Posted on 01/15/2016 12:10:20 PM PST by Citizen Zed
The selloff comes down to two simple Economy 101 forces: Increased supply and decreased demand. High prices prompted U.S. companies to start drilling for oil in shale formations using unconventional methods like hydraulic fracking and horizontal drilling. This "American Oil Renaissance," which began to gain traction in 2010, has extended from the Eagle Ford in Texas to North Dakota's Bakken Shale, Ohio's Utica, and Pennsylvania's Marcellus Shale, as U.S.-based oil & gas companies started pumping out oil and natural gas. To put it in perspective, the U.S. overtook Saudia Arabia and Russia as the top oil and gas producer.
As prices slid, many waited to see whether the Organization of Petroleum Exporting Countries (OPEC) - a collection of oil-producing countries that pumps about 40% of the world's oil - would cut back on production to push prices up. OPEC did nothing. Ever since Saudi Arabia's decision to maintain output in late 2014 - a decision it upheld at the end of 2015 - prices have kept tumbling. And U.S. drilling production has just started to decline, but the decline has been far less severe than originally predicted.
Then there's demand. Demand for oil globally began tapering off, driven most notably by a slowdown in China's economy.
(Excerpt) Read more at finance.yahoo.com ...
...or more likely so Sanders gets elected and ushers in full blown socialism to “save” the economy and us. It’s the 2008 redux engineered (most likely) be the same cabal that made 2008 happen.
Or both. But if the domestic producers go bankrupt won’t somebody snatch them up at bargain prices and start them back up when oil goes back up?
This sort of idiocy has become rampant, and why not? The US Federal government shows that there are no consequences to borrowing far more than you can afford, right?
I have come to the conclusion that much of the problems we face now are the result of LBJ's "great society" programs, which put us on the path to this false economic prosperity paid for by borrowed money.
Frugality and financial stability are hard to most people, and the "me" generation wants the best!
If the whole fake system wasn't kept pumped up by all that government borrowing, none of these attitudes would have ever developed.
It is a big plus for people cutting their heating bills in half and filling up their gas tanks for 20 bucks. It is a big plus for manufactures and retailers cutting there energy expenses including the cost of trucking goods around the country which should in turn lead to a lower cost for the goods themselves. People should be buying more not less. Only now all that saved money is going into Obamacare. So it is not saved at all.
I’m pretty sure you’re one of those freepers I was talking about.
Everything gets cheaper, we can lower wages too because everything gets cheaper. The market goes down, everyone’s net worth and their retirements become worth less. Isn’t deflation a wonderful thing... why... it’s like an economic boom.
That is a good way to put it.
That is crazy. I have more than that is cash in my mad money account.
We were drilling horizontal wells in the Bakken in 2001, and even back in the mid-1980s. We had quit spinning the wheels long before 2010.
Right now, what I see in oil country are dropping prices as inventories are reduced. Demand has dropped off severely because rig counts are a small fraction of what they were and coupled with overordering by optimistic retailers, prices are going down for the short term. Groceries are the cheapest they have been in a few years, but in a boom town, that means the prices will be more normal until the excess inventory is unloaded, especially with perishable items. We're restocking freezers with select loss leaders.
“everyone’s net worth and their retirements become worth less. Isn’t deflation a wonderful thing...”
By definition you have that part backwards. Savings are worth more during deflation. Not less. Wages will drop but so will the price of goods. So the value of money already saved is actually recaptured during deflation.
And if the Fed followed its mandate then inflation would be be pretty much zero percent at all times.
Instead of that our savings have been losing value like stored dairy products. For instance Anyone who was saving to buy a house in the last few decades has been run over by a train. The cost of a buying a given house has tripled or more since 1990.
It’s all about interest rates.
The market soared as interest rates were going down over the last 5+ years.
Now, as interest rates are rising, the market tanks.
I didn’t say savings. I said retirements and net worth. If your retirement and net worth is all in “savings” you’ve lost already. It doesn’t matter what happens going forward.
I haven't seen the boon cheap gas provides, but I sure have seen the bust flatten local economies, and that reaches much farther out.
When gas was $4.50 a gallon, I could afford it. Now, not so well.
There’s been a lot of lying about economics for many years at a business level, an illusion of prosperity to serve self-interest, keep one’s job and so on.
Its a human thing, I wouldn’t admit my credit card obligations for years and other bills I owed.
That means if you put the money that you could have bought a house in 1990 into "a savings account" think how badly you invested....
Yep... you are right. But so many can’t see past the $20 they save when they fill up their car.
Maybe the USA should impose a $25.00 per bbl tariff on imported crude oi;? What do yo think?
It is if you are heavy in cash.
If you are heavy in cash you NEED deflation. If you have been heavy in cash for the past 20 years you already toast.
And, if you’re heavy in cash... you should have it buried in a mason jar in the back yard.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.