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What are they thinking? (2)

November 1, 2014

What are those silly oil producers and speculators thinking? They’re driving the price down again.

Yes, Virginia, there is a global market in oil. And since oil is about as fungible as any good can be, its price isn’t controlled by the US President, or the US Congress, or even the big US oil companies.

I don’t know the cause of the decrease in oil prices recently but I strongly suspect the increase in US oil production, which is at a 30+ year high, has something to do with it.

In fact, if the global price of oil drops very much more, it’ll be so low that some fracking operations may be operating at a loss.

And removing those fracking sources may cause an upward price adjustment as supply contracts. You can look it up.

Someone said once about US stock market prices, "I believe they will fluctuate." And so will the price of oil, no matter what the politicians may say or do in their misguided attempts to control it — or to demonize the people producing and selling it.

Video via Carpe Diem


Update (1/25/15):

Here’s some follow-up on my original remark (3 months ago) about fracking operations shutting down due to falling oil prices. This article at Business Insider appeared last Friday, Jan. 23rd.

The Number Of US Oil Rigs Has Dropped Almost 20% From Its October High

The Baker Hughes US oil and gas rig count is out, and it shows yet another weekly decline.

In the wake of tumbling oil prices, Baker Hughes, the $25 billion oil services company that publishes out the weekly rig count, announced Tuesday that they would be laying off 7,000 employees over the next few months.

BHP, an Australian mining giant, also said this week that they would shut down 40% of their US shale drilling rigs by the end of their fiscal year.

the-number-of-us-oil-rigs

I expect oil & gasoline prices to rise again in the coming year, perhaps in a few months.

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