So about 250 billion set aside in government bonds, to finance that stream of payments. A beginning - doesn't cover the direct and immediate damages, or the interest accumulated in years of delay.
The Saudis unexpectedly announced further productions cutbacks. So you have 2 things at work here. First, the unexpected nature of this announcement and then the actual cutback. Remember, at this point, this is all speculation. Not a single drop of oil has been taken off the market at this point. The same amount of oil is in the pipeline. It takes months to reduce the oil supplied to the market.
OK. I have no interest in "financing that stream of payments" - the oil companies should pay it directly (either through direct payments or through an insurance provider of their choice.)
It does cover direct and immediate damages.
A little over half the oil the US produces is tight (shale) oil.
Compared to what? The odds are good that US producers will produce more oil as oil prices rise. If the free markets work, if the oil market in the US is free, that's what will happen.
No, oil consumption goes down a bit because people don't travel as much during the winter months and the vast majority of people don't use oil to heat their homes. But here is the thing, US oil production has been falling since June. That trend is likely to continue for at least the next few months.
I don't think he has to. Congress has already passed a law allowing the export of oil. But based on Trump's appointments, I think he would let the oil industry do whatever it wanted to do as long as it didn't cause him to suffer any negative press.
In which case the de facto subsidy will lower the cap on the market price of a barrel of oil, by externalizing major costs.
The 250 billion? - maybe. But the current obligation is about a tenth of that, and is yet to be paid in full - and that ten cents on the dollar is how the price cap drops as low as $70.billvon said:
Because interest rate increases slow/reduce demand; they slow economic growth.
I mean higher interest rates make the cost of money more expensive; so people spend less money. Less spending means less demand for virtually everything including oil. For example, when interest rates rise the cost of buying a home increases because the borrower will have to pay higher interest rates. If a car buyer borrows money to buy a car, it will cost more money to buy the car, because the borrower will need to pay a higher interest rate on the money he/she borrows to purchase the car. Higher interest rates will affect people who carry balances on their credit cards. They will need to pay more interest. More of their disposable income will be used to service their debt, i.e.make interest payments, and less of that income will be available to purchase goods and services. And the same applies to businesses. It will cost businesses more to borrow money, and thus more to purchase goods and services.
Because it wants to keep inflation under control. Slowing the economy does that. And in this case, the Fed wants to get back to normalcy.
Yes, it will strengthen the dollar and it will draw money from overseas, especially developing countries.