Posted on 10/30/2014 4:47:37 AM PDT by thackney
Gas prices are falling below $3 a gallon across the United States for two big reasons: (1) the world economy is growing slower than we hoped, and (2) global oil production is improving faster than we expected.
"India and China are slowing down,” said Charles K. Ebinger, director of the Energy Security Initiative at Brookings. "The IMF just downgraded Europe’s growth to less than 1 percent, and they're already quite energy efficient. Brazil’s a problem, too. All around the world there is no great growth story, and expectations are that things will stay that way or get worse."
There is also unanticipated supply. A few years ago, political turmoil was taking up to 2 million barrels a day off the market. Now production is roaring back in Libya, southern Sudan, Yemen, Nigeria, and even Iraq, and the global price of crude has fallen about 25 percent in the last five months. It's the same old story: low demand, high supply, etc.
Andrew John Hall, the alleged "God" of oil trading, is predicting $150 barrels within the next five years. But the deeper you dig, the more reasons you find to be down on the price of oil in the near future. "Japan’s announcement that they’re starting two reactors means that there will be less oil import for Japan,” Ebinger said. Second, there are industrial shifts that are reducing oil’s share in the energy market. For example, many U.S. companies are using natural gas rather than petroleum products to power their refineries. Third, hedge funds...
(Excerpt) Read more at theatlantic.com ...
Yep, we’re pulling most of our contract now. At that price, pulling out of shale isn’t as lucrative. As long as we can buy that finite resource from our overseas enemies, I say do it, because why use our own resources when we can take theirs for just trading small amounts of money.
But should you?
I wonder if the Midland - Cushing discount is falling with the falling prices, making Midland oil prices more stable.
https://www.energyandincomeadvisor.com/widening-discount-between-wti-midland-and-wti-cushing/
Aug 2014
Only wondering at this point.
Nope, it is just another bubble. The real economic value of oil, adjusted for inflation, is closer to $40. I don’t think they will rise after the elections. I think they still have a lot further to fall actually. China, India, production, etc doesn’t matter. If you look at global supply and global demand as a hole, it has been virtually unchanged since 2002, yet the price tripled. So China and India’s gains were someone else’s loss. Demand is a zero sum game. There have certainly been short term supply shocks, but the price of oil has never recovered since Hurricane Katrina aside from a few months during the 2008 financial crisis.
Midland prices should have started lifting relative to Cushing, which would slow/offset falling local prices.
New pipelines to end Midland crude discount in coming months, analyst says
http://fuelfix.com/blog/2014/09/30/new-pipelines-to-end-midland-crude-discount-in-coming-months-analyst-says/
September 30, 2014
More likely the regime was advised to stop interfering with energy production until after the election, and did so (kicking and screaming, of course).
Things change, I recall that my family’s first TV cost about two months wages for my father. A month’s electricity back then cost about half a day’s wages for him or a little more and the programming was free once you paid for an antenna. Now anyone with a minimum wage job can buy a nice TV for a week’s pay or less but the month’s electric may cost two days pay and almost everyone is paying a cable bill that no one in the old days would have even considered paying and the programming is lousy except for the reruns of fifty year old shows.
Lets look at production. 
Nope, wasn't a big hit in supply that caused it either. The market has been in an artificial, derivative driven bubble since Hurricane Katrina. I was managing 7-Elevens at the time. Prices spiked from around $1.50 to over $3 and NEVER recovered.
20% increase in the amount of oil produced/consumed daily, not to mention 400 billion barrels consumed between now and then.
New oil replacements to maintain that growing production are not cheap like back then.
What did they do when oil was around $35 to $40 a barrel? I think people might start to drive much more, and the oil companies might make up some of that money, by sheer volume.
Great news. Everyone can afford to pump Ethyl again!
I meant to say 2004, not 2002. Yes, there was a spike in supply between 2002 and 2004, but prices tripled between 2004 and 2010, despite the supply and demand being almost unchanged. Fact is they never recovered from the supply shock of the 2005 hurricane season, but instead have been kept artificially high by the banking conglomerate.
Who was the industry ‘expert’ that said just a year or so ago that we would never see <$3 a gallon gas again?...........................
They will have to learn how to ‘compete’ all over again....................
I’m not sure about that...
is there anyone that equates “democrats” with “lower gas prices”?
Wells are not magic machines that produce the same amount forever. And the days of finding cheap easy oil have been over for a while.
Cost to produce has gone up greatly. They are not drilling 2 mile long horizontals in tight formations with +30 fracking stages, nor $8~10 billion deepwater platforms just for fun.
Predictions are real tough in a market that is greatly influenced not only by supply/demand, but politics, wars, environmentalists, weather...
Anyone who claims to be sure of future prices, and doesn’t use Bill Gates to polish his shoes, should be considered suspect in his writing.
Do tell...
“I have a relative who works for Chevron. They’re in full crisis mode.”
The Saudis are hoping that’s true.
Do you understand just how much prices moved up and down since then?
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