Real estate, bonds, cryptocurrencies and stocks are at an all-time high, and many economists and analysts are warning of a bubble that can burst at any moment. They expect a market crash that can drag down the global economy. However, there is one asset class that is still very cheap and that is energy. The price of a barrel of oil has increased a little, but it is relatively low.
Affordable energy prices in combination with free money are the drivers of economic growth in Europe, Asia, and the US. The Gefira team expects that the global economy will come crashing down as the oil price starts soaring again in the coming years. A steep increase in oil price will benefit shale oil producers and is necessary to make the US independent, but it will harm China and Europe. The US Middle East policy objectives are meant to secure oil supply for the US and its Western allies. Now that China has overtaken the US as the largest oil importer, the Chinese are the beneficiaries of this policy. This new reality will change the US Middle East policy. Now a higher oil price will cause more mayhem in the Middle East, which can be to Washington’s advantage. Disrupting one’s competitors’ supply chain and supporting domestic producers is nothing new in history.
A case for war
The Trump administration can drive up the price of oil to increase shale oil production by decreasing supply from other countries. As we argued oil supply for the coming ten years will be tight. Taking out one of two oil suppliers will increase the price of oil and provide an extra market share for other players.
Sanctions against Venezuela and Iran will do a good part of the job. Venezuela’s problems to satisfy its debt obligations increased after Trump imposed further sanctions on the country. It is now impossible for Venezuela to refinance its debt; a bankruptcy seems unavoidable, unless the Chinese or Russians step in. A bankruptcy procedure will make it extremely hard for the country to export its oil.