Some of you are old enough to remember the occasional gas price wars in the 50’s and 60’s, where gas stations would change their prices several times a day, with prices falling from the normal 23 ¢ to 16 ¢ per gallon. Well, you will never see those prices again, but we are seeing oil prices fall on world markets and there is some hope this trend will continue for a while. You can thank American ingenuity in fracking technology and Saudi Arabian greed.
With US oil production approaching that of Saudi Arabia thanks to the use of fracking technology for oil and natural gas production there has been an over-supply of oil in recent months. Typically, Saudi Arabia, the largest producer among the OPEC countries would orchestrate a reduction in the quotas for each member country. Not this time, according to CNBC. The Saudis have never minded lowering production before as log as they continued to maintain their market share. But, with US production rising in leaps and bounds, the Saudis are losing market share and they don’t like that.
But Commerzbank analysts said ” OPEC appears to be gearing up for a price war.”
In a note, they said Saudi prices are getting close to levels of the 2008-09 economic crisis. “Such measures give rise to doubts about OPEC’s longstanding strategy of striving above all for price stability,” they wrote. “We therefore do not expect prices to stabilize until this impression disappears and OPEC returns to coordinated production cuts.”
“I think we’re going to see the low $80s fairly quickly from here if there’s no supply response from OPEC,” Kilduff said. “Peak winter demand season is upon us, and it could bail them out. Brent will likely head to the low $80s. If the winter cooperates even slightly I would look for the price action to bottom around January.”
So, smile America! This winter you should enjoy lower energy prices. Europeans are no doubting breathing a sigh of relief as the sanctions against Russia for daring to support freedom of choice in Ukraine could have resulted in Russia cutting back on their gas supplies this winter. But, with lower oil prices, Russia will be hurting and will need to sell all the energy they can to whomever they can.
No doubt our narcissistic President will claim credit for the lower energy prices, although we know the increased production in the US has occurred in spite of his efforts to cripple America’s energy companies.
Only slightly off topic is this interesting article at Zero Hedge. America often is hammered by the governments like the one I live in for consuming a disproportionate amount of the world’s oil production I recall a few years ago when oil prices had surged to $140 per barrel the president here (now deceased) said something to the effect of: ” Americans make up just 5 percent of the global population, they use 20 percent of its energy. We’ll see how the imperialist yankees like it when oil goes to over $200 per barrel.” He was an idiot and now he is a dead idiot. Sadly, he was replaced by an even bigger idiot. Anyway, you might be interested in know that of the top ten energy consumption per capita nations, the US ranks number nine. The eight that surpass America may surprise you. They are, according to the ZH article:
- Iceland – 18,774 kg.
- Qatar – 17,418 kg.
- Trinidad and Tobago – 15,691 kg.
- Kuwait – 10,408 kg.
- Brunei – 9,427 kg.
- Luxembourg – 7,684 kg.
- United Arab Emirates – 7,407 kg.
- Canada – 7,333 kg.
- United States – 6,793 kg.
Check out the short ZH article to learn some the interesting reasons these countries consume so much energy per person.
So, enjoy your lower energy prices while they last. Keep in mind, however, there is another contributing factor behind these lower oil prices and that is lower economic growth world-wide, which does not bode well for the future.
Well, that’s what I’m thinking. What are your thoughts?