Found this article on MSN re oil prices for your reading interest. “We are in the midst of the worst oil bust in decades. The industry hasn’t been in this bad shape since 1999, or perhaps as far back as 1986. With prices spiraling down to less than $40 a barrel, companies have been forced to slash their drilling activities dramatically, while cutting thousands of jobs. In sharp contrast, consumers are rejoicing. The average gasoline price in the U.S. may fall below $2 a gallon later this year for the first time since 2009, according to AAA. That’s spurred a boom in car sales, particularly for large trucks and SUVs.
Things certainly look great for consumers and horrible for producers, but don’t get used to the current situation.
Production Falling Off A Cliff
The biggest culprit for oil’s plunge starting in the middle of 2014 was the enormous growth in U.S. shale production. Output in the country had grown by nearly a million barrels per day for three-straight years up until that point, and the market simply couldn’t absorb that breakneck pace of growth anymore. Prices cratered from more than $100 a barrel in July 2014 to less than $45 in early 2015 (they later moved even lower to $37.75 in August of this year).
Compounding the oil market’s problems was a surprise decision by the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, to increase its production to punish and steal market share away from U.S. producers. OPEC’s strategy worked, and now U.S. output is tumbling on the back of reduced drilling, with daily production down 500,000 barrels from its high of 9.6 million barrels per day.”
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