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It’s been a catastrophic 18 months for crude oil, which has suffered a dramatic 68% plunge due to a massive supply glut. Oil fell to a fresh seven-year low below $34.50 a barrel on Friday.

The collapse in prices has wreaked havoc on the industry, causing tens of thousands of job losses, a surge in corporate defaults and plunging stock prices.

Many Wall Street oil experts believe that prices will rebound in late 2016. Yet more pain may be inflicted — some say it’s actually needed — before prices bounce higher.

Continue reading:  Oil price crash could get even worse in 2016

Related story:  DOW falls 150 points as investors eye oil options

Commentary by The Secular Jurist:  This may seem counterintuitive, as consumers just love cheap gas to run their cars on, but dramatically falling oil prices is a bad thing in at least three very important ways.  In addition to the above stated effect on the stock market which directly or indirectly affects everyone in the economy, declining demand for energy is a telltale sign of weak economic conditions, and – most importantly – low oil prices are an impediment to climate change mitigation because it creates a cost disincentive to convert to clean energy alternatives such as wind and solar power.

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13 thoughts on “Oil price crash could get even worse in 2016

  1. So much for supply and demand. I think it is a good thing and could be seen as a precursor to serious inroads into alternate energy sources.
    As the saying goes … follow the money.

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  2. No surprise I like that low oil prices discourage new extraction infrastructure. If the true destructive cost (carbon tax) is becoming evident we may be finally making the transition away from fossil fuel. But if we don’t conserve and keepitintheground, we will pay the ultimate price.

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    • Excellent points. Low oil prices are closing newer high-cost extraction technologies in North America (which were over-developed) and discouraging capital reinvestment in them, because it made those businesses unprofitable.

      However, the price decline has happened for mostly the wrong reasons. The oversupply issue causing the low prices results not from competitive alternatives (i.e. clean/renewable energy sources), but primarily from OPEC over-pumping from their older, cheaper production systems, and secondarily from a weak global economy. OPEC will certainly raise prices again once it has forced-out much of its North American competition. This is being forecast to occur as early as next year.

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      • Do we know for sure? If these are indeed stranded assets mightn’t this mean petroleum states must attempt to liquidate now? US citizens ought to double-down conserving energy, especially now, and use this windfall savings to transform our energy infrastructure for good. I know nothing’s that predictable or simple but, for once, OPEC doesn’t have us completely, pants down over the barrel. But – who ever thought “Peak Oil” meant leaving 80% of it buried? We’ll see how the 1.5 an 2 degree threshold agreement alters a fossil industry.

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        • The role of OPEC in all this is well understood, and has been covered extensively by energy and environment focused journalists (which have been shared many times on this blog).

          I don’t believe petro-states are looking to liquidate. Conversely, I see them as holding on to the bitter end. Unless challenged by a massive economic transformation to clean/renewable energy, their low production costs should keep them in business.

          Regarding the prospects of a great energy transformation, your guess is as good as mine. I just don’t know what’s going to happen other than knowing that we’re rapidly running out of time. Given our dismal track-record of reactionary governance, I must admit to being sadly pessimistic.

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