You can all start to panic even more now

[Platypus]

If I was the US, I'd be stock-piling all that cheap oil from Saudi.

I wonder if the low price could put Saudi out of business, and not the Frackers?!

[BrilloPad]

but getting harder and harder, and ever more expensive, to extract ..

2014-12-29 How Increased Inefficiency Explains Falling Oil Prices

True. But at the moment Saudi is pumping oil. So its over supply rather than lack of demand - way different from 2008.

[OwlHoot]

In 1970 I was told oil would run out in 2020. Now there seems to be 60 years worth left! Its an infinite resource! ..

but getting harder and harder, and ever more expensive, to extract ..

2014-12-29 How Increased Inefficiency Explains Falling Oil Prices

One thing we have seen recently is a sudden drop in oil prices that does not represent a sudden drop in the cost of extraction. Instead, it reflects the fact that current wages are not high enough to pay today’s high cost of oil extraction. There is getting to be a difference between

* The full cost of oil extraction, including governmental services needed to keep the country’s economy functioning well enough for this extraction to continue, and
* The amount the economy can afford, considering both wages and the increase (or decrease) in debt for the economy.

This situation is not simply affecting oil; it is also affecting other commodity prices as well. Clearly we cannot continue indefinitely on this trajectory. Something has to give. So far, what we have seen is a drop in oil prices and other commodity prices to levels that are likely to seriously disrupt production. How this will all play out is worrisome, if a person understands the dynamics behind what is happening.

[BrilloPad]

It's actually a great buying opportunity for oil.

The world demand for oil is getting more, not less. The price can't stay depressed forever.

In 1970 I was told oil would run out in 2020. Now there seems to be 60 years worth left! Its an infinite resource!

And by the time oil runs out fusion will have come along.....

[SantaClaus]

It's actually a great buying opportunity for oil.

The world demand for oil is getting more, not less. The price can't stay depressed forever.

[scooterscot]

The root cause has yet to be dealt with. Debt. We're bankrupt.

[BigTime]

..
At the moment, because of low unemployment, lack of supply and even lower interest rates, ..

I've heard from a number of sources this year that lots of housing supply is coming very soon. Stuff that wouldn't have got planning permission in years gone by has been approved.

[tomtomagain]

If oil prices can collapse like this why would house prices be immune should demand just melt away?

They not immune. Prices can drop quickly in any market. It needs a change of circumstance to make this happen.

At the moment, because of low unemployment, lack of supply and even lower interest rates, there are not too many distressed sellers forcing the prices down.


Regarding the oil supply. My hunch is that the American Oilers will figure out a method to get at shale oil at a lower cost. There's too much oil under their feet for them to ignore.

If the Yanks are good at one thing. It's innovation.

This could lead to low prices for a long time to come.

[scooterscot]

If oil prices can collapse like this why would house prices be immune should demand just melt away?

[BrilloPad]

"When the price of oil falls dramatically, that is a sign that economic activity is slowing down."

No - it can be a sign that economic activity is slowing down. In this case, there is a glut of supply. I think this *could* usher in an era of cheap energy and lead to a boom similar to the late 90s.

Which would let quite a few politicians off the hook - and be good for us all. Unless Russia explodes.....

[OwlHoot]

2014-12-01 Guess What Happened The Last Time The Price Of Oil Crashed Like This

Interesting article on the reason for the lower oil prices (OPEC trying to stitch up US fracking companies), and its paradoxical negative effect on for the economy (collapse in junk bond market largely dependent on the performance of energy companies).