Business, Economics

Forty Bucks A Barrel?

5 Comments

It’s certainly plausible to me. Given how much of an overshoot there was, it wouldn’t be surprising to see it dip that low before stabilizing. As I’ve long said, over a hundred bucks was unsustainable. I would hope it won’t stay that way for long, though. It’s harder to justify shale and new drilling (and conservation) at those prices.

5 thoughts on “Forty Bucks A Barrel?”

  3. > Leland wrote:
    > What do you know about oil? We should ask a reformed oil man, ==
    >== what he thinks! And he says $150/barrel this year.

    Well yeah – for a couple weeks.

    > K wrote:
    > Is it just me, or does it seem that the price of oil always
    > drops just before an election?

    The price nearly always drops in the fall?

  4. >… over a hundred bucks was unsustainable. I would hope it won’t stay that way for long, though. It’s harder to justify shale and new drilling (and conservation) at those prices.

    It can be tricky to develop alternative oil sources when the price is $140 one day and $62 a few months later. So why not hedge? Say you want to develop some alt. oil that would only be profitable if oil was over $80 a barrel. Well it was over $80 a barrel for months this year. You had all sorts of chances to sell oil for future delivery at $90, $120 or $130 a barrel. And I think I saw contracts that go out for years.

    What am I missing?

  5. T. Boone Pickens said that back in May. But, as it turned out, the peak was below that, and the oil run-up was being driven by financial gimmickry, not fundamentals.

    Now that the finance bubble has burst, the price of oil has collapsed. I do not expect it to recover soon. A long term sustainable price, based on fundamentals, will be much less than $150/bbl.

    BTW: in China they can make methanol for between $.33 and $.50 a gallon, and methanol blend fuels are increasingly being used in transportation.

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