OPEC conundrum and the Middle Eastern endgame

It is impossible to believe that a few years ago peak oil was the main paradigm in the oil complex. Shorting oil was unheard of and Middle Eastern leaders were throwing their money around like confetti. The oil complex has gone full circle.

OPEC is powerless and the grand traders and politicians dictate the oil  markets and the politics behind it. This is the endgame for many Middle Eastern regimes. A painful war of attrition on the battlefield and the oil field. The nuclear talks with Iran are now irrelevant as the country is hemorrhaging capital and a normalization of ties with the West will even reduce the price of oil further. With the price of oil  so low,  the larger  powers can afford to  have a multitude of proxy wars across the region,  without worrying about  the disruption of supplies. The only issues  is how  deep  are the pockets of the oil producing nations.

It is difficult to fathom how long the Iranian regime can sustain itself with 70 dollars a barrel oil. The rear guard of OPEC desperately push for higher prices, unaware that they will have to pump more to sustain their market share. The dual threat of alternative energy sources and shale oil has thrown the traditional oil complex into turmoil and destroyed the old order.

The revolutions started in the streets but ended in the boardrooms of the great trading houses and oil producers. As economists in the Middle East and the US count the costs of this war of attrition consumers reap the reward of cheaper energy prices. Yet this is a short term phenomenon. The low prices of oil can only lead to trouble in the Middle East.  A few points to consider.

• How long can Iran sustain its embargo ridden economy with massively declining revenues ?
• When will the increasingly sectarian Sunni-Shia war in the Middle East spillover ?
• How will the new  emerging oil  states like the Kurds change the oil-state dynamics ?
• How long will  Russia remain on the sidelines  of this oil war ?