[thackney]

[kidd]

I don’t understand the OPEC strategy. OPEC has gotten used to $100+/bbl oil and they cannot possibly maintain these prices for very long.

When OPEC goes back to $100/bbl oil, domestic shale oil production would simply restart.

Or is this just capitalism working out the best price based on supply vs. demand, and OPEC strategies are irrelevant?

[Mouton]

For those who play the energy area, this is a good concise picture of the situation. Only missing part is how natural gas plays in this equation for each company. In any event, firms at the current $75 per barrel for oil are going to be pressed if they are facing large debt structures as their ability to be flexible by cutting exploration and development is hampered by debt service and the ability to obtain further credit. There will be some consolidations and some firms may go chapt 11 before this all plays out. It has happened before, it will happen this time too. Sooner than later the advice of T Pickens will bear out, “it sometimes is cheaper to find reserves on wall street than in the field”.

[j. earl carter]

The article mentions the possibility of OPEC cutting production. I really doubt that will happen. They might agree to production cuts, but they will all cheat. Most of these countries are completely addicted to the oil revenue.

In economics, they refer to the "income effect" vs. the "substitution effect". The Saudis don't have a substitute for the oil revenue. The only way they may have to replace the lost profit from the falling oil price is to pump even more oil. This increase in production would, of course, just drive prices down even further.

I don't really know much about the current state of the world oil market, so I can't really make an intelligent prediction, but I will predict anyway. Oil prices will continue to fall, a lot.

[celmak]

So many variables; the best being environmental Nazis going completely nuts over the increasing sales of big gas guzzling trucks!

http://www.nbcnews.com/business/autos/pump-prices-tumble-gas-guzzlers-soar-fuel-sippers-slide-n248631

[Lurkina.n.Learnin]

Good discussion over here.

[zeestephen]

A couple weeks ago I saw two oil economists on CNBC.

One of them said that financing for new wells in North America would completely stop if the price of oil goes below $67 per barrel.

WTI is currently trading at $76.