Not sure it is as we suspect. I did hear somewhere that oil-rich countries with sovereign wealth funds needed to start to liquidate some holdings because oil revenues slowed up and that may be part of the selling pressure involved. Oil companies are big employers too and if they do lay off staff or cut spending, they influence local economies, the general velocity of money. May eventually impact banks or credit unions with slow to pay debt (mortgage or credit card payments).
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Not sure it is as we suspect. I did hear somewhere that oil-rich countries with sovereign wealth funds needed to start to liquidate some holdings because oil revenues slowed up and that may be part of the selling pressure involved. Oil companies are big employers too and if they do lay off staff or cut spending, they influence local economies, the general velocity of money. May eventually impact banks or credit unions with slow to pay debt (mortgage or credit card payments).
jhm
Well-Known Member
I find myself wondering if the Saudi sovereign wealth fund may have been shorting the whole stock market all along. They certainly would not want to such a maneuver in the oil market without hedging the chaos it could precipitate. So one basic way to hedge is simply to short the stock market. Along with that the might also short specific stocks they believed would be most vulnerable to an oil crash. So oil related companies, renewable energy and Tesla are all plausible short targets. If they have been shorting Tesla, then that would surely explain the emergence of a correlation between Tesla, which was not witness statistically prior to the decline in oil.
What's particularly interesting about the possibility that sovereign wealth is shorting the market is that this wealth knows precisely when OPEC will shift its strategy. Thus, it can close its position and even go long prior to the Saudis breaking news that signals relief to the markets. What would be most profitable to them would be to tank the whole market and fright retail and other investors away for long time. This would give them an opening to buy the whole market at a fraction of its value and plenty of time to execute.
So regarding Tesla specifically under at least the mild assumption that sovereign wealth crashing the oil market is well hedged, I think it is very important to hold shares. When OPEC changes it's tune it will already be too late to jump back in. We could be in for an incredible ride, but remember who is at the wheel. The Saudis control the timing.
jhm
Well-Known Member
I have seen positive reviews of the Model S in MENA online news sites. I would expect them to sell quite well among the affluent.
Go green but in style | Economy | Saudi Gazette
Also a lot of solar power is going into the region.
Just because an area is oil rich does not mean they can't appreciate such things. A certain wealthy country in the North Sea comes to mind.
At least one in Abu Dhabi. Tesla Model S electric car spotted in Abu Dhabi | Drive Arabia : Dubai / Abu Dhabi [UAE, Saudi, Bahrain, Qatar, Kuwait, Oman GCC]
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Didn't they also short airline stocks back in late 2001 prior to the event their young men perpetrated? Good analysis, jhm. I do watch the tape of oil futures and tsla and they seem closely correlated. Like the machine traders now include oil futures and other futures together when trading TSLA. Oil and S&P up will bring up TSLA. I think they reset on news and Earnings events.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Saudi Arabia are absolutely able to pull this off, as you point out jhm. Make up whatever is lost from lower oil sale revenue by first shorting the market and then buying the stock market at the bottom. Only caveat would be that you need to be able to control the world market price of oil as well as sit on a hughe pile of cash... Wait, I think the Saudis have both 
And add to this a non-democratic government with zero transparency and you're good to go.
And add to this a non-democratic government with zero transparency and you're good to go.
Gerasimental
Member
jhm, I don't know about macroeconomics, but would this kind of mega-scale, institutional global insider trading not constitute a major crime?
Causalien
Prime 8 ball Oracle
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I look at this as QE by the Saudis. Everyone benefits and should be happy. Instead, it sounds like doom and gloom. Canadians are complaining because the majority of the industry is oil. Same for every oil producing countries I guess. The Chinese gov should be dqncing in joy right now as their new strategic reserve caves come online during this era of cheap oil
Saudi Arabia are absolutely able to pull this off, as you point out jhm. Make up whatever is lost from lower oil sale revenue by first shorting the market and then buying the stock market at the bottom. Only caveat would be that you need to be able to control the world market price of oil as well as sit on a hughe pile of cash... Wait, I think the Saudis have both
And add to this a non-democratic government with zero transparency and you're good to go.
I look at this as QE by the Saudis. Everyone benefits and should be happy. Instead, it sounds like doom and gloom. Canadians are complaining because the majority of the industry is oil. Same for every oil producing countries I guess. The Chinese gov should be dqncing in joy right now as their new strategic reserve caves come online during this era of cheap oil
No, it's a hedge; very unlikely that the hypothetical shorting of oil was in volumes greater than SA's sales.
It would be really difficult to put on that large of a short position without it going public. Additionally, most exchanges require that large traders report their positioning, which is aggregated and distributed via weekly market summaries such as:
http://www.cftc.gov/dea/futures/petroleum_sf.htm
http://www.cftc.gov/dea/futures/petroleum_sf.htm
Except for states such as Texas and North Dakota, where oil production is a major part of the economy, most of the rest of the country will benefit from the lower oil prices. It's like putting more money in the hands of consumers without worrying about inflation. Want to help pull China out of its economic slump? Cut the cost of oil. You are going to see economies of net-importer countries invigorated by lower oil prices. My biggest concern for TSLA at this point would be a major global economic meltdown, and lower oil prices are going to be a bit of a short-term boost to many economies. Yes, some economies such as Russia's will be harmed, but most economies will benefit if prices stay low for a year or so.
I do wonder, however, if lower oil prices will adversely-affect sales in Norway, an important Tesla market. Maybe someone from that country can chime in and give us an opinion.
I do wonder, however, if lower oil prices will adversely-affect sales in Norway, an important Tesla market. Maybe someone from that country can chime in and give us an opinion.
I saw a snippet somewhere this week that said while oil is a leading cost input in our economy, enough of the Dow and S&P500 companies are energy production related that the price decline has a mixed timing effect on market averages. It seems that market participants are saying a net negative one short-term (although no one can separate out other year-beginning effects).
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Low oil prices will only affect the Norway economy if sustained over a longer period of time. With oil Norway's biggest export isn't oil itself but technology and consulting related to exploration, drilling etc.
Lower oil prices "on a large scale" does one thing that EV enthusiasts will find problematic. All the CO2 saved by the world fleet of EVs is negated by halving the cost of oil and thus motor-fuel. The rise in driving caused by lowered fuel prices should increase the net exhaust of burnt fuels worldwide. Growing economies use more fuels and if cheap oil was used by the USA in the last century to grow the economy - then lower fuel prices will grow fuel usage in 3rd world emerging economies encouraging growth. Perhaps temporarily. Thus, Asian countries from Bangladesh to Taiwan to others will burn more fuels as they grow now. So, enjoy EVs for what they are - smooth powered, high torque driving vehicles. They have lost the battle in helping the climate - thanks to OPEC. OPEC wants to maintain market share - not help the climate. Those who have claimed vanity plates such as "F-OPEC" - good show!
I don't think consumers will put the extra fuel-savings into their debt paydowns. They will probably generally use it to go out dinner once more per week, to the movies or initially spent on fun things. Going out means burning more fuels. Almost all economic growth due to lower fuel prices may cause some level of increased fuel usage. Even people turning up the heat in their homes a couple degrees to feel warmer, etc.
I don't think consumers will put the extra fuel-savings into their debt paydowns. They will probably generally use it to go out dinner once more per week, to the movies or initially spent on fun things. Going out means burning more fuels. Almost all economic growth due to lower fuel prices may cause some level of increased fuel usage. Even people turning up the heat in their homes a couple degrees to feel warmer, etc.
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Runarbt
Active Member
Well, in the long run it might be a good thing.
A lot of oil fields are now to expensive to build out.
If oil stays cheap long enough, then EVs will have killed the ICE before the oil price rises again, and those oil fields will never be built out.. oil staying in the ground is a good thing. We all know it, a good EV is way better than any ICE in almost every way, so cheap gas really doesnt have the power to stop the EV future.
With high oil prices, all this oil would have been extracted.. now a lot of the oil might stay there long enough, until we have moved away from oil for our transportation?
mitch672
Active Member
Quote: "The Stone Age ended, not for the lack of Stones. The Oil Age will end, not for for the lack of Oil"
http://peakoil.com/consumption/the-stone-age-didnt-end-because-we-ran-out-of-stones
JRP3
Hyperactive Member
So you're thinking this drop in oil prices will be permanent? Impossible, and hence whatever effects will be temporary. In reality we'll see short sighted increases in consumption serve to drive prices up once the "supply glut" is over.
jhm
Well-Known Member
The oil glut was created buy years of high oil prices motivating heedless development of marginal oil sources. Environmentally, theses marginal sources should have never been tapped. OPEC is warding off such malinvestment and creating an incentive to leave the oil in the ground. Once this correction occurs, and it may take a couple of years, the price of oil will go back up to about $80. (This actually could be perfect timing for the release of the Model 3.) So I am not worried about oil consumption going way up. There's a glut to work off, but that's as far as it goes. Longer term what is needed is massive roll out of Tesla's production capacity, multiple Gigafactories especially. Consumers must be given the opportunity to substitue electricity for oil. When this happens at scale falling demand for oil will drive the price down below $40/bbl. And this is precisely what must happen to make it uneconomical to keep drilling for yet more oil. This is the only way divestment will shut down the age of oil.
sundaymorning
Active Member
Obama thinks gas wont stay low for long. Yahoo link below:
Obama to Americans: Enjoy cheap gas, but don't count on it | Motoramic - Yahoo Autos
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