Skip to comments.The Coming Oil Crash (Good News! Gas Prices Could go Down to $2 a Gallon by Autumn)
Posted on 06/20/2012 9:19:43 AM PDT by nickcarraway
My mom out in California is elated -- gasoline prices in her neighborhood are below $4 a gallon for the first time in four months. Less so are the world's petro-rulers, who are watching the price of oil -- their life blood -- plunge at a rate they have not experienced since the dreaded year 2008. Industry analysts are using phrases such as "devastation" and "severe strain" to describe what is next for the petro-states should prices plummet as low as some fear. No one is as yet forecasting a fresh round of Arab Spring-like regime implosions. But that's the nightmare scenario if you happen to run a petrocracy.
To understand why your average oil king is right to be worried at the moment, grab your calculator. The price of U.S.-traded oil fell to $83.27 a barrel on Monday, and global benchmark Brent crude to $96.05 a barrel; now juxtapose that against the state budgets of Iran, Russia, and Venezuela, which require more than $110-a-barrel Brent prices to break even, according to generally accepted estimates, and you'll see the problem.
Given this already-existing revenue gap, one might fairly wonder what would happen if, as Citigroup's Edward Morse says is possible, prices drop another $20 a barrel for an extended length of time. Oil economist Philip Verleger's forecast is even gloomier -- a plunge to $40 a barrel by November. Or finally, what Venezuelan Oil Minister Rafael Ramirez fears -- $35-a-barrel prices, near the lows last seen in 2008. In Russia, for instance, "$35 or $40, or even $60 a barrel, would be devastating fiscally," says Andrew Kuchins of the Center for Strategic and International Studies. That could damage the standing of President Vladimir Putin, since his "popularity and authority are closely correlated with economic growth," Kuchins told me in an
(Excerpt) Read more at foreignpolicy.com ...
Pardon my ignorance friend but what is “QE3”? Thanks in advance for any reply, It will be appreciated.
If drilling in shale oil ends or slows much I believe production will fall pretty quickly. I believe I have more learned company in that view than there are those who think the declines in production from wells will be slow.
Production of shale oil will rise significantly in the next couple years not just because of the rise in production in the Baaken field — but because a half dozen other big shale oil fields and maybe a dozen minor shale oil fields are going to be coming on stream.
The is a secular change in oil production
This is not my point.
Have a happy day.
I wonder if it isn’t the opposite:
‘bams friends are dropping the price to lower the misery index here. Less misery=less voter dissatisfaction.
After the election it will go up, just like the last one.
Gas prices fell in plenty of time for the election, but the financial industry collapse took over the headlines that September.
This isn’t all good news.
First of all, it means the recession is much worse than reported.
Second, a crash in commodities will smash a lot of people. Farmers, workers in North Dakota, etc. will be out of work.
There is a HUGE commodity bubble. When it bursts, I don’t know of any more safe harbors. The PTB will be forced to admit we are in a deep recession.
I’ll pay extra through Decemeber if it gets Obama out of office.
Actually, here in the Alaska bush we’re paying $6.40 a gallon. Don’t expect the price to drop any until the next barge load of fuel.
I would be happy to pay over $10 a gallon, if that would help get that piece of corrupt filth out of our White House.
Oh course, at that price I would quit mowing my lawns. ;>)
Works for me! I keep my tires at 75 psi and I'm saving gas!
Those are my bike tires, so I'm saving gas by not driving my car...
Perhaps the declining oil price is a Saudi move against Iran. Arabia makes money at $60 a barrel. Iran goes broke at $60. The tactic was used against the USSR and it had a powerful effect. The Saudis went along with Reagan and boosted the supply of oil to make the price crash and stick the screws to the Soviets, which it did. The Sovs had run out of all the treasure they stole from Eastern Europe post WWII and the war booty they got from Germany and were living on their oil. The Saudis remember.
the one drawback to having a lasting declìning price of oil right now is that people will feel like Good Times Are Here Again! and vote for the kenyan because he Finally Made It Happen.”
Keep in mind that the oil industry, right here in the US is the source for millions of jobs. It is the economic engine keeping parts of the private sector going. Obama has been trying to shut it down since he got into office, and $40 oil will do it (drilling/extraction cost break-even is between $60 and $80). The lowest unemployment in the US is in states which rely on oil—and people have been moving there from everywhere else. Otherwise, there are government jobs.
It's an election year, and everyone in an elected office is going to push for lower prices any way they can.
This happens and it certainly won’t be good for the Texas economy.
Prices in CA seem to be dropping steadily.
The Saudis are pumping into these soft prices and an obvious global slowdown. Why?
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