It appears that prices may be on the verge of collapse. The Link What would be the implications for the U.S. elections?
Gas Prices always balloon in the early spring late winter timeframe. As the summer months approach, competition and supply lower the price. This happens every year.
Matt Simmons, (RIP) and several others have studied Saudi Arabia extensively. Their analysis, including that from German and Kuwaiti intelligence, was that the KSA has the ability to increase supply temporarily but at the expense of the longer term viability of the fields. And most importantly, Ghawar, their king field, and the one that is about 30-40% of KSA production, is in decline. The above reasons are the principle rationale for why KSA stopped permitting outsiders to have access to country wide supply data a decade or so ago. We've posted links to this on other threads, and this can all be googled if you want to read for yourself. It is surprising that they would hike supply now- perhaps it is in an effort to help squash Iran further, who they certainly consider an enemy. Not sure though. Regardless, in my book this does not affect the long term strains on supply caused by the spike in demand from developing countries. No matter what new supplies they "might" find, it will never keep pace with the increased need for energy for transportation. Oil can dip now, but it will never crash, and the price spike is inevitable due to not politics or speculation, but global demographics.
Then why do gas prices do the same thing year over year. Someone on here said that there is a change from Winter gas to Summer gas and there is a dip in supply that coincides with the amount of traveling that is done during the spring.
I have thought for a while that $100 and up was economically unsustainable because it tremendously hampers growth. $80 is probably the best price point for both economies and production. A collapse would be a bad thing for everyone imo just as $100 or higher are a bad thing. I do think the prices going down moderately help Obama, but employment and the overall economic mood matters far more (and they look bad although not terribly so imo).
$100 oil is good for Texas. $80 oil is better for the rest of the country. Outside of that range things get dicey.
By a collapse, I'd say you're talking about $60/barrel or worse. Could that happen? Yes, if the stock market takes a major dive. The recession in Europe could very well be the trigger. I expect to see one more such dive followed by low oil prices for a significant period. but even if the economy were to recover, CHEAP OIL is running out. The US has plenty of oil, but most of it can't/won't be recovered unless prices are above $80 or so. It's just unprofitable to get out of the ground at a price level under that level.
Crazy to me that we think paying $3.15 to $3.50 at the pump is cheap. I agree with Mus that the situation in Europe and Spain specifically is going to lead to another dip and this should send oil prices lower. Spain is running a 24% unemployment rate and that is 50% for the younger population. They were at 8% in 2007. This to me is a country that is on the brink and in near depression levels of unemployment. This is not a situation that is unique to Spain. In contract the US economy is doing much much better and has had a remarkable recovery since the 08 financial collapse. I know our perspective is skewed but when you look t what is going on in Europe it is quite remarkable.
I'm sure if the price gets too low for an extended period, Eagle-Ford production may slow down. Here in the BeevilleKennedy area, the population is exploding and hotels and business are popping up everywhere.
One factor (that I didn't see mentioned yet) regarding falling oil prices has been the stronger U.S. dollar throughout the month of May, which was largely caused by the weakening Euro (due to the Greek/PIIGS debt crisis). The US dollar has retreated over the last two weeks, so if this continues, it stands to reason that oil prices will head back up again. Also, if prices drop too low, OPEC can throttle output. And China would probably love to use their hoard of U.S. Treasuries to stock up on cheap oil. So while an oil price collapse is certainly possible, I don't think it's likely.
It's about damn time. Prices have been artificially high for the past 30 months, at least. During that time period US inventories of oil, gasoline, and distillates have all been experiencing upward trends while US gasoline consumption has been steadily declining (about 3-4% year over year)...in fact the US has become the largest net exporter of gasoline. Gasoline and oil prices have NOT been responding to market forces, perhaps they are now. If we see prices fall to the $63 - $68 per barrel range and remain fairly stable within that range, then the market is probably in pretty good equillibrium. Should be interesting to watch the next few months.
