Oil-price-fall

Oil Corporations Promote Scare Tactics In Crude Price War

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happypricesThe price for a barrel of crude oil hit a low point it hasn’t seen in more than 5 years, down to $49.66/barrel yesterday and only recovering slightly today, as investors try to prop up the price. As of this writing it is at $51/barrel, but the day isn’t done yet. I’ll be surprised if it remains above the $51 mark by the end of the week.

Who would have thought our country would still be in existence? We were supposed to believe that lower oil prices would bring about an economic world collapse. That was the hype of oil conglomerates that tried to convince people (and some believed it) that a high oil price was a necessary evil. Our bending over and taking it was good for the nation.

 

So, why has oil dropped in price and why are we not digging ourselves out of a new era of depression?

Some mistakenly believed that prices began falling because the demand for oil had lessened. Our nation had taught OPEC a lesson by learning to conserve and we needed less of their oil. That, coupled with solar and wind and fracking technology, has made us less dependent, therefore driving the price down.

Bull.

What we are seeing are the benefits of a non-shooting oil war among oil producing nations that began when Venezuela and Mexico fired the first shots by cutting prices of Brent Crude in an effort to gain more market share. OPEC responded by undercutting those prices, which started a cascade of price cutting by every other oil producing nation, including big countries like Russia, Canada, and our own USA, down to the smallest, like Nigeria (which previously broke away from the OPEC cartel) and independent oil drilling companies.

OPEC has opened the spigots to glut the market and they can continue to do so for the foreseeable future, should they desire. For them, producing a barrel of oil costs them from $15 – $17, compared to the USA, which needs $65 – $75 per barrel to break even.

What OPEC wants to do is control the price of oil and they can’t do that unless they send a clear message that they own a third of the world’s oil supply and can put a hurt on every other nations’ profits. That is, gaining market share will be unprofitable for those who attempt it.

Personally, I’m glad to see it. At least, while it lasts.

Years ago, we were told that oil had to stay above the $100/barrel mark because it was good for our economy. It created jobs. It made America prosperous.

Even fracking for oil was now profitable, because fracking is expensive. Fracking has the lowest profit margins of all ways to drill. With higher prices came more fracking. More devastated land and more poisoned water. But hey, thousands of trucks carrying waste products were creating jobs, along with those of minimum wage workers who clean hotel rooms and deliver pizzas.

With oil continuing to drop in price, oil fracking wells are beginning to be shut down. My hope is that there will be a reason to shut down the gas fracking wells one day.

Supposedly, if oil dropped below $100/barrel our economy might collapse, the oil and gas industry would tell us. Meanwhile, the economy suffered because discretionary money went into our gas tanks. People cut back on dining out, recreational activities, shopping, travel, clothing, home improvement, and everything else that creates real jobs. Oil corporations showed BILLIONS of dollars in profit, while small businesses went out of business.

Now, in just a few short months of gas at the pumps dropping in price, the benefits of lower gas prices are being seen. The past holiday season was the best in 5 years for retailers. A recent news broadcast stated that with gas prices at around the $2 mark, an average savings of $700/yr will be seen by the public, for every car they own and drive. That’s money they will either spend locally, or use to pay down their debt.

That money is what feeds an economy and creates jobs. Not higher prices at the pumps. Though, you’ll be seeing more and more oil industry representatives on those talking head shows telling you that it’s all doom and gloom. I’ve already seen a few on TV. “While lower gas prices are being enjoyed by the public, we’ll need crude oil at a stable and reliable higher price to benefit our economy over the long term,” said one lobbyist whose name I didn’t note, but who was trying desperately to convince me I should be prepared for a coming apocalypse.

Apparently, loss of profit will mean the end of the refineries, including maintenance and expansion. I say, use some of those billions of profit they’ve made over the last decade to offset the supposed losses they will suffer while this crude war lasts.

Crude oil is expected to continue to drop in price. OPEC has no plans on cutting back production. Some analysts think that $25/barrel is a real possibility. Imagine it… Gasoline at $0.99/gallon, which would take away manufacturer’s excuse of higher prices for commodities being due to higher transportation (fuel) costs. I might actually be able to buy apples for less than $1 each.

So, cry me a river, Exxon, Mobile, BP, Shell, and the rest of them.

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They’ll get no sympathy from me. Especially when that river doesn’t contain fracking fluids.

Disclaimer: On January 4, 2016, the owner of WestEastonPA.com began serving on the West Easton Council following an election. Postings and all content found on this website are the opinions of Matthew A. Dees and may not necessarily represent the opinion of the governing body for The Borough of West Easton.