“If oil drops below $30 a barrel (now it’s around $44), a global recession is inevitable”, according to a recent survey of investment professionals, performed by ConvergEx Group. More than half those surveyed represented buy-side firms such as asset managers and hedge funds, and about a quarter of them were from sell-side firms such as banks or broker dealers.

Recession_2The oil price fall in the last US recession, when the first was a consequence, not a trigger.

ConvergeEx polled 306 investment professionals, asking what oil price would show that a global recession was inevitable. The most common answer was $30 a barrel, from 26% of respondents, with $35 a barrel being the second most common answer (16% of respondents). All told, 62% of respondents said $30 or lower crude was a global recession’s canary in a coal mine.

This is the bad news. The good news is that, according to a report of the World Bank release in mid-January, all of the major commodities may fall in price this year: “the steep decline in oil and related energy products is driving down the cost to extract other commodities”.

The risk that the scenario of a global recession may occur is real, according to the more careful analysts. Indeed, the current fall of oil price was surely triggered by the Lugano report on the E-Cat, as it has been well illustrated on this blog by a former oil trader in the post: “Why the E-Cat is responsible for the fall of oil price”.

NewYork_2As confirmed by some independent analysts, a sharp decline in the price of Brent oil was observed in the immediate aftermath of the report’s release, coinciding with a download of the report by the hedge fund Blackrock. Thus many financial little firms looked at this “strange” choice for their later moves and strategies, enhancing the drop.

Indeed, better known as a multiasset-class titan, with more than $4.6 trillion under management worldwide, New York-based BlackRock has been in the hedge fund management business since 1996, and is now the world’s largest money manager. Although hedge funds account for a minuscule 0.7% of the firm’s overall assets, BlackRock ranked sixth worldwide on Pensions & Investments’ most recent listing of hedge fund managers.

But LENR are suspected to be still hitting the oil market: take a look at the oil price and you can notice its behavior near the Parkhomov’s announcement of his really independent replication of the Rossi Effect, made on December 25, 2014: this event broke the consolidation phase in place and kicked off the possibility for an immediate rebound of the oil price.

Parkoil_6

Oil price after the announcement of a Hot-Cat replication by the Russian physicist Parkhomov.

The independent trader “Sifferkoll” explains, on his homonymous blog, that “the ‘Big Oil’ companies put their money from selling their oil fields in the bank and enabled the merchant banks to short oil, i.e. to bet on an its further drop”. So, the Big Oil avoided bankruptcies and fire sales, whereas the big merchant baks such as Goldman Sachs, JP Morgan among others have been extremely well positioned for this fall of the oil price since 2011.

Saudi Arabia wants to undercut oil production to allow the market to stabilize on its own, as already decided in December, even if non-OPEC nations did so or wanted to do so. In this way, Saudi Arabia can kill off as many of its competitors as it can now. So, when the oil drops to $30, the Saudis will be the sole suppliers and they will earn thanks to the large volumes.

Indeed, already an oil price below $50 means that U.S. shale oil and gas production, which has surged in recent years, causing a large build in global oil supplies, will be curtailed. Also investments in Brent crude oil – extracted through expensive offshore platforms in the North Sea – will be reduced, as profitability from these ageing fields has worsened. In both cases, the new projects of exploration and drilling will be cancelled or deferred.

ShaleThis is already happening. In December, the US-based oil giant ConocoPhillips said they were cutting 230 out of 1,650 jobs in the UK. It announced a 20% reduction in its worldwide capital expenditure budget, in response to falling oil prices. Other big oil firms are expected to make soon similar cuts to their drilling and exploration budgets.

But what could happen if in the next months there will be new major announcements regarding the LENR? It’s reasonable to expect that, when LENR will become widely known by the general public, the oil crash could worsen, and oil stocks – i.e. the stocks of oil companies quoted in the stock exchange – will plunge as well, since their stock price reflects many years of potential growth and huge profits, which will evaporate within 10 years or so.

Sifferkoll’s prediction for the oil price is “30 Dollar Oil within a year and 10 Dollar on the long term”. This could mean a global recession and, apparently, the end of the fossil fuel age. However, oil is used for producing fuels, lubricants and as a precursor chemical for the chemical industries such as plastics, therefore that market will probably still exist for a long time, until these material will be replaced in some way by others.

Therefore, oil prices can go lower for a relatively long time, and the new “normal” could be far lower than we thought. Perhaps, at the end of this year we will look at the relatively high prices of the oil reached in 2014 such as a bubble, that LENR has now popped.

Lenr_Oil_3

But also the opposite – a new surge in oil price in the next years – is possible, for a simple reason. There is a natural decline of 5% a year from existing fields around the world. That means by 2030 more than half of the existing global oil production will disappear. If now there are not investments in new oil fields, soon or later there will be a production shortage, and low availability of a commodity results in higher prices.

There is an enormous amount of money that needs to be invested now to get another 50 million barrels per day of new production. In absence of such investments, the cycle will come back and higher prices will come back. And by that time hardly the LENR may already have reduced the need for oil of our energy-consuming society.

Therefore, big up and down in the oil price are likely to happen in this decade, perhaps a new world recession could be triggered by these events, and one thing is sure: the E-Cat is not yet on the mass market, but its effect are for real and already quite heavy.

This article has been written in collaboration with Simone P., an Italian trader that I want to thank.

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10 comments

  1. Hello, Paolo Rocca.
    It is premature to make such considerations. Now I am totally focused in maintaining in good standing the operation of the 1 MW plant.
    That’s all, so far.
    Thank you for your kind attention to the work of my Team.
    Warm Regards,
    A.R.

  2. The fear of depression is in fact not only wrong but iot is a desperate manipulation, that I see in france with other similar subjects.

    Oil, and energy price reduction, like any price/cost reduction (see computers, cars, food, VoIP, whith price lowered) increase the wealth of the population.
    big technology improvement have always helped people to get richer, and have improved the production of goods, the GDP.

    problem is that the economic rents are attacked by such improvement, and the cry agains that boom is the cry of the parasits who are afraid to lose their golden egg chicken.

    In france I see it by people who want to justify to spent taxpayer money to maintain the wealth of some subsidized elite. they say “fer of deflation”.

    we are far from deflation, and low prices simply allow more consumption.
    this is even observed today with lower food price in big stores, that is used to buy pleasure goods instead of food.

    no fear for us the people. lower prices is good for us… just bad for parasits, wh will have to adapt to the new work.

    did phone company moan that Internet will cause a general deflation ? yes they did and it did the opposite.

  3. Hello Andrea!

    Do you have any comments about the Russian scientists Parkhomov? And do you think Parkhomov might start a snowball effect for LENR research in more countries?

    All the Best Malmo / Sweden
    /David

    • David:
      As I said on the blog of the Journal of Nuclear Physics, I consider serious the work of Prof. Parkhomov.
      I am glad for the domino effect his work, which I tink is a positive situation for the LENR world.
      Warm Regards,
      A.R.

      • Obviously “tink” is “think” and ” domino effect his work” is “domino effect OF his work”…
        “When you are in a hurry you must be slow”, my old mathematics Prof used to teach me…

      • Thanks for the reply Andrea!
        What is your time prediction for the field? Previously told you about the products on the market. Has this changed with Prof. Parkhomov?

    • Luca

    • January 29, 2015

    • 11:12 AM

    • Reply

    Mi scuso per la trattazione in italiano ma il mio inglese non mi permette di spiegare ciò che vorrei qui dire.
    Concordo con quanto detto dal carissimo dott. Rossi. Anche se, per modestia, forse sottovaluta la velocità di osservazione e valutazione dei pescecani che stanno lavorano nei “big founds”.
    La congiuntura economica mondiale non è delle più favorevoli e l’estrema instabilità dei territori in cui si estrae il greggio non facilita certo una stabilizzazione al rialzo dei prezzi dello stesso.
    I paesi arabi, sanno che tenendo basso il valore del barile, tengono sulle spine le false economie in cui, il loro prodotto, è indispensabile per fare guadagni e speculazioni. L’economia occidentale è basata sulla speculazione ed è per questo che i grossi speculatori stanno soffrendo, facendoci credere che siamo di nuovo sull’orlo di una recessione.
    Certo. per loro si riduce il prezzo….si riduce la carne su cui affondare i loro denti….l’osso è vicino!
    Per il comune cittadino tutto questo è incomprensibile. Infatti, al contrario, questo calo si traduce in: meno costi per riscaldamento, energia elettrica. E poi meno costi per le imprese che così hanno più possibilità di investire…..
    La perdita del lavoro riferibile al settore estrattivo? Niente di più falso!
    Saranno invece le piccole/medie/grandi società di speculazione che lasceranno a casa consulenti e analisti…..a meno che non troveranno qualcosa altro su cui affondare le loro
    unghie…..e spero non sia l’ECAT o una coscia del dott. Rossi (che per altro ha già uno stomaco foderato di pelliccia di tigre).
    Sono più propenso a pensare che l’attuale prezzo sia una resa dei conti tra USA/VENEZUELA/SAUDI ARABIA/IRAN/IRAQ/RUSSIA.
    Anche volendo prevedere un’esplosione del mercato ECAT nei prossimi anni, il petrolio sarà comunque necessario per almeno altri 10/20 anni.
    Chi è quell’imprenditore che, pur sapendo che il suo prodotto andrà fuori uso al 75% (i polimeri, sino a nuova invenzione continueranno ad essere prodotti con basi petrolchimiche)nei prossimi 10/20 anni ma che per il momento resta indispensabile, non sfrutta il momento per rialzare i prezzi al fine di mettere quanto più fieno in cascina ($$$$) prima del collasso??
    cordiali saluti

  4. Sorry for the typo: ” triggere” is, obviously, “triggered”.
    A.R.

  5. Dear Vessynik:
    I , honestly, don’t think that the oil price drop has been triggere by the Lugano Report and eventually by the important replication made by Prof. Parkhomov. I think it has been generated by complex political controversies and from the discovery of enormous reserves of gas due to the fracking technology.
    Warm Regards,
    Andrea Rossi

      • Paolo Rocca

      • March 16, 2015

      • 3:10 AM

      • Reply

      Hello Andrea,

      I totally agree with you, the coverage you received for now doesn’t justify such a price fall for the single most important commodity in today world imho.
      But a better question would be:
      what do you think would be the consequences of the future public revelation of your invention, namely after the 1MW plant is revealed?

      Meanwhile i would like to thank you for your perseverance, and for trying to make the world a better place!

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