Recently in the news their have been reports about how much black market oil is circulating in the global oil markets that is coming from the islamic state. Indeed the amount of oil coming from them is substantial. And just recently a senior U.S. administration official confirmed that in excess of 500 million dollars worth of oil has made it from the Syrian battlefields and into the hands of global consumers. He goes on to stipulate that the oil mostly flows southward to President Bashar al-Assad in Damascus, and up to Turkey. However this is only one of the sources of cheap black market oil that is making its way into the hands of consumers. These dark source minerals seem to be having a huge impact on the price of oil on international commodities indices around the world, particularly in the United States.
The amount of oil that has made its way into the hands of american consumers by way of fracking in the upper plains states cannot be understated. It had completely flipped the equation regarding the amount of oil that the United States consumes versus how much it imports, to a net positive for the united states. The idea that the united states would be a major oil producer was something that could not have been foreseen just five years ago. At that time there was an oil spill in the gulf of Mexico and it was uncertain what the future of oil would be in the equation of the united states going forward. The series of unfortunate events surrounding that accident have given way to new technologies which have opened up new sources of fossil fuels. This new way of extracting has had a deleterious effect on the major oil companies as well as the price of gasoline in the country. And, in addition, the idea that dark minerals is not a problem in the United States is simply not true. In 2008 the Department of the Interiors, Minerals Management Agency had several employees implicated in an access for funds investigation. And also the administration, recently, was forced to reevaluate its policy with oil export to Mexico after U.S. oil companies found a loophole that allowed them to bypass laws that effectively ban all oil exports from the United States. These are just a fraction of the many cases that the Department of Interior, and the Department of Energy investigate every year in the United States involving the violation of U.S. trade laws.
Russia has since the late eighteen hundreds been a major payer in the hunt, extraction, and consumption of oil in the world. There is no surprise then when it is alleged that there is a lot of cronyism involving today’s Russian oil tzars and their liquid gold. This should come as no surprise then that the people who control Rosneft, Russia’s largest oil and gas company. Have side deals and back doors that they transfer huge sums of oil from the Russian oil fields to illicit traders who no doubt have dubious intentions for their product, while making a quick buck. This too is a major downward pressure on the price of oil throughout the world.
In the middle east oil and power go hand in hand. With OPEC as its major conduit. The amount of oil OPEC, a major oil cartel distributes has been steadily above stated goals for at least the last year alone. This means that though there is an influx in the amount of oil available in the world, and the cartels main goal is to manipulate the price of oil for its members. OPEC, due to political pressures, as well as monumental deals such as the Iranian JCPOA, have not caused the member states to decrease supply for the market. Even though countries such as saudi Arabia, and Qatar now have dwindling supplies of Reserve currency in their treasuries. These actions have had a net downward pressure on international oil markets as well leading to lower prices at the pump, and smaller profit margins for the large oil companies.
The idea that the energy markets will rebound from the glut of oil in the world is a complete fallacy. Traders who hope to get an edge in these markets by playing them long will be in for a rude awakening when earning are announced. Even trying to pare your losses with short term options tactics could see your wallet take a severe blow. And the coming energy revolution which will take even more profits from the big energy companies will only make things worse. In short there is no known end to the precipitous fall in the price of oil and it seems as though that will never be abated so long as the amount of oil both legitimate and dark continues to flood the zone.