BookMarks #136: So You Want To Know About Economics

Title: So You Want to Know About Economics

Author: Roopa Pai

Genre: Non-Fiction, Economics

Published: 2017

BookMarks

“So You Want to Know About Economics” is a good primer for anyone wanting to learn about the subject of economics. The author answers quite a few questions on economics, markets, and its impact on the world and its people.

What is Economics? - The answer maybe varied or as the author imagines an economist would say ‘It’s about, you know, markets and things. Supply, demand, price elasticity, externalities, cost-benefit, scarcity, resources, exchange rates, maximising utility, protectionism, globalisation, and all of them, of course, ceteris paribus…’

Why is Economics important? “Economics is important because it is really the study of how the world thinks and works!”

What do Economists do? “Economists are really superheroes fighting for a fairer world! Just like environmentalists, they are constantly trying to understand how we, the 7 billion people that inhabit this planet, can get the most out of what the universe gives us for free. Economists are wizards who make magical things happen with numbers.”

What is the root of economy? “Trade”. And the root of trade? “Money”. And the role of money – “Money’s a matter of functions four, A Medium, a Measure, a Standard, a Store”

And thus it goes on about the concepts of macro and micro economics, banking, government interventions, markets etc.

Overall, an interesting primer for anyone who wants to learn a little bit more about economics before delving into the likes of Adam Smith and John Maynard Keynes. 

Previously on BookMarks: Mad Money Journey 

Learn N Blog #22: The Energy Trilemma

What is it?

the need to find balance between energy security, affordability, and sustainability and its impact on everyday lives.

Who coined it? 

The World Energy Council in 2010. The Index is prepared annually.

What are the Three Elements?

• Energy Security measures a nation’s capacity to meet current and future energy demand reliably with minimal disruption to supplies from any disruption.
• Energy Equity assesses a country’s ability to provide universal access to reliable, affordable, and abundant energy for domestic and commercial use.
• Environmental Sustainability of energy systems represents the transition of a country’s energy system towards mitigating and avoiding potential environmental harm and climate change impacts.

Why the focus?

It’s a balance between short-term pain (definitely) and long-term gain (hopefully). How countries can aim for Net Zero Ambitions while keeping the current energy security in mind. The situation has been exacerbated by the combined impact of the Covid19 pandemic and subsequent lockdowns followed by the Russian invasion of Ukraine. The consequent global supply chain disruptions, increased living costs and global recession fears have just added to the uncertainty.

Countries are looking at securing their own energy resources at the cheapest price. Hence Russian oil is still available at a discount for the willing buyers, coal production has been increased, plans to phase out nuclear power plants have been shelved, there is increased capital expenditure on hydrocarbons as well as renewables! Regulations are being modified to increase the scope of what counts as “clean energy”.

All this to resolve the energy trilemma. It’s not an easy task and there is no one-size-fits-all solution either. After all, each country has their own varied requirements and available resources. And they will have to take their own measures to attain Net Zero!

Links:

• Online tool to track energy trilemma index for each country: World Energy  
• Gas & Nuclear are Green Energy: CNBC 

Previously on Learn N Blog: Lithium Reserves Estimation

2019 TYIL

TYIL - This Year I Learnt.

Sometime, very early in the year, decided to compile a list of "interesting" (for me at least) things which I have learnt during the course of the year. And publish it close to the end of the year. So, at least one New Year's resolution got complete. And I have my own hashtag for it as well - #TYIL. So here goes. 

1. Michelin Star was designed to ensure people have places to go out for dinner, in their cars and wear out their tires. Thus needing more tires and increasing the revenues of Michelin. It was a part of the Michelin Guide. (Business Insider)
2. Yellow Cane Toads are so poisonous that a python, or even a crocodile, will die if they eat the frogs. Hence that python was smart and allowed these pesky creatures a ride on its back. (Link)
3. The phrase “Rule of Thumb” has seemingly negative origins. According to folk etymology, English Law permitted a man to beat his wife with a stick no thicker than the width of his thumb. If true, quite a bizarre origin of an everyday phrase! (Link)
4. Zugzwang – German for Compulsion to Move – A situation in Chess where any move you make will weaken your positional advantage! (Chessdotcom)
5. Ikigai – Japanese formula – a reason to jump out of bed each morning (Link)
6. Nagashi Somen – Japanese system of eating flowing noodles! Catch the noodles with chopsticks before it flows away from you! (BBC)
7. Captology – the invisible ways in which technology can persuade and influence those who use it. Coined by BJ Fogg, a behavioural scientist. Derived from “Computers As Persuasive Technology” (Stanford)
8. DC stands for Detective Comics. Somehow for all this time never tried to figure it out! 
9. The ‘3-6-3’ rule of Banking - borrow at 3 per cent, lend at 6 per cent, and head off to the golf course at 3 P.M. {Life was simple then}(Investopedia)
10. The Three Comma Club – or in simple terms a Billionaire – well, that could be an aspiration (Link) 
11. Eugene Shoemaker – The only person whose ashes are buried on the Moon. (NASA)
12. Marginalia - the writing in the margins of a printed book to underlining or otherwise marking out passages with asterisks or other symbols — essentially any type of visible interaction a reader has with their book. {Something we all indulge in but didn't know there was a word for it}(Firstpost)
13. Shampoo originates from Champi – Washing hair from head massage – an interesting leap of language! (Link) 
14. Henry Cavill’s mustache was subject of a $3 Million contractual dispute between the makers of Mission Impossible: Fallout & Justice League. (Link)
15. Gandhiji’s 3 Monkeys have their origins in Japan – Mizaru, Kikazaru, Iwazaru (Natgeo)
16. Steiff – a German company which is the creator of children’s teddy bears. All their toys have a button tag in the ear for authenticity! (BBC)
17. The “Traps” in the Deccan Traps comes from the Swedish word “Trappa” meaning steps (Link)
18. Karoshi – Japanese for “death-by-overwork” {Japanese do have a lot of terms to offer} (Business Insider)
19. Men’s Underwear Index – is an economic index which can supposedly detect the beginnings of a recovery during an economic slump. (Wikipedia) 
20. Badluram Ka Badan Zameen Ke Neeche Hai – marching song of Assam Regiment, dedicated to the memory of Badluram, a soldier who had died during World War II, but his platoon still got his share of rations! (Firstpost) 
21. Kessler Syndrome - The concept that collisions between objects create space debris and will cause a cascade of further collisions, making space activities and satellite use impossible. (Wikipedia) 
22. Pineapples can eat your mouth while you are eating it! (Link) 
23. Gibbous Moon - when the Moon is more than half full, but not quite fully illuminated, when you look at it from the perspective of Earth. (Link)
24. Lipstick Effect – purchases of smaller and more modest consumer discretionary items tend to pick-up during uncertain economic times. (Investopedia).Mr. Ravishankar Prasad, may please take note! (ET)
25. Anna Karenina Principle - a deficiency in any one of a number of factors dooms an endeavor to failure. Consequently, a successful endeavor (subject to this principle) is one where every possible deficiency has been avoided. (Wikipedia)
26.  The "high" in "high tea" refers to the height of the table on which it is served. 
27. Mosambi’s name originates from Mozambique, from where the fruit was brought by the Portuguese to India (ET).

So this was 2019. There was no specific number planned - just a list which grew with time. 

Certainly more will be added next year. After all, the more I learn, the more I realize that like Jon Snow, I know nothing!

BookMarks #57: India in the Age of Ideas

Title: India in the Age of Ideas

Author: Sanjeev Sanyal

Genre: Non-Fiction, Economics, Compendium

Published: 2018

BookMarks

"India in the Age of Ideas" is a collection of essays, written over a decade on subjects of economics, urban infrastructure and history. The author Mr. Sanjeev Sanyal is currently the Principal Economic Adviser to the Government of India.

The writings offer a fresh perspective to the three subjects, especially in the field of urban planning. Some of the ideas are radically different from the conventional point of view. The author presents a contrarian approach to the philosophy of rigid five-year plans. The author doesn’t believe in meticulous planning but rather being agile and having a quick response to ever-changing dynamics - a case of Complex Adaptive Systems.

New urban developments should be integrated with existing infrastructure. There is no point in fresh buildings far off from the cities. He contrasts the F1 tracks in Singapore against Noida, the university towns in US & UK versus our universities which are inside walled campuses usually far away from urban centers. 

The author presents his ideas about making cities more livable by improving connectivity through walkability and integrating public transport with last mile connectivity. 

There is an interesting contrast of Chandigarh with Gurgaon. One a modern planned city which has become a center for retired bureaucrats. And the other which has grown in a haphazard manner but providing a major boost to the economy. And thus, comes the question, do we build to a meticulous plan or manage a random growth better? The author certainly believes the second is a better option!

The post-independence policies of socialism and centralized five-year plans of Mahalanobis model come in for heavy criticism. Rightly so, if the results are compared to the potential. But never given the perspective of the world just after independence. The balance is not there in the criticism.

History is another interesting subject which is touched upon. Was Ashoka really great? Why are our history books only Delhi focused? Why are many of the major empires of North-east & South India barely mentioned in our text-books? Why do we not talk about our naval successes in South-East Asia? Interesting questions all. Certainly, we need a more representative history rather than rewriting it completely.

A radical suggestion (and an easily implementable one) is having the Independence Day speech from different locations of historic importance every year! But doesn’t every politician aim for giving a speech from the Red Fort?

Because it is a collection of articles, there are passages which are repetitive across the book. Also, the original date of publication of the article should have come at the beginning to give a perspective of the time-frame. This is especially true in our ever-evolving VUCA world, where the past decade has led to huge technological evolution.

While reading the articles, remembered a chart which showed the most populous cities of the world and different times. India had three entries- Pataliputra, Agra, Delhi. Interestingly, none of them are even the largest Indian city now. Cities are living entities. How they are managed will lead to how long they stay as a center of economic & social importance!

Previously on BookMarks: Stories from Tagore

Thanos' Snap & the Aftermath

[Spoilers Ahead – Although it’s been weeks since the movie released, so should not matter] 

In Avengers: Infinity Wars, the central character, Thanos, seeks to bring together all six Infinity Stones, to enable fulfilling his mission to reduce the universe’s population to half, so that the other half can live happily on the remaining resources. The superhero team from across the universe joins forces in a failed attempt to stop him. Thanos succeeds and with a single snap of his fingers, makes every second living entity disappear from the face of this universe. 

What happens next will remain a point of conjecture, till the next movie comes up. In this post lets try to figure out the aftermath from a economics perspective. 

Thanos believes that resources are finite, the universe is overcrowded [a belief shared by every person who spends a considerable part of their day in commute] and the population has grown much beyond sustainable limits. For the betterment of humankind, he intends to destroy half of it. Resulting in the remaining half living happily ever after on effectively double the per capita resources. But does it really work out? 

Assumptions – Only Earth (as we know it) is considered. And the Snap works only on Homo Sapiens. All other life (plant, animal, extra-terrestrial) is spared. 

First, who survives the “snap” and who does not? As per Thanos, it will be a random occurrence. So assume it to be like a coin toss. We don’t know the outcome for each specific event but overall, it will be close to 50-50 heads or tails or in this case, survival or disappearance. 

And what happens to the survivors? Overcoming the initial shock itself will be a herculean task. Every other person just fading away, is too big a shock to easily recover from. They will have to bear with the huge emotional trauma of an unprecedented global scale. Humankind has faced disasters – both man-made (World Wars, atom bombs, terrorist attacks) and natural (earthquakes, tsunamis, volcanic eruptions, cyclones) but these have been geographically limited and not on a global level. Here no corner would be spared. 

In the immediate aftermath of the snap, there would be further human losses. Folks in need of care (the sick, the very young and the very old) might not have people around to take care of them. Also, at any given point of time, millions of machines are running under human control (vehicles, industrial plants, utlities etc.), Sudden removal of this control in the immediate aftermath of the "snap", will lead to a multitude of accidents globally. Insurance companies are certainly going to take a major hit on their books from this global catastrophe.

Now coming to the resources bit. Assuming that the natural resources, crops, livestock are spared. Does it mean every survivor now has access to twice the per capita resources? The resource distribution is not homogeneous & neither is the consumption pattern. And more importantly the skill-sets required to manage the resources are differentiated. 

Natural resources – air, water, minerals – would be increased per capita. But managing the utilities will become a major task. 

Perishables will see a lot of wastage, as consumption would be halved (or even less, accounting for trauma and the cascading reductions). 

Supply chains will get severely impacted, with links broken in-between leading to glut of certain items and crunch of others. In an increasingly inter-connected world, breakdown in supply lines for essentials could create major havoc especially in the urban areas.

Labour will be in high demand leading to increased wages. But payment might be in kind and not cash. Barter system might make a sudden comeback. Overall production will reduce due to shortage of workforce. Automation might get a boost, but the number of consumers will also have reduced. So technological innovations might take a back-seat in the immediate aftermath. 

Prices will decline. Real estate will suffer. Owned housing will certainly become more affordable. Other consumer products will also lose selling value. Overall, economy will see a severe deflationary trend. 

The carbon footprint will decline. We might achieve the COP21 targets after all. Less humans will mean more space for the flora and fauna to thrive as well. The ecological balance will undergo a sea-change.

Some nations might have constitutional vacuums, if their leadership disappears. Significant shifts may occur in the geo-political map. Balkanization could become a worldwide phenomenon. Monte Carlo simulations might help predict boundary shift scenarios on the basis of which leadership survives ? 

Overall, the scenario becomes further bleak. Population reduced to less than half, survivors trying to rebuild from the trauma, supply chains broken, breakdown of law and order, territorial disputes, an economy in recession, shift in the ecological balance, climate change under control. In the immediate aftermath, the scenario appears grim for humankind. However, Homo Sapiens are a resilient lot. Life will survive and thrive again but it may take centuries to get things back on track i.e. exploiting our limited resources to the hilt and then some more. And what does the omnipotent, omniscient Thanos do in the interim? Does he wait for the population to grow back to a certain level and "snap" his fingers again or does he undertake regular trims? 

In all, Thanos's snap doesn't quite fufill his objective of making the world a better living place (at least for the humans). And certainly makes no economic sense.

BookMarks #35: Predictions 2018

Title: Predictions 2018: Froth and Frustration 

Published By: Thomson Reuters

Genre: Current Affairs

Published: 2018

BookMarks

Making predictions about world affairs in these increasingly crazy and uncertain times is not easy. We are living in world of rapid Global Warming while parts of Europe are freezing! But its human nature to attempt to predict and anticipate the future - reason why every newspaper has the astrology section!

Predictions 2018 is a compilation made by Thomson Reuters on likely scenarios affecting the world in this year. However they are more generic in nature and just give likelihood of events which could shape the world. But in my humble opinion, the events which can be predicted have only a minor effect, it is the Black Swan events which really alter our world.

The predictions covered are more economic and technology focused rather than the political ones. Which is a more accurate reflection of the current times and an increasingly inter-connected world. After all technology boosts changes faster aided by the right economics while politics mostly tries to maintain status quo! The predictions cover a variety of subjects - Cryptocurrencies, commodity prices, economic policies of Trump & Xi, the next steps for the tech giants, trade wars and potential impacts and potential regime changes. However, the book only describes potential scenarios but doesn't detail out their possible impacts. Actually a smart move!

Its a short and succinct read on the subjects which could shape our future.

Previously on BookMarks: Fire and Fury

P.S. 2017 edition of Predictions.

BookMarks #20: Predictions 2017

Title: Predictions 2017 Seismic Shifts

Published By: Thomson Reuters

Genre: Current Affairs

Published: 2017

BookMarks

After the surreal year that 2016 was, we enter 2017 a little apprehensive of what the future has in store for us. "Predictions 2017" is a compilation of some of the predictions made by the Thomosn Reuters for the coming 12 months.

The predictions are categorised under three major heads -  geopolitics, economics and technology. And over all of these looms the shadow of one major unknown - Donald Trump. We do not know what Trump has in store for us. Yes, he has proved to be a maverick, he says things which are not politically correct and his actions defy conventional political wisdom and yet he won the elction. Many of predictions hinge on what this maverick force of nature will do and how much of his campaign "promises" he acts upon.  And more importantly how the rest of the world - Putin, May, Merkel, Abe et al react to him.

The prevailing geopolitical uncertainties add to the risks in economics. Declining crude prices have already shaken up the oil-dependent economies. This could lead to consolidations and alliances of a different kind. Advances in technology may also act as major disruptor. Trump's climate change denials might come to nought for the auto-makers, if Tesla's electric cars come up with a viable recharging infrastructure. The self-driven cars might have a role in changing the insurance industry as well. 

So what will 2017 hold for us. Trump, Putin, Syria, Self-driven cars, Climate change, improvements in gene therapy, consolidation in banking industry, major M&A activity? It covers a wide gamut of subjects. Yet the article which I liked best is the very last one. Every model needs imaginations, a la Harry Potter. Remember the dozen publishers who thought "Harry Potter and the Philosopher's Stone" was not publishing!  Well every one needs a little bit of magic.

Previously on BookMarks - Inferno

India @ 69

15th August, 2016 – Time for my 10th annual Independence Day blog post - a little round-up of all things India. (Here is the 2015 edition).

How is the nation doing as a whole? Current mood of the nation seems quite grim, especially if one is in the habit of watching TV news and following social media. Apparently, intolerance has been rising to new Himalayan levels while the nationalistic pitch is reaching the moon and hyperbole on every single topic has piggy-backed to Mars riding the Mars Rover. Meanwhile there are intense debates (mostly hot-air) on freedoms of expression, choice of food etc. And there are new folks demanding different forms of "Azaadi". Oh, and there are intellectuals who are disturbed enough by the goings-on to return their well-earned awards. Where we begin wondering how many awards are given.

The country seems to be in a perennial state of elections. And that means that our elected leaders are in a non-stop campaign mode rather than in actually running the country. Hunger for quick take-over of power has resulted in a couple of states having governments changed and then reinstated via court interventions. In fact, we are seeing too many court interventions, certainly not a healthy sign for any democracy.

Governance of the country is being done through Twitter. While it feels good to see ministers addressing individual grievances, it also shows a lack of proper complaint redressal mechanism in our massive bureaucratic set-up. From missing passports to trains running late, if every complaint requires ministerial intervention, there is something terribly wrong in the system.

Its becoming increasingly difficult to separate the real from the presented news. There is a media version and there are multiple social media versions (depending on the ideology). Not sure which is more dangerous, the message shaped by conventional media (whatever their agenda) or the more extreme one shaped by social media based on one's belief. Add a multitude of whatsapp forwards which are mostly in the nature of garbled version of truth. Why people join online (and in some cases real) lynch mobs  and outrage without doing any basic fact-check is something beyond me. And there seems to be a constant need to fix the narrative has led to history books being re-written.

Meanwhile nature has started fighting back. We have had played enough with nature. It was a year of drought in many parts of the country. And followed by floods all over. Floods in multiple cities (Chennai, Bangalore, Assam, Gurgaon) have shown up the reality of our mismanaged development. World class IT parks surrounded by medieval drainage system, certainly a recipe for disaster. That the monsoon is still the single largest factor in the economic indices in a telling comment on the state of infrastructure development of the country. The sensex maybe growing at a steady rate but it hasn't been able to keep up with the food prices.

Start-ups are the new cool thing in the business domain. Everyone seems to be starting up something or working in a start-up. And there is a whole industry of start-ups. Start-ups seem to mushroom out of nowhwere and many either get absorbed into another company or simply disappear. Anything and everything is coming under the aegis of start-ups. A fellow running multiple blogs is now termed a "serial entrepreneur". Lets see how much longer this cash-burn continues.

On the sporting front, we have sent our biggest contingent to the Olympics, which is a tremendous achievement. But mid-way through the Rio Games, things haven't exactly panned out in our favour. Michael Phelps has now moved ahead of India in the Olympic medal tally. Well, there is always cricket to fall back onto for the Indian fan.

The most tragi-comic news of the year -  ISIS considers its Indian recruits inferior to those form other countries. (Indian Express). Hmmm!

All said and done. things not looking so good. But we are relatively better off given the goings-on in other parts of the world. And one always carries a sense of hope. After all, tomorrow is another day!

Happy Birthday India

The Big Oil Drop: Free fall continues...

Almost a year back, I had written about the falling crude prices. Since then the free-fall has continued with oil trading in the low to mid 30s. Alarm bells are ringing across the industry. The time for trying to figure out the reasons for the slide is long gone, though everyone has their own. The sharp slide is already having its impact. Projects worth nearly $35 Billion have been shelved; 200,000 jobs have been cut, the M&A market is warming up for the bloodbath. And the situation is likely to worsen. 

The US Congress has agreed to allow sale of crude outside US lifting a 40-year ban. The Shale boom made US less dependent on external producers. Which was one of the main reasons for bringing the prices down. However with prices down, the producers are in for a hard time, some having shut shop, most cutting activity levels to the bare minimum. Thus the US Congress decision is an attempt to ease the producers as their domestic market is already having a glut. This move might stabilize the US market but is unlikely to lift the prices.

The lifting of sanctions on Iran is likely to bring more cheap oil in the global market this year. Thus putting more pressure on the oil producers. Supply increases further with demand staying same or even worsening given the global economic slowdown.

The sharp drop has resulted in Saudi Arabia having a huge deficit in its budget. The Saudis, who are the only ones with swing capacity, have steadfastly refused to cut production to boost the price. Instead they have taken an interesting decision to publicly list Saudi Aramco.The listing of the world's biggest company could be the biggest financial event of the century, making up quite a bit of the Saudi deficit. Although it would also open their economy to more scrutiny, something which is against their secretive ways. But then tough times do call for drastic measures.

The emergence of Australia as a source of LNG would shift the direction of the global LNG trade away from Qatar. However the low prices have resulted in delays in some of the projects. Thus enabling Qatar to retain its hegemony for a while longer. Meanwhile, Qatar has been doing its bit to retain its market renegotiating supply contracts with the likes of China and India.

Then, the Paris agreement on Climate Change. If every country keeps their end of the promises, their would be shift from hydrocarbons to alternate energy sources. However, the low crude prices have made the alternate energy sources less attractive. We are reaching a stage where the oil is unlikely to run out but environmental concerns would reduce its consumption.

However, the tensions in the Middle East over Syria and the Saudi Arabia-Iran stand-offs might spike the prices up. Throw in further uncertainties like the possibility of Saudis acquiring a nuclear deterrent from North Korea or Pakistan, further escalation in the so called fight against Islamic State (which has captured a big chunk of the oil trade) or the migrant situation blowing up in Europe  But hoping for a war to jack up prices is certainly not good karma. 

Low prices are welcome news (for now) for an energy-importing country like India. The export bill reduces and with it the foreign exchange outflow. However, it comes at the cost of its domestic production which needs a much higher price to be commercially viable.

Times certainly are tough for the people in the oil sector.

Falling Crude Prices

Crude prices have been plummeting down since the middle of this year

Crude prices are now dipping the $60/barrel mark, much below the $100-120 range in which it had been moving for the past few years. Chief reason for the collapse is being supply outpacing demand (basic economics). Quite a few reasons have been attributed to this.

1. The Shale supply has enabled US to become self-sufficient (for now) and hence it doesn't need to import further.
2. Economic slowdown in Europe which is still not fully recovered from the recession.
3. The OPEC cartel is not united. And Saudi Arabia, the only ones with the spare capacity, are unwilling to cut production.

While lower fuel prices seem to be a good thing at first sight, this sharp dip in prices will have a major impact all round the industry.

1. Revenue calculations gone haywire, not just for the big oil companies but also for governments who have a substantial part of their budget sourced from taxes on oil & petroleum products.
2. Quite a few upcoming projects have been put on hold because the economics don't work out anymore. The projects become viable only if the costs go down. The supply chain generally lags behind the crude prices by a couple of Quarters, hence the projects might see quite a lengthy delay.
3. Marginal plays (e.g. Deepwaters, Unconventionals etc.) which had opened up due to higher crude prices may have to be put on hold. 
4. The alternate energy sectors (solar, wind, bio-fuel etc.) have to compete with these lower prices. This certainly delays their arrival as a big energy source.
5. Consolidation in the oil industry - Many players may be put out of business. Even the big companies are feeling the pinch. The second largest oilfield service provider Haliburton has bought Baker which was the third largest service provider. The M&A market may become quite busy in the days to come.

Normally when the prices have fallen the Saudis have intervened. They have cut production reducing supply. But this time they have chosen not to act.

Quite a few conspiracy theories are going around on their possible motives. The most obvious one is to destroy the competition. Saudi crude is available at much lower production costs than Shale or deepwaters. So when prices fall dramatically the Saudis will be the last to feel the pinch. 

Below are some of the theories doing the rounds. Most of them have less to do with economics but more to do with geopolitics.

1. Destroying US Shale - US Shale boom is considered the chief reason of this price drop. Ironically this boom happened only because the prices had breached the $100/barrel mark in the first place. Now that the Shale industry is well developed, we have to wait and watch how long they can hold up.
2. The OPEC cartel has seemingly run its course. The Saudis are the only ones with any swing production capacity left. So there is a theory that they will let the prices drop till the other OPEC members take a hit on production. Probably leading to the demise of OPEC.
3. Collusion between US and Saudi Arabia to stop the further development of the Russian oil industry. Russia may have even bigger reserves than Saudi Arabia but its more difficult to access, thus needing higher costs to sustain. Russian rouble is already in trouble and interest rates have been boosted up from 10.5 to 17% in Russia. 
4. A pre-dominantly Sunni majority Saudi Arabia does not want a Shia majority Iran to get oil revenues. Plain and simple.

Many theories doing the rounds. But oil prices have a major impact on world's economics. Falling oil prices will reduce inflation, creating more spare cash, which will be hopefully pumped back into the economy causing the economy to boom again, creating more demand for oil and pushing prices up. But this cycle will require at least a year's time. And during this period the industry may have already undergone a drastic upheaval.

Interesting times are ahead not just for the worried oil industry but also for the world economy as a whole. We will have to wait and watch what impact this churn has on the energy industry.