Posted on 10/17/2014 5:11:41 AM PDT by thackney
There is nothing remotely surprising about the sharp fall in oil prices over the last four months, except perhaps the timing.
The fundamental forces driving prices lower (rising supply outside OPEC from shale and sluggish demand growth as result of conservation and substitution) have been clearly visible for at least two years.
"If the shale revolution can be sustained in the United States, and successfully exported to other countries, some combination of OPEC production cuts or lower oil prices to encourage demand and forestall more investment, will be inevitable by 2015-16," I wrote last year ("Saudi Arabia must decide response to shale" May 31, 2013).
"The massive rise in prices means Saudi Arabia will face intense competition from shale," I wrote even earlier ("Saudi dominance of the oil market to fade by 2020" Dec 12, 2012).
"Compounding the problem, projected oil demand is now expected to grow much more slowly than a few years ago as a result of conservation measures."
But it didn't require a crystal ball to see that prices above $100 per barrel were unsustainable. Inexorable increases in shale production have been evident in the reports published every month by North Dakota's Department of Mineral Resources and the U.S. Energy Information Administration (EIA).
On the demand side, consumption of refined products in the United States is still more than 2 million barrels per day lower than it was in 2005, and the drop is more like 3 or 4 million barrels if population and output growth are taken into account ("Energy efficiency, bigger than shale" Sep 24, 2014).
James Hamilton, veteran oil expert at the University of California, has calculated oil demand...
Prices above $100 are unsustainable...
(Excerpt) Read more at af.reuters.com ...
Bad news for the world’s thugocracies.
Good news for American consumers who can look forward to cheap and plentiful fuel, food and housing. And even being able to eat out and take vacations.
What’s not to love?
Gasoline prices going down - credit the great Obama.
Obammy should place a tariff on all oil imports from countries that a) do not have a democratic government and or b) practice Sharia Law and or c) have more than 25% of their population that wants to practice Sharia Law.
Do you think we’re in for several years of $80 (or lower) oil? If so, could some highly-leveraged oil services firms go bust?
Yes we are. I don’t see oil prices going past $100 any time soon.
The market demand simply isn’t there.
To do a number on oil sands, oil would have to drop to $50 per barrel. I wonder if OPEC member budgets can take this kind of pain.
Yesterday, the stations I drive by every day to work in one area were all at $2.79, regardless of brand.
This morning, every single one of them was at $3.09.
Did something happen? Was there a refinery fire?
Temporary spike - I think gas will go down to $2.70-$2.80 a gallon nationwide in the near future.
Do you think we’re in for several years of $80 (or lower) oil?
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Without try to sound like a jerk, if I could predict the price of oil, I wouldn’t work for a living. I learned a long time ago understanding the oil/gas industry is not equal to understanding all the influences in a volatile commodities market.
Too much outside the industry impacts prices: wars, regulations, taxes and subsidies of other technologies, etc.
I try to avoid price predictions.
Lower oil prices will result in less investment for growth. $80/bbl will lead to slower growth, but still some US shale growth, IMHO. Some smaller independents at that price will be selling assets with future production to cover their overly large debt. Major producers will slow, maybe stop buying in shale; or if they believe that prices will be back near $100/bbl in a few years, they may buy in like crazy at bargain prices.
As a market watcher, I like to read the takes of educated observers in the industry. It may not be a bottom up exercise involving guesstimates of demand curves vs supply curves, but it's still valuable because ultimately you have to decide whose judgment you trust, and make your decisions on that basis.
The good news is the price of oil is dropping.
Price at the pump going way down.
The bad news is, State, local, Federal governments likely to increase taxes to make up the difference.
Government has been pushing fuel efficient cars. Fuel usage down, tax collected down. Government answer?
Pat on the consumer’s back? No.
Tax per/mile driven to get revenue back up.
One way or the other we are going to pay.
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