I don't normally talk about politics on my blog but I do a bit on social media. Today's topic of the day has to be how global stocks crashed as oil prices plummeted.
Don't cite me on this. These are just my opinions.
Global Oil Prices
I'm probably simplifying the chain of events here, but from what I understand after my research, oil prices were generally regulated by OPEC, a loose group comprising of the major petroleum exporting countries of the world. Negotiations about keeping the price of oil at record highs collasped, and then member nations like Russia and Saudi Arabia, decided against the proposed supply constraints by the United States of America.
Russia also saw an opportunity to bankrupt the American oil giants which would take out their competition. Russia's state corporations made the bulk of their money through the sale of oil and there must have been supply constraints placed on how many barrels they could sell on the market.
As China's manufacturing and production capacity slowed down from the Corona Virus, there became an over supply on the market. China's imports dropped by about 3 million barrels per day, which left the petroleum exporting countries fighting over how to deal with the excess. Americans want to keep the price of oil high, whilst the others want to increase supply, which forces the price on a downwards trajectory.
China is sitting on a hill sipping tea, watching the tigers fight.
Global oil prices is sometimes used as an indication of the health of the global economy. When prices go up, it means there is a healthy demand for oil. When prices come down it means that there is the possibility of the world heading into global recession.
The impact of the oil prices have had spectacular consequences on the world markets. ASX200 is down 5.6 percent with over A$110 billion wiped off the exchange. Other markets around the world are not fairing better.
I hedged my bets a few days ago buying some units of BBOZ - a betashare inverse index fund. It shot for the moon! How far will it go?
It's one thing to talk about the markets. It's another to put your money where your mouth is. Don't gamble anything you can't afford to lose. With the volatile markets I'm glad i cashed out early with the exception of these BBOZ shares. Too bad there is nothing I could do about my super. The gains from BBOZ barely covers the losses in my super! (>__<)
Ah! Australia has officially entered recession territory! Don't quit your jobs.