consumption shrinking, the plunging oil prices suddenly cease being so mysterious and shocking, after all.

( So what follows from all that? )