If you work in market chances are you would be asked day in & out “kya lagta hai market?” and its question people pretty much ask everybody and believe me they get orgasm discussing it (yup that’s what turns Analyst on). One of the key reason why people ask this question is, because he wants you in turn to ask him very same question so that he can tell you “he has got it all figure it out”. However off late it’s been crude oil, from high of US$147/148 it has suddenly crashed to US$55/57 and suddenly everybody wants to know why or rather what has actually happened. So here are my top picks that I have managed to gather, remember I don’t know which one is true but surely each one of them makes one hell of reason
- Hollywood still shows American Hero and Russian Villain, needless to say they are always at loggerhead. So one theory suggest Russian wants to hurt US economy so best way is to hurt shale gas industry which has been growing by leaps & bound. So Russia increases production, supply increase and prices crash boom.
- Theory 2, Saudis realised that shale gas could one day pretty much stop American import of oil and hurt their economy, so Saudis increases production, supply increase and prices crash boom.
- Many countries have managed to increase supply from alternate (solar, wind, hydro) energy. Traditional cost has been key barrier, hence those alternate energy never picked up. But lately R&D has picked up pace and cost are coming down. Realising over time world may switch from Oil to alternate energy – economy (Including Saudis & Russia) which are dependent on oil export had to act, so increase production, supply increase and prices crash boom. (many people give extra weight to Saudi & Russia being OPEC member…wink)
- You know that Malaysian airline plane that got shot down over Russia-Ukraine border…and then resulting Russian adventure in Ukraine, it seems US is not too happy and wanted to kind of make Russia Unhappy. So US gets Saudis to increases production, supply increase and prices crash boom, Russia suffers.
- China is world’s second largest economy and many global renowned economist have been predicting slowdown (since 2000) now finally it looks its slowing down and hence demand for crude would go down and so should price.
I am sure there are more conspiracy theories going around the world and don’t know which one is true. But surely there are tonnes of smart people working on it, till then probably it would make a case to look at all those companies who have been negatively impacted by fall in prices. After all Howard Marks said “Everything is Cyclical”, and Warren Buffett said “Be fearful when others are greedy and vice versa”.