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There has only been one other time in history when the price of oil has crashed by more than 40 dollars in less than 6 months. The last time this happened was during the second half of 2008, and the beginning of that oil price crash preceded the great financial collapse that happened later that year by several months. Well, now it is happening again, but this time the stakes are even higher. When the price of oil falls dramatically, that is a sign that economic activity is slowing down. It can also have a tremendously destabilizing affect on financial markets. As you will read about below, energy companies now account for approximately 20 percent of the junk bond market. And a junk bond implosion is usually a signal that a major stock market crash is on the way. So if you are looking for a “canary in the coal mine”, keep your eye on the performance of energy junk bonds. If they begin to collapse, that is a sign that all hell is about to break loose on Wall Street.
As I mentioned above, energy companies now account for close to 20 percent of the entire junk bond market. As those companies start to fail and those bonds start to go bad, that is going to hit our major banks really hard…
Over the coming weeks, keep your eye on the price of oil, keep your eye on the junk bond market and keep your eye on the big banks.
originally posted by: AnIntellectualRedneck
I'm as interested in the effect this will have on the petrodollar. After all, it stands to reason that this will result in a bit of a decline in the demand for dollars if most oil is indeed traded in dollars...so....
But for some of the oil exporting nations, it is a financial disaster. In Russia, it is estimated the falling prices have already cost it $100 billion.
With the economic sanctions imposed on Russia over Ukraine, the decline in oil prices could not have come at a worse time.
The price of this global commodity has declined by nearly 40 per cent this year - below the cost of production in some countries, including Russia.
While the oil pumps keep flowing there, the rivers of revenue gold in reverse have reduced to streams.
As the price goes down, so too does the Russian rouble, which has declined by around 40 per cent this year.
originally posted by: grey580
a reply to: BornAgainAlien
The article is not taking into account that the United States is producing almost as much oil as Saudi Arabia is.
Thanks to fracking.
Oil is dropping because there is an abundant supply of it.
And I'll throw this out there. It might also be a ploy weaken Russia and their oil market. Others can chime in. But I think that Russia needs to be in a certain price per barrel range to make a profit.
originally posted by: ItCameFromOuterSpace
a reply to: BornAgainAlien
Gas prices predicted to drop below $2.00 in some places.