Posted on 01/09/2015 8:07:02 AM PST by SeekAndFind
It's getting serious now: On Wednesday, West Texas Intermediate futures tested a low of $46.83 a barrel before rebounding.
That's down nearly 57 percent from the summertime high of $107.68 and pushing toward the depths last seen during the 2008 financial crisis and recession that followed. Wholesale gasoline futures tested a low of $1.31 a barrel.
The wipeout in energy prices has been covered on all angles in recent months — including my recent piece on the negative repercussions for the U.S. economy, corporate earnings, and energy independence. Now, the focus is increasingly turning to how bad the damage could get.
New estimates from Bank of America Merrill Lynch put the short-term floor somewhere below $35 a barrel — a drop that would represent a decline of nearly 30 percent from here as the market is oversupplied by about a million barrels of oil per day.
SNIP
Oil demand is unlikely to soak up the excess supply anytime soon, with Europe stalled, Japan picking up the pieces from its recent sales tax hike and China still trying to control its runaway housing and fixed-asset investment bubbles without pricking its bad debt problem.
The demand situation also has an element of negative self-reinforcement: Bank of America Merrill Lynch analysts note that 50 percent of the global oil demand growth of the last decade has come from oil producing countries. That's a problem, with Russia heading into recession and sovereigns in the Middle East drawing down currency reserves. And besides, they estimate that any response on the demand side would occur with a six month lag anyway.
(Excerpt) Read more at thefiscaltimes.com ...
With my 160 mile daily commute, this is somewhat pleasing news.
Cheap gasoline is a real psychological boost.
It’s not a huge deal in most folks’ budget, but so rare to see something getting cheaper.
Of course after the Saudis succeed in breaking the back of competitors, we can expect oil prices to go back up again.
Consider what would happen if McDonalds decided it wanted the hamburger business all to itself, and had enough money to be able to roll prices back to 19 cents for as long as it took.
Some people just hate good news.
Oil has been overpriced for the last half decade. WAY overpriced!
Had any other person been POTUS, we would already be enjoying $1.50 Gal gas as we would be full bore fracking on Government land, drilling on the continental shelf and in ANWR. With that low price the economy would be growing at close tp double digit rates every year!
Low cost energy is the engine of the American economy. It pushes the expansion of manufacturing, trade, shipping and even home building as more people can afford to buy property instead of overpriced gas.
Take the good news and go to the mall, save a couple bucks in the bank and enjoy a night on the town wit the money we used to spend on getting to work.
what if cheap oil prices make fracking unprofitable. I don’t know enough about the oil business to know what it costs per barrel to pull a barrel of oil out of the Bakken.
I don't entirely disagree.
But it wouldn't really have made much difference. All available drilling rigs have been going flat out for a decade now.
Allowing drilling on federal land would not have added a single rig. All it would do is divert some of those rigs to the West from locations further east. I don't know any reason this would have resulted in more oil being available today.
East of the Rockies the relevant geological layers are flatter and generally easier to access. From the Rockies west the geology is much more complex and challenging. I suspect most companies would rather drill in TX, ND or PA.
The oil in the ground isn’t going away. Neither is the equipment and expertise needed to tap it.
If this is truly the Saudi strategy, it’s a really stupid one.
Personally, I think they’re aiming more at defunding and possibly collapsing Iran.
>> Wholesale gasoline futures tested a low of $1.31 a barrel.
A dollar thirty a BARREL? Wow, that’s really cheep!
35 bucks a barrel and still above 2 bucks a gallon for gas.
Feds and states want to raise taxes to keep prices up there.
I’m guessing at the >$2 buck price as I am still paying almost $7 a gallon here in the Alaska bush...it’ll never go down.
Then the fracking businesses wait until the next time the price of oil goes up. That’s the nature of the oil business (and business in general), there are reserves that aren’t profitable to exploit if the price is below X, so when it is they don’t.
The question isn’t how low oil prices can go, it’s how long they can stay low. Even if the low oil prices temporarily force some firms out of business, cutting supply, the demand for oil (which would increase) will soon cause the prices to rise.
I think a long term $60 can work, but below that, you’ll empty storage and prices will jump.
When you have two people working in a family and driving 30+ miles ONE WAY to work in population centers a doubling of gas prices adds hundreds of dollars a month to the family expenses.
As a car averages 20 miles per gallon a sixty mile daily commute would cost $4.50 a day per driver at $1.50 a gallon. At $4.00 per gallon, close to the average the last six years, it is $12 a day per driver. A difference of $7.50 a day or $150. per month. PER DRIVER or $300 per month per household.
Many suburban households where so tight that the additional $300 per month caused them to fall behind on credit cards, car loans, and even mortgages. Add in a rocky job market and disaster happens.
In some exurban communities, more than 25% of all home loans where X's 3 delinquent.IE: they where either IN or heading into foreclosure.
$35 per barrel is right around where oil should be based on the massive amount of recoverable oil that we have available. Certainly less than $40 is called for. Couple that with soft demand. Especially in China, where it WILL NOT recover, and we have a recipe for cheap gas for the next decade. Not even Obama can screw this up, though he is trying.
There was a column in my Gannett generipaper via USAToday last week by some black guy who said
Republicans talk about “drill baby drill” but Obama is the one who made it happen.
The sad part is a lot of the population will believe this...
Lots of unemployed oil field workers now.
You’re right.
I remember thinking the Europeans were nuts for buying $3.50 gasoline. Now, we’ve been conditioned to think it’s normal. No it’s not!
This is at least the 3rd boom & bust period in my adult lifetime.
Rigs get stacked, no need for new ones.
Spare equipment & parts for working rigs have plenty at the yard, no need to buy new equipment or spare parts.
The reason why more oil would be available is that more rigs and more people would be in the business of extracting that oil. We certainly have no lack of steel or man power to employ.
Rigs will go dormant until prices make the drilling profitable. However we are not at that point. Not even close.
Yea! Some black guy is going to have deep thoughts about Obama. OK!
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