More indicators that the current oil price chasm will be longer, and stronger, than most experts have been telling us over the last year.
China’s economic slowdown, and the expected flood of Iranian oil on to the world market, will tend to hold prices down and keep them down. This means sustained pain for “exotic” oil producers, such as extreme arctic drilling, or Alberta Tar Sands. Stay tuned.
If crude’s slump back to a six-year low looks bad, it’s even worse when you reflect that summer is supposed to be peak season for oil.
U.S. crude futures have lost 30 percent since the start of June, set for the biggest drop since the West Texas Intermediate crude contract started trading in 1983. That beats the summer plunges during the global financial crisis of 2008, the Asian economic slump in 1998 and the global supply glut of 1986.
Crude could fall to $10 a barrel as the Organization of Petroleum Exporting Countries engages in a “price war” with rival producers, testing who will cut output first, Gary Shilling, president of A. Gary Shilling Co., said in an interview on Bloomberg Television on Friday.
“OPEC is basically saying we’re not going to cut production, we’re going to see who can stand lower prices longest,” Shilling said. “Oil is headed for $10 to $20 a barrel.”
With oil prices collapsing and companies in retrenchment, a federal auction in the Gulf of Mexico on Wednesday attracted the lowest interest from producers since 1986.
It was the clearest sign yet that the fortunes of oil companies are skidding so fast that they now need to cut back on plans for production well into the future.
The auction, for drilling leases, attracted a scant $22.7 million in sales from five companies, but energy analysts said that came as no surprise on a day when the American oil benchmark price plummeted by more than 4 percent. For the first time since the recession, it is approaching the symbolic $40-a-barrel level. Last summer, it was above $100 a barrel.
A glut on American and world markets is to blame for the depressed prices, but the unusually large daily decline occurred after the Energy Department, in a report, lowered its oil price projections and showed a considerable increase in inventories.
Until now, most companies have insisted that they would not sacrifice production in future years when they said oil prices were sure to rebound strongly. But in recent weeks, executives have expressed concern that the oil price collapse could last through 2016 and even 2017, and it is important that they tighten their belts even more.
Imagine the oil glut which would occur if everyone bought a highly-subsidized electric car which could be charged up for free with highly-subsidized renewable electricity. Imagine that – your tax dollars being used to reduce your out-of-pocket expenses for a change!
Hey… wait a second. Isn’t that what public infrastructure has done all along – reduce individual out-of-pocket expenses by using the economy of scale of public projects?
Fire departments are cheaper than a fire suppression system for every domicile. Police departments are cheaper than everyone hiring a security service. Public water is cheaper than everyone drilling their own wells and purification system. Public schools are cheaper than everyone hiring tutors, or having one parent stay at home to tutor the kids.
Thousands of dollars to stimulate local economies into everyone’s pockets, year after year, and solving AGW to boot. IF we demand that our most publicly-owned sector of the economy remains that way, and gives us the future for which it is mandated.
The fun thing up here is that although the price of oil has dropped, the price of gas is nearly as high as it was last year.
When the price of a barrel was 50$ higher than it is now.
Every fill up is provoking rage.