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Oil’s Pricing Mystery Has Been Solved – Chris Mayer

It’s a new year, but it’s still the same market with the same people in it and the same worries. And the big story is still the collapse of oil prices. As I write, oil just slipped to a new 5½-year low.


Below I’ll reveal some things you probably don’t know about oil pricing — an explanation from the only guy who seems to get this: Warren Mosler, a former banker and ace hedge fund manager. He is also a pioneer of the school of macroeconomic thought called Modern Monetary Theory, or MMT.

Mosler recently wrote a series of brilliant posts about oil pricing.

First, you have to understand that the Saudis are the world’s swing producer and price setter. They supply the last 9-10 million barrels of crude oil consumed every day. “The Saudis don’t sell at spot price in the marketplace, but instead simply post prices for their customers/refiners and let them buy all they want at those prices,” Mosler wrote. “And most recently, the prices they have posted have been fixed spreads from various benchmarks, like Brent.”

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