Talk about oil these days frequently focuses on its extreme sensitivity to supply and demand. Between 2011 and 2014, worldwide demand for oil increased by about 3 million barrels per day, despite a decline of one million barrels in European demand. During the same period, non-OPEC supply increased by a little less than 4 million barrels a day. Production from fracking and other non-conventional oil in North America accounted for over 100 percent of the gain as production for other non-OPEC producers declined slightly. In other words, for the oil market to have stayed in balance, OPEC should have reduced production by about 1 million barrels—the difference between supply and demand. Instead, OPEC production today is nearly a million barrels more than at the end of 2011.

Hard to believe but those two million barrels—i.e., the OPEC decision to raise production by a million barrels rather than cut a million barrels—explain why oil now stands closer to $50 than $100 per barrel. Every major oil producer suffers from lower oil prices but those with low costs and a lot of money expect short-term pain to be more than covered by enormous long-term gain. Lower oil prices could conceivably cut capital expenditures for hard-to-get oil by up to a trillion dollars—maybe more. American shale oil will be hurt, but perhaps even more important so will deep water projects, which offer far greater production potential than shale. Some analysts estimate that $50 per barrel oil could block as much as 15 to 20 million barrels daily of oil production for at least several years. Indeed, even if oil production fell by just 1 million barrels daily, very likely the oil market would balance thanks to rising demand, which is estimated to grow by a million barrels a day in 2015.

In truth, however, a major, 3 to 5 million barrel decline in daily oil production could spur a rise in oil likely to surpass that of 2007-2008, which caused worldwide disaster and ultimately served no one’s purpose—not even that of OPEC. Now, we think OPEC wants two things—to establish more control over the oil market and to shift economic hegemony to the East. Anyone betting on oil prices under $70 or $80 for the long term is likely to be disappointed. Meanwhile Saudi actions will produce winners and losers.

Who wins from the crash in oil? Short term, most oil importing nations win, but to various extents. For the U.S., as we have previously noted, the rout is a bit of a mixed blessing, given that much new oil production is resource intense and its economic impact reaches from the well-head to truck and train traffic to mining to steel factories. Workers in industries related to oil production are among the best paid, so the U.S. will feel some pain. Overall growth in energy demand has proved faster than one might expect from previous economic growth in this range, a consequence of the high energy requirements to produce oil from shale and the relative value added to our GDP.

Possibly, the recent outright drop in wages resulted from shale field layoffs. Still, we think that history will be proved right once again and the very positive signal from our Master Key—a year-over-year decline in oil prices—will coincide with at least a decent stock market for the next six months or until oil prices again near their 2014 highs. On balance, we believe the cross currents from lower oil prices to be positive, especially if oil prices rebound fairly soon. But as always with major cross-currents, volatility will likely remain high. And this is one reason we like health care stocks.  Some of our favorites are examined in the next issue of The Complete Investor.

Keep in mind that lower gasoline prices and heating costs will put a lot of money in consumer pockets, which should mean higher consumer spending and spending on more costly products with a greater effect on economic activity. We already see a move toward larger, more expensive cars, which do use more gas, but also mean greater short-term demand and profits for the auto industry. Consumers’ savings from gasoline and heating will also mean a pick-up in housing—another fillip for autos and everything associated with new homes.

For us the most interesting question remains the whys and wherefores of the dramatic fall in oil prices—and the interplay between China, Saudi Arabia, and Russia and other Eastern countries. We now believe that harming the shale industry was more an afterthought. To totally cripple the shale industry would have damaged the U.S. and made it nearly impossible for oil producers (including OPEC) to keep up with future demand. Again, it is in no one’s interest to create a worldwide catastrophe that would result from a profound oil shortage.

Moreover, shale in our opinion, was close to its production peak and did not represent a long-term threat. It would be enough for Europe to return to normal to balance worldwide demand and supply for oil. If the goal were to hurt the U.S., Saudi Arabia would have done better to wait another year to act, to allow shale to grow even more economically important. Moreover, the so-called productivity improvements in shale fields resulted much more from the vast increase in materials injected into wells, such as water, sand, and chemicals. This is akin to using more cooks, more flour and more eggs to make a bigger cake.

On the other hand, harming a competitor a little is not so bad, especially if you want to assure that the East controls oil production. Shale production will slow and may even decline because of the Saudi actions. The industry is highly leveraged and shut-in plays may not emerge for a long time. However, even if oil recovers fairly quickly, increased volatility in the price of oil means lenders will not be quick to extend new credit.

The real prize would be to hasten the development of conventional oil and other hydrocarbons still easily within man’s reach and assure control of oil and gas in friendlier Eastern hands, particular China, than with the disapproving West. Probably Russia owns the largest conventional fields yet to be exploited, in Siberia and particularly Eastern Siberia.

According to Texas-based DeGolyer & MacNaughton, unexploited Russian reserves could exceed 100 billion barrels and might even approach 150 billion barrels, nearly the same as Saudi’s reserves. To exploit these reserves will cost money and require expensive technology. While largely conventional, these reserves sit far from civilization and their development would need technological expertise.

Russia has already begun to spend big on large pipelines and other transportation systems to transport that oil. Thus Russia, while right now a clear short-term loser, is a potential long-term winner.

Russia, however, lacks the finances and technologies to build the necessary infrastructure, a problem compounded by the drop in oil prices. Russia can only turn East to realize its potential. Already India’s Prime Minister Modi and Putin have discussed a $30 billion oil pipeline and an even larger gas project.

Doubtless for India to develop economically, it will need more hydrocarbons. Russia’s need for funds more than ever makes India a likely partner. But China arguably benefits most from the lower price of oil. It will need lots of oil to complete its infrastructure, much of which will devoted to renewable energies—smart grids, wind, photovoltaics and the like. Its transition to battery or hydrogen powered cars will not happen overnight. And China’s coal production is set to peak sometime in the next five years. (As Greg Dorsey and I noted in Red Alert, Chinese scientists observe in peer-reviewed articles that its coal production should peak in the next decade, regardless of environmental considerations.) Not surprisingly, the Middle Kingdom has taken full advantage with oil (and for that matter copper) imports recently reaching record levels.

The Russian reserves would give China a much better way to bridge the gap from now to a future it plans to be powered mostly by renewables. China’s money could buy it control of a great deal of Russia’s reserves. China has already signed a $400 billion pact with Russia for gas. With India’s possible investment, Russia now has pledged investments of close to half a trillion dollars. And those projected sums could double or more in the near term, though we do not expect to see such headlines in the New York Times or Wall Street Journal. This will happen regardless whether Putin or some other leader controls Russia politically. The entire East will in fact will benefit. Noteworthy is that China is  Saudi Arabia’s largest source of imports thanks in good measure to arms and renewable energies. Even the Saudis, in other words, realize that hydrocarbons are finite.

Keep in mind that the East—India and/or China—has ruled the economic roost for 18 of the past 20 centuries. China aims to make it 19 centuries out of the last 21. China seeks hegemony to provide its populace with the economic means to navigate the 21st century; it is not imperialistic, but simply wants to “live and let live.”

President Xi, in this calculus, has emerged as the world’s most powerful leader and clearly China’s most powerful leader since Mao. His battle against corruption has temporarily slowed China, which amounts to short-term pain for long-term gain. China wants both to reform its economy and eliminate potential enemies.

We’ll bet on Xi’s ultimate success. Consider a little incident before he took power. For no apparent reason, shortly before Xi was anointed, he disappeared from public view for several days, an event accompanied by great speculation. When he reemerged, Xi received dual control of both the Communist party and the military. Past presidents like Hu waited more than a year before obtaining military control. Xi knew he would need full control from the outset to accomplish his objectives. He’s no megalomaniac; he sees himself as a man on a mission and gives himself another eight years to set China’s economic foundation for the 21st century.

Another Chinese goal is a new monetary system that will give the yuan and gold major global roles. In other words, gold is important. It is the only currency capable of rationing the commodities that will in short order become scarce. We expect great volatility ahead, a view that reinforces the value of an overweighting in health care. But with the world needing perhaps up to $30 trillion in new infrastructure spending—the $1 trillion or so needed simply to bring Russian oil to civilization is just a drop in the bucket, compared to the spending needed for a full-fledged smart grid—the time is approaching to pick the best infrastructure companies. That includes those companies that produce commodities necessary for the required infrastructure. Gold and silver are clear winners—and especially silver, thanks to its dual role as an industrial and monetary metal. We would bet on triple-digit gains in silver within the next five years.

According to our research for The Complete Investor, the implication is that oil will not stay cheap for long. We hope the run-up in oil will occur later rather than sooner, but we will take our cue from the markets. When oil averages $95 for a month, it will be time to cash out or at least lighten up on stocks. We will watch oil and all other investment-related variables like hawks for you. For now, however, we believe there is still money to be made in stocks. Health care for the somewhat faint of heart, gold and silver for everyone, and for those with an urge to go for the gusto, two energy-related stocks we recommend in our sister publication Leeb Income Millionaire, have multi-bagger potential.