Jolie Rouge

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The Oil Price Causationsphere

Whenever the stock market, or commodity prices move, analysts and interested parties feel compelled to “explain” why it has moved one way or another via what could be called “Overton Rationalizations”. The Overton Window is a window of acceptable discourse, and the Overton Rationalizations are the window of acceptable causation.

For instance, if the price of oil goes up, there is probably some tin-foil hat nutter who thinks it went up because the reptilian space dominion wants to bankrupt individual consumers, driving them into homelessness so that these intergalactic masters of the financial universe can harvest livers in ghetto back alleys. That’s probably not the case (who am I to know really), but one thing we can say, is that it is not within the “Overton Rationalization” window. That is, the reptilian oil price causation theory is an extreme or fringe “cause” to explain a mundane (appearing) effect (the price went up).

Cause and Effect, in order to be considered thus, must be consistent. At least statistically consistent. The market, due to certain amounts of noise and a dependence of investor sentiment, is at least in the short term semi-stochastic, so some allowances have to be made for small errors in causation.

Within the Causationsphere of Oil Prices, we have something like this:

Apparently, a terror attack in Libya, endangering oil production further, has a negative effect on the price?

You’d think a direct terror attack, plus the devolving situation in Libya would at least merit an uptick or two?

Ahh, but here comes Reuters, to the rescue:

Ahh, I see, the rumor that the US might possibly kinda lift some sanctions of Rusal, which exports Aluminion leads to a fall in Oil Price because: “reasons”?

That makes so much sense…

No, actually, it really does not.

Here’s another fantastic point to consider:

The most disruptive thing to happen in the Middle East in nearly 100 years causes the price of oil to Fall?

Within days of ISIS declaring the new Caliphate, and seizing a whole shitload of territory. The price of oil went into free fall. Because of a magical “Oil Glut” that hadn’t been noticed until then.


The Price of Oil is not determined by the market

Oil is far too important a commodity to allow it to be determined by the market. It is also not a matter of it being singly controlled by the US, Russia, OPEC. It has to be more complex than that. It doesn’t mean it is “rigged” as in it is always up or down based on the whims of a bunch of cigar sucking oil execs, but it does mean that it is strongly influenced not by geopolitical events, but geopolitical strategy.

What the various actors are trying to accomplish has more influence on oil, than any single event.