The global oil landscape is changing very quickly. In the 80’s there existed an organization that could send fear into the minds of investors and world leaders: OPEC, the Organization of Petroleum Exporting Countries (focus on the exporting part). OPEC members were composed of the world’s largest oil producing exporters including Venezuela, Libya, Saudi Arabia, Iran and Iraq. This group had the ability to turn the oil spigot on and off with ease, wreaking potential havoc in world markets and economies. But we don’t live in the eighties anymore and today’s headlines show just how irrelevant this group has become. With the world’s global supply of oil increasing due to new drilling techniques we find ourselves facing the emergence of a new oil exporter, the United States.
You’re in a tight parking spot in your brand new car. Trying to avoid the disaster of getting a ding or scratch on your vehicle you start the engine and slowly, very slowly, start to maneuver the big beast out of a narrow spot. No room for errors, you’ve got to get it perfect. I don’t know if that can be used to describe the Fed’s action this week but it comes pretty close. What they are trying not to dent is our big, shiny market and economy. The market has been like a rocket ship rising consistently since March of 2009 benefitting from the Fed’s aggressive monetary policy. The economy has benefitted as well, just at a slower pace. The market has been waiting for signals of when the Fed would take their foot off the stimulus gas pedal and start to reverse monetary policy. Great concern and debate surrounds what will happen when the Fed changes course. Can the Fed orchestrate the end of super easy monetary policy and not wreck, or at least avoid scratching, the market?