Hyeonju explained briefly.
While stocks and bonds represent financial assets, oil and gold represent real assets.
Until the financial crisis broke out, oil prices were close to $150 per barrel. However, after the financial crisis, economic growth slowed, demand decreased, and prices also fell.
What started the fire was the development of shale gas and shale oil in the United States.
It has long been known that gas and oil exist in shale rock. However, drilling has been impossible so far due to cost and technical issues.
However, as oil prices continued to exceed $100 per barrel and new technologies were developed, drilling finally became possible.
American companies began to rush to break open shale rock and extract the gas and oil within it. But the amount was enormous.
It was no exaggeration to say that it was a shale revolution.
"Do you know what the world's three largest crude oils are?"
I know this because I heard it when I was taking a global economics course.
"It's North Sea Brant, Middle Eastern Dubai, and West Texas."
For reference, Korea mainly imports Dubai oil from the Middle East.
Hyeonju smiled and nodded.
"that's right. As you can see, the United States was originally an oil-producing country. However, the amount was far short of domestic demand, so despite being an oil producing country, it maintained its position as the largest importer. But the shale revolution has completely changed the situation."
The amount of shale gas and oil produced by the United States was enough to transform the United States, the world's largest oil importer, into an oil exporter.
Naturally, oil-producing countries were in an uproar.
Oil demand is inelastic. Consumption does not increase dramatically when prices rise, and consumption does not increase significantly when prices fall.
Therefore, supplier-centered price formation has been carried out so far.
OPEC was virtually an internationally recognized cartel. Every time they colluded, oil prices fluctuated, leading to the first and second oil shocks.
However, outside the cartel, the United States emerged as a new supplier.
The once rosy outlook that it would exceed $200 per barrel has disappeared, and oil prices have continued to fall.
Demand is fixed anyway.
In order to raise prices, supply had to be reduced. OPEC member countries held several meetings to hastily reduce production, but the results were always failure.
"The interests of oil-producing countries are too complicated."
The biggest disadvantage of shale oil is that it is expensive.
Since production costs alone are estimated to be around $45 per barrel, it has even been said that if oil prices fall below $50 per barrel, more than half of the companies will go bankrupt.
"Countries on the verge of starvation, such as Venezuela, are strongly in favor of reducing production because they may go bankrupt if oil prices fall further, but countries such as Saudi Arabia have made a lot of money, so they are in the position of holding on without reducing production for the time being. "If oil prices continue to remain low, it will be difficult for shale companies as well."
"What will be the outcome of this meeting?"
"I feel they will fail to reach an agreement. Currently, it is barely maintaining the $60 per barrel range, but if it fails again this time, it will fall to below $50. Even the big players are betting on that, and the price of WTI (West Texas Intermediate) has already fallen by more than 8 percent this week alone."
It is a problem for oil prices to rise too much, but it is also a problem for oil prices to fall too much. In the current situation, the decline in oil prices has had a negative impact on the economy.
"What if an agreement is reached?"
"Oil prices will soar, and the market will cheer, but the possibility is extremely low."
"But there will be an agreement this time."
At my words, Hyeonju looked at me with a puzzled expression.
"Why do you think so?"
My words came out in vain without me even realizing it.
I vaguely explained it.
"Well, I just thought it would be good if it were like that."
Hyeonju smiled bitterly.
"That would be nice, but hopes and predictions are different things."
At the end of the conversation, Hyeonju phone rang again.
Vrmmm!
After checking the text message, Hyeonju stood up.
"The preparations are complete. I have to go now because of work. See you again. "Jinhu, please take good care of him."
"yes. Do not worry."
Taekkyu grumbled.
"I'm the one taking care of Jinhu. "You don't even know your brother very well."
* * *
We got back into the car to go home.
While Taekgyu was driving, I kept thinking about what I saw earlier.
What does the OPEC production cut agreement really mean?
"······."
Of course, that means OPEC agrees to reduce production, right?
If an agreement is reached, oil prices will skyrocket. Even if it's not necessarily what Hyeonju said, it's common sense.
At that moment, a thought came into my head.
So what if i buy crude oil in advance?
If this is truly foresight and what I saw is correct, wouldn't it be possible to make a lot of money just by purchasing crude oil in advance?
oh! I think I have a really good idea now.
I thought about it calmly.
It predicted the mortar explosion and the Mountain Hill bankruptcy. According to the inductive method, this OPEC production reduction agreement will also be correct.
The problem is the investment amount.
Since I found a lease and gave 100 million won to my mother, the money I can currently spend is 275 million won left in my bank account and 740 million won in Taekgyu's account.
Should I invest all of this?
As i thought about it, Taekgyu asked.
"Did you see something when you were talking to my sister earlier?"
"huh?"
"You saw something, right? What? "What did you see?"
"······."
This child is unnecessarily quick-witted.
Wait a moment. Come to think of it, I only have about 1 billion, but this guy has more than 10 times more than me.
I looked at Taekgyu and asked.
"Do you want to buy crude oil?"
Taek-gyu looked puzzled.
"crude oil? Buy oil? "I'm not running out of gas right now."
"No, I'm not telling you to refuel…"
I explained what I saw and the thoughts that just occurred to me.
Taek-gyu was surprised when he heard my story.
"It predicted the OPEC production reduction agreement, and if the production reduction agreement is reached, crude oil will rise, so we should buy it in advance, right?"
"That's right."
Fortunately, it was easy to understand.
"But where do you put the crude oil after purchasing it? "Do you have drums stacked up at home?"
"······."
I don't think you fully understand.
* * *
We arrived at Taek-gyu's living room in Yeoksam-dong.
As soon as Taekgyu entered the house, he put the dishes on the desk aside and turned on the computer. He opened an Internet window and immediately searched for WTI.
America's oil production cannot even meet domestic demand. Therefore, even if a transaction is made, it is never actually taken out of the country.
Nevertheless, due to the characteristics of the United States, which has a developed financial market, it served as a price indicator to determine international oil prices.
As Hyeonju said, WTI was barely maintaining the $60 per barrel level. To be exact, it was $60.48.
"It fell a lot."
Crude oil is not just used to fuel cars, but is used throughout industry. Therefore, the rise in oil prices has a significant impact on producer prices.
When my father ran the factory, he had a hard time with oil prices exceeding $100 per barrel. But to hit rock bottom like this in just a few years.
Shale oil is truly amazing.
Taek-gyu accessed the Golden Gate account. Even after sending me 500 million, he still has a balance of $11,932,000. Of these, about $673,000 is mine.
"WTI? "Where do you buy that?"
"At the New York Mercantile Exchange."
Taek-gyu looks like he's excited about something.
"How much do you plan to buy?"
Since I don't know what will happen, should I just bet half of it?
"300,000 dollars."
"Then let's buy mine too."
"How much will you buy?"
"A reasonable amount of 10 million."
"Won?"
"No, dollars."
I said, dumbfounded.
"Why do you think is that is reasonable? "Are you out of your mind?"
"Then $5 million?"
Have you lost control because you suddenly have money?
"This isn't a sure thing, dude."
"You said you had foresight? "Then it will be fine."
"And what if it doesn't work out?"
"okay. 3 million dollars. "I cannot yield anything less than that."
"······Alright but it's on you."
The market was predicting the failure of the production cut meeting.
That prediction has been reflected in advance, and oil prices have fallen to the point where they have fallen. Even if production reduction fails, the further decline will not be that large.
If it's wrong, you can sell it at a loss.
* * *
I went into Taekgyu's account and bought WTI.
That's 3.3 million dollars, which sounds good, but it's a huge sum that the average person can't even imagine. I clicked the buy button with trembling hands.
"What should we do now?"
"We have to wait for the OPEC meeting to end."