The anxious industrial chain, if… history is an online game, 2020 will undoubtedly have a hellish start.
Coronavirus, US-Iran conflict, Palestinian-Israeli crisis, Tsai’s re-election, Kobe Bryant’s death, fires in Australia, locust plague in Africa, Brexit, crude oil crash, US stocks circuit breaker, European stocks plummeting…
No data chart is needed to prove that from the second half of 2019 to the beginning of 2020, we generally felt the harshness of the approaching winter, and a sense of crisis was coming.
“The general environment is not good”, two big words are written on everyone’s face: anxiety. This cold winter that has continued since 2019 is spreading everywhere like a terrible epidemic, constantly creating panic.
Some people even say, “2019 is the worst year, but it will also be the best year in the next 10 years.” It’s a true prophecy!
When 2020 really comes, mankind has been knocked upside down by the violent storm.
On Monday, March 9, oil prices plummeted 30% at the opening, and the Dow Jones Index fell off a cliff, falling to 7% within 5 minutes, triggering the circuit breaker mechanism and directly falling to the limit. This is the second meltdown in the history of the US stock market after 23 years. Affected by this, all capitalist countries in the world plummeted, including Britain, France, and Germany. The market all plummeted by more than 7%, Canada plummeted by 8%, Italy plummeted by 11%, Greece plummeted by 12%, Brazil and Argentina plummeted by 10%, and Kuwait plummeted by 10%… …Let’s put it this way, almost all stock markets with circuit breakers have circuit breakers.
If we take a deeper look and place 2020 in the long history, and compare it with the major crisis years that have a more profound impact on the world trend, we will find that this series of major events, however, It is a small wave on the stormy sea. Although it looks rough, under the iceberg is the real surge of thoughts.
Everyone is thinking, who benefits from the entire industry chain?
The operating logic of the market, the crude oil market in 2020, must be oversupply. The root causes of this global stock market crash are mainly two factors: the oil crash and the new coronavirus.
In fact, the oil futures market started to plummet last Friday. A lot of capital thought they were buying the bottom line and bought with 50 times or 100 times leverage. As a result, in order to close their positions, they had to sell off all the assets on hand, which in turn caused a chain reaction in the stock market, leading to a complete collapse as soon as the market opened on Monday.
New coronavirus → No production, no circulation → Failure to reduce production → Oil price war → Debt crisis → Stock market crash. This is the market logic of the stock market crash.
There have always been three major players in the international crude oil market: the Organization of the Petroleum Exporting Countries (OPEC) composed of Middle Eastern countries such as Saudi Arabia, Iraq, Iran, and Kuwait; Russia, whose main economic income is the sale of energy; The shale gas revolution transformed the United States into an oil exporter.
Each of the three players has their own plans.
OPEC wants to join forces with Russia to reduce production, so that oil prices can remain high and everyone can get rich happily together. But Russia does not agree, because with the United States as its academic leader, once OPEC and Russia reduce production, American shale gas will make up for it. It can take up any market share, and the reduction will be in vain, and it will also lose revenue.
The United States wants to suppress the Russian economy through an energy war, and would rather not make money than let oil prices rise.
In this context, Saudi Arabia and Russia, led by OPEC, repeatedly discussed multiple rounds of production cuts, but failed to achieve anything. In anger, they decided to start a price war and win market share first. Saudi Arabia has the lowest mining cost. Let’s see who has the last laugh.
International crude oil prices have been falling, reaching an unheard of US$30 a barrel. As a result, oil is actually cheaper than water, which is almost like giving it away. Not only Russia can’t stand it, but American shale gas companies also feel overwhelmed.
Coupled with the significant decline in the global tourism, transportation, and logistics industries including aviation, shipping, freight, and automobiles due to the impact of the new coronavirus, as well as the large-scale production reduction in China, the world’s manufacturing factory, Industrial manufacturing demand for oil has plummeted, while the virus is still spreading to major industrial countries around the world.
It is foreseeable that the energy market in 2020 will definitely be oversupplied.
The future trend of oil
When talking about future trends, we need to put it in a larger dimension. Let’s start with World War II.
After World War II, Britain handed over the scepter of power to the United States. Since the United States had reserved 70% of the world’s gold at that time, in order to facilitate international settlement, the United States announced that the U.S. dollar would be linked to gold and issue U.S. dollars using gold as credit. This way, countries would not have to worry about the Federal Reserve’s indiscriminate currency issuance. From then on, the U.S. dollar became the world’s currency. Because this system was signed at Bretton Woods in the United States, it was historically called the Bretton Woods System.
In 1973, the United States suddenly discovered that it had issued too many U.S. dollars, far exceeding the value of its gold reserves. Many vigilant countries, such as France, began to withdraw gold. If this goes on, the gold will be emptied. , and the US dollar lost its credibility, so the United States and OPEC announced that the US dollar was no longer linked to gold, but to oil, and international oil transactions must use US dollars.
The market can distrust the US dollar, but it cannot use oil.
If you want to buy oil internationally, you must increase US dollar foreign exchange reserves. How to increase it? Of course, the goods produced in the country are exchanged for U.S. dollars, and then the U.S. dollars are used to buy oil. The oil-exporting countries then use U.S. dollars to buy the goods they need. In this way, the U.S. dollarHaving become the world’s currency again, the Federal Reserve can finally let go of its hands and over-issue currency, and the United States can also use the U.S. dollar to plunder the world’s wool in circles.
But this oil settlement system makes other players in the world very unhappy, especially several oil-producing countries that do not deal with the United States, such as Russia and Iran. China is also very unhappy, because as the world’s largest industrial country, China is also very unhappy. Oil has the greatest demand, so it is the most exploited.
Since 2013, Russia, Iran, and China have discussed using RMB to settle oil. On March 26, 2018, the Shanghai International Energy Trading Center, a subsidiary of the Shanghai Stock Exchange, was established and soon became the largest in Asia. The daily trading volume of the oil futures market exceeds that of the Dubai crude oil futures contract, ranking second only to New York and London, ranking among the top three in global trading volume.
In January 2019, nine EU countries, led by Britain, France and Germany, abandoned the US dollar and established the INSTEX settlement mechanism to settle oil with Iran through a barter model.
In April of the same year, Iran Petroleum listed RMB and Euro as the main exchange currencies and stored 20 million barrels of crude oil in Dalian, China. In August of the same year, Venezuela, a South American oil-producing country that was severely sanctioned by the United States, officially implemented RMB settlement instead of US dollars. In addition, Central Asian oil-producing countries such as Kazakhstan and Uzbekistan have also tried to bypass the petrodollar system and use RMB and Euro in bilateral oil trade. Even hard-core US allies Saudi Arabia, Brazil, Sudan and other countries are waiting and hesitating. China…
Now it is, “The world has been suffering from Qin for a long time.”
The United States itself also knows very well that non-US dollar settlement of oil is to dig into the lifeblood of the United States, so it treats Iran and Venezuela , Russia hates it to the core, and various military and economic sanctions and sieges have also given various countries a great stimulus. For the sake of their own energy strategic security, they no longer want to play with the United States. However, in view of the powerful military power of the United States, they dare not be angry. He said that he could only do some small things secretly and privately.
The oil plunge this time, coupled with Trump’s comprehensive strategic contraction, has given everyone confidence that the United States is nothing more than this. In particular, OPEC and the United States have discovered a rift. On the surface, Saudi Arabia is at odds with Russia, but in fact But it is trying to grab market share from the major shale gas companies in the United States, even knocking down the U.S. stock market, and directly slapping Trump in the face. It is hard not to think about how deep the water is.
The so-called embankment of a thousand miles collapses in an ant nest, the end of the US dollar’s seigniorage status, the will of the people and the general trend, is likely to start in 2020.
Human history is always repeated. Du Mu said in Afang Palace Fu, “The people of Qin had no time to mourn for themselves, and later generations mourned. Later generations mourned and ignored it, which also caused future generations to relapse.” I mourn for the descendants.”
In 2020, this is not the end, not even the beginning of the end, just the end of the beginning.
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