I may sound pessimistic – I am not. What I am, is a realist. When oil plummeted yesterday to levels never seen before, my first thought was connected to the Peak Oil scare of a few years ago.
Peak Oil was based on the idea that the world was running out of oil, thus the price would continuously rise until it became to expensive for the system to function.
What is happening now is the opposite. There is so much oil its value does not even equal the amount it costs to run fracking or oil rigs.
Yet there is something more going on here. Oil has been closely connected to the value of the US dollar since 1945, when FDR and the King of Saud met. It was further strengthened when President Nixon took the US off the gold standard in 1971.
In a sense oil is the gauge that tells us what is going on with America. When it crashed it was really a signal that the game is up.
The game that America has been playing is the game of consumer excess. It is an economy based on nothing of value, but everyone still purchases the many things that they see.
When an economy is based on the degree to which consumers are purchasing things they don’t really need, then that economy is not strong enough to weather serious challenges.
What we are essentially seeing now is a great unravelling. Oil’s descent into negative territory is a frightening omen to what is coming. This is why President Trump ordered the US Navy to repel Iranian warships. This caused oil to rise, but it also moved the world closer to a confrontation it has been seeking to avoid.
Oil’s collapse affects everyone and everything. From Putin to the King of Saudi Arabia. Chaos is coming. The only question is, do we have the ability to make it through or not?