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Forgive me , but I’m not sure what this all means. Sounds like market forces working like they’re supposed to ?

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Yes and no.

OPEC is pushing the price higher by constraining supply. They are doing this because without constraints slack demand pushes the price of oil lower.

To a degree OPEC is manipulating the market to get a higher price per barrel. However, as Russia and Saudi Arabia are both facing decreased oil revenues the invisible hand of the market is still at work.

The main takeaway is that the driving force behind the recent price rises is still constrained supply. While there are forecasts still of increased oil demand in the fourth quarter, that demand has yet to materialize, which means the long-term trajectory for oil is still likely to be lower.

Rising oil prices under these circumstances are not an indication that the global economy will avoid stagflation. That's still very much in the cards.

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Got it. Thanks. Is demand lower because so many people are dying from the vaccines and so many are not driving because they are still depressed from the Covid years or they can't afford gas? I know that I have not returned to my pre-Covid lifestyle.

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When we look at aggregate demand, all we can really say is that it's down (or up, as the case may be). The reasons are always going to be a myriad of factors.

Unemployment (here and in China) certainly plays a role.

A contracting manufacturing base also plays a role.

The prior low prices are also coming into play. A significant part of China's "demand" when prices were low was purchasing for inventory--China built up oil stocks against future price rises, and now that those prices rises are here China is drawing down those same stocks. Essentially, the slump in prices "front-loaded" demand (at least in China).

Incidentally, that last aspect also means that actual demand for oil in China has been even lower than purchases would indicate, because of the very deliberate decision to purchase a surplus as a hedge against prices.

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Of the top 10 oil producing countries (https://www.eia.gov/tools/faqs/faq.php?id=709&t=6 ) most are now a part of or will soon be a part of BRICS - China, Saudi Arabia, Russia, UAE, Brazil, Iran . Most people are focused on them coming up with their own currency, To me this is just as much a blow to the petrodollar because although they may not control what is used for the purchase of the product yet, they control the PRODUCT itself!

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Sep 4, 2023·edited Sep 4, 2023Author

The petrodollar has never been anything but a propaganda prop.

Iran and Saudi Arabia are in competition for hegemony in the Persian Gulf. India and China are not on good terms. Argentina is looking for fresh bailouts as their economy collapses. These are not geopolitical dynamics which can yield a common currency.

It took the EU 40 years to mature from the Common Market into a full blown currency union. And currency union without political union is a primary reason the euro never displaced the dollar as the premier world reserve currency (and the expectation for the euro was that it would do exactly that).

The very earliest that BRICS could hope to launch a common currency is 2030, and that's a wildly optimistic timeline. 2040 is far more likely, and that presumes China is able to halt its economic decline while Russia emerges from the war in Ukraine in a position to project geopolitical influence beyond its own borders. Both outcomes are problematic at best.

In a deglobalizing world, institutions like the G20 and therefore BRICS are fated to become an increasingly anachronistic sideshow, not a geopolitical locus of power and influence.

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