Anyone explain in a brief and simple way?

I’d have though falling oil prices would be good as it would mean cheaper transport / manufacturing considering how much oil is used for.

Obviously i have no idea about these things!

+1

My pimp should be charging me less to drive me to clients 🙁

Because demand is slowing at the same time, as the world economy isn’t growing very fast.

If demand was high and oil fell, it would boost GDP, but if demand is weak, oil price falls don’t have such a big effect. Combine this with low confidence and it’s seen as a negative indicator as it means less investment by large oil cos and lower dividends etc.

Has it fallen due to oversupply or under demand??

Anyone explain in a brief and simple way?

Well in the UK many of the companies in the FTSE are oil companies so that’s one effect and it’s one that felt in the US too. The Russian economy is reliant on oil as are quite a few other countries. Ally this to relatively low growth in China and this is what you get.

It’s also about uncertainty. Markets really really don’t like uncertainty.

Has it fallen due to oversupply or under demand??

Yes.

Has it fallen due to oversupply or under demand??

Massive oversupply

then theres how much of the economy is built around oil – providing for getting the oil out of the ground…..

you have a slow down in that – there an oversupply of material/machinetime/componants/rubber/plastic etc etc ….

As exporters we are feeling the pinch now because our biggest markets all rely on oil sales to earn the dollars they neeed to buy our products. Nigeria for example has a desperate shortage of dollars so we are accumulating naira over there and keeping our fingers crossed there won’t be another devaluation.

FTSE is a relatively oil and mining focused index. Low commodity prices will hit companies in this area.

It’s as much about China as oil. Baltic Dry index has tanked, so if you want to ship stuff do it now. Maersk are in a bad place being exposed both to container shipping and oil (drilling & production), and they make up a decent chunk of Denmark’s GDP.

If you take the money made in the North Sea oil boom the UK economy has flatlined since the 80s

its a huge chunk of our income
last year only 2 North Sea oil companies turned a profit

because the oil is hard to find and under a cold and stormy sea its expensive to extract so with prices this low its costing waaay more to find and extract than its worth

our economy is still hugely dependent on the services/financial sector so any benefits of low oil prices to manufacturing are minimal

osbornes economic recovery is based on huge levels of state and consumer debt, coupled with fears of a Brexit and the huge cost of borrowing that would follow

My understanding:

They are extracting the same amount but demand for it is falling because less stuff being made.

Less stuff is being made it is because less people are buying stuff.

If less people are buying stuff the people that sell stuff aren’t making as much money.

My pimp should be charging me less to drive me to clients

the places/countries that produce oil rely on oil so cannot easily just reduce supply as that massively reduces their incomes. When supply remains constant and demand drops then the price drops

The problem for the economy is that the decline is what is causing the slump in demand for oil which is the cause and bad.

Cheaper prices would tend to be good but one needs to know why.

then theres how much of the economy is built around oil – providing for getting the oil out of the ground…..

you have a slow down in that – there an oversupply of material/machinetime/componants/rubber/plastic etc etc ….

This.

You’ve got BP, Shell, etc

Then there’s Bechtell, AMEC etc supplying engineering resources to them.

Then theres Oceaneering etc supplying actual physical equipment to them

Then there’s all their suppliers etc.

Then there’s the car manufacturers who sell super-cars to engineers in Aberdeen (and all the other stuff).

Oil
Is
Huge.

At best it’s always balancing out the impact on consumers (every $ saved by a transport company is a $ lost by an oil company), add that tot he markets dislike of instability and you get a falling market.

If you take the money made in the North Sea oil boom the UK economy has flatlined since the 80s

And it probably flatlined before that if you discount some other industry (weapons for the cold war?), and before that with something else until you get back to 2 blokes in a cave and one turns to the other “we’ve basically done nothing new in the past thousand years apart from your project to cultivate barley from grass”.

Are the Saudi’s flooding the oil market with cheap oil to try and destroy US Shale oil production?

Are the Saudi’s flooding the oil market with cheap oil to try and destroy US Shale oil production?

This but replace US Shale with Iranian oil supplies.

Then there’s the car manufacturers who sell super-cars to engineers in Aberdeen

Nah, they’re all leased. 😉

loss of confidence in the yuan

In the USA and Europe there has been a drop in demand too, but this is more than made up for my the continued increase in third world countries.

The introduction of Iranian oil has obvious added another blow to the market.

tbh I am hoping this is the beginning of the end for the dominance of the oil industry. A bit of me always regrets not going into it after Uni though and making a boat load of cash but it wasnt what I wanted to do.

tbh I am hoping this is the beginning of the end for the dominance of the oil industry. A bit of me always regrets not going into it after Uni though and making a boat load of cash but it wasnt what I wanted to do.

It’ll pick up again, there’s more to oil than fuel.

I’m in the alternative position of being in the industry, but not making a boatload of cash (we’re not all in Aberdeen or Saudi).

pound is in free fall too

China is the big cause . A low oil price is a positive for the UK economy although very bad for Aberdeen. The really big losers will be the luxury goods brands as two of their main markets Russia and China are in trouble.

‘cos rich people aren’t making as much.

of course if you use heating oil to keep the house warm it’s a great time to fill the tank up!

to much effort is put into office based work and supply, and little put into true manufacturing something we always did well,before thtcher decided all manufacturing should slowly be erradicated from uk plc, with the huge loss of highly skilled and well paid labour all forced to work in call centres or other non profit making office jobs, and now technology is doing away with those jobs.

I suspect the real reason markets have fallen is the simple fact that the primary requirement for working in finance is a shiny suit instead of intelligence.

Governments and rich Arabs make a lot of money out of oil prices being high, and they’re all part of this so called “1%” and if the claims are right they’re the people that run the world.

That and a lot of investment is in oil and lower prices mean lower profits which means lower share prices. On top of the knock on effect with other industries.

As also said, companies spending a fortune to extract oil from tricky places on the basis that supply was more limited, are now screwed with oversupply. Likewise fracking could be doomed… which is a good thing for those who don’t want to be fracked 😀

I don’t think the causality is quite as direct and as simple as oil and markets.

Oil is falling partly because we have massive oversupply (deliberate political move from USA and Saudi) and also because demand for all commodities has fallen through the floor as China’s economy turns out to be not growing anything like as fast as the 7% their government say it is… and Western consumers are all skint and already own about as much stuff as we can reasonably use – so not buying much new stuff – certainly not at the rate we were before 2008.

I spent a lot of summer reading FT and Economist and in particular reading the comments to the stories, and also got to know my neighbour who was an ex-fund manager in the City. She said the markets were being fixed for a lot of last year.

What’s happening now has been expected by many for many months, it’s not new news – but only by those who read the data and have a real understanding of how economies work… UK consumer has had the wool deliberately pulled over our eyes – it’s been necessary to get us to keep borrowing and keep spending in order to try and keep some growth coming through. Whilst I hate being lied to, this does make sense when the situation is as dire as it is…

Put simply, the ‘recovery’ across the world is largely a mirage. No-one has fixed the problems which 2008 made clear existed (excessive debt and ageing populations) and many economies are in even worse shape now than then – Russia and Brazil in recession, UK in more debt and with a housing bubble in SE/London to boot, Manufacturing is in recession (mainstream media and government have noticeably failed to report this), Emerging Markets in more debt, US not going anywhere fast, China slowing up fast…

I think the markets are falling now because the professional investors have been hoping central banks would be able to steer us through but it’s becoming increasingly clear now that the central banks are running out of ideas – so now the markets are responding to that.

For Carney to say he can’t see any reason to raise rates for the foreseeable is actually pretty scary – it suggests he really doesn’t know what to do next – it’s a complete reversal of what he said a couple of years ago. Markets are reacting to this lack of clear leadership – they’re losing confidence in central banks’ abilities. It’s also a dire sign for UK – these are emergency rates we’re at, designed to help us through the 2008 crisis. If we’re still at those rates 7 years later, then presumably we’re still in crisis, no?

Fundamentally, the entire world economic system is layer upon layer of made up bollocks, constantly shuffled by armies of geniuses and idiots since five minutes after someone first decided to lay one bollock layer on another. Once you get that, everything else makes sense.

What Brooess and Northwind said.

I wonder how long the new relationship with Iran will last. There must be those who would prefer that additional oil wasn’t available on the open market.

I wonder how long the new relationship with Iran will last. There must be those who would prefer that additional oil wasn’t available on the open market.

Interesting that the deal was brokered at around the same time fracking released massive increase of supply onto the market… one could be forgiven in thinking the Yanks are trying to break the House of Saud after one of their lot pulled off the biggest attack ever seen on American soil. You could also be forgiven in thinking the Saudis are trying to break the US banks again, knowing how much of the banks assets are loans to fracking companies…

oil generated soverign wealth funds seem to be liquidating their assets

slowoldman – Member
I wonder how long the new relationship with Iran will last.

As long as Iran is of benefit to US intentions.

They’ve been flipping between allies and enemies as it suits the US for the last 100 years or so, and the US has been much involved in events all that time.

Northwind – Member
Fundamentally, the entire world economic system is layer upon layer of made up bollocks, constantly shuffled by armies of geniuses and idiots since five minutes after someone first decided to lay one bollock layer on another. Once you get that, everything else makes sense.

Never better put.

Listening to R4 business, guest will be introduced as Mr So & So from Doesn’t Know His Arsehole From His Elbow (DKHAFHE) Asset Management.
This person will be gambling with everyones money at the global casino, whilst banging on about downturns and uncertainty.

I am sure the worlds finances are moved around like a game of Monopoly by idiots with no brain that can’t think for themselves.

Trading Places is a documentary.

Pretty sure the market fell when the price was high. Any excuse to be all scaredy.

The technical reasons have been described earlier, but reality is that several negative things are coming together at a time when markets had become quite expensive, largely due to the fact they are being deliberately distorted by policy choices here and elsewhere in the world.

Markets ceased to be markets a while back and are now a reflection of unorthodox policy options in which traditional valuation and asset allocation techniques become largely redundant – what is the true risk-free/ reference rate? Why is money flooding into overnight deposits offering negative real returns? Investment at the moment is largely a mugs game.

It’s a buggers muddle indicative in itself of the fact that policy makers still fail to correctly diagnose the true nature of the issue ie we are in the middle of a balance sheet recession that will last for some considerable time yet. There has been bugger all deleveragng in fact in many areas debt levels are higher than at the start of the crisis.

And people talk of free markets!!!!!

Markets ceased to be markets a while back and are now a reflection of unorthodox policy options

My ex-fund manager friend reckoned that the US markets were being rigged by the Federal Reserve running algorithmic trading to buy shares when bad news was coming out and the natural momentum would be for prices to be falling. Much harder to know the source of a trade when being done by a computer rather than a human trader apparently.

I also wonder if the sheer volume of share buybacks going on, being used to boost earnings per share rations will, in time, be considered massive fraud…