Ebola!! ISIS!! Putin!! Yet Oil Prices Drop

Despite plenty of turmoil in several oil-producing areas of the world, crude oil prices have dropped. Russia at war in Ukraine, Ebola striking fear into N Africa, ISIS wreaking havoc in the Mid East, Libya once again in civil war, terrorists in Nigeria on the loose.  Yet oil is dropping, from 110/bbl a yr ago to 90/bbl today

There are several reasons for this strange phenomenon. One is the global economy is slowing down, Europe in brink of recession, China slowing noticeably.  Another is the large advances automakers have made in getting better mileage in new vehicles with even more to come. (100 MPG or better cars are coming soon!!).  But the biggest reason is the advance of horizontal drilling and hydraulic fracturing getting huge increases in oil production in the US.

  US citizens and the entire world should be very happy that HVHF has saved them from drastic jumps in energy prices and prices of nearly everything else because energy is a key component to just about every product made and shipped. Food is especially affected by energy prices so keeping people fed at reasonable prices is critical.

But while we should rejoice that HVHF and those evil oil companies have insulated us from the affects of global crisis, it does have a downside for landowner/mineral rights owners.  If oil prices are actually dropping if the face of multiple foreign disruptions, what does that mean for future drilling and royalties? Will companies continue to invest hundreds of millions of dollars going after new resources or will they cut back because of fears that oil will continue to drop? If oil drops under these circumstances, will it drop even further if and when things calm down? How rapidly will other countries use the new technologies to develop their own fields? Will prices fall enough that it is no longer feasible to keep leasing, keep drilling, keep building out infrastructure? 

Areas that are marginal will certainly be affected. Even some of the best areas may see a slow down in activity. And people that are already getting royalties will see a drop in their checks.

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Permalink Reply by Trapper on October 3, 2014 at 5:16pm
Sounds like energy independence comes at a price. Some of us send our sons to fight and die to protect our oil supply. Reduced royalties seem a petty price by comparison. Consider it OUR contribution.
Permalink Reply by jason irvine on October 3, 2014 at 6:39pm
Oil has had a monopoly for years. Introduction of another source that now has become more reliable and at a cheaper price attracts investment which effects the demand. And I think we are starting to see change that will continue. It will obviously go up and down but in the long term it will slowly decrease.

I also believe as oil decreases and coal gets frowned upon ngl's and gas will increase....or at least I hope.
Permalink Reply by Kevin in Belmont County on October 3, 2014 at 6:54pm
You can thank OPEC for the drop in oil prices, and it's just the beginning. They have had a monopoly for years and now it's slipping away. So now the barrel of oil that demanded $110.00 per barrel when they had control is now being sold for $88.00. All they have is sand and oil, sands just that, and they will keep dropping the price to force the prices down until the companies here in the U.S. Are no longer profitable and out of business and let's see how long their price stays at $88 Bbl. For oil.
Permalink Reply by Tim Tarr on October 3, 2014 at 11:42pm
Notice how oil is dropping and natural gas is holding steady at ~$4MMBtu. You may be seeing a trend to closer parity for those Btu's. Would be nice if gas would move up to meet equilibrium. $70 oil and $10 gas. Something to consider is Chairman Putin and those Sheiks have big money problems below $100.
Rubel at all time lows. Chicken is now expensive in Russia and Putin is the one of the few eating beef there.
Could get interesting in Russia this winter. What happens if an "accident" happens at a Russian pipeline or two and shipments to China are delayed. There are a few Ukrainian's mad at Moscow for some unknown reason.
Permalink Reply by Bill Barnaby on October 4, 2014 at 2:48am
Lol just our luck we have the chance to get lots of free money and now it's dropping in price LOL
Permalink Reply by paleface on October 4, 2014 at 4:40am

 I heard $65.00 a barrel is Opec's break even.Thats where they would stop production. I don't know the cost in the USA.

Permalink Reply by Tim Tarr on October 4, 2014 at 10:50am

They can't stop production. Just think what happens when all the "free" stuff is cut off to the citizens and the payoffs to that "Religion of Peace". Quite a few leaders may go the way of Sadam and His boys.

Permalink Reply by gary smith on October 4, 2014 at 7:49pm

the Saudi's and a few others need to make enough money to keep their populations at bay. a recent survey showed 70 percent support for hamas in jordan, and a near the same percent think isis is okay.  this so called cooperation against isis will disappear in a flash if the monarchy and others are overthrown ,just like Libya.  my  opinion is we are looking at a meltdown of biblical proportions.  the muslim populations want islam in charge.

Permalink Reply by Trapper on October 4, 2014 at 9:08pm
It's time to put our kilts on , fire up the 'pipes , and have us a little party!
Permalink Reply by Jim Litwinowicz on October 4, 2014 at 9:40pm

Gary interesting conundrum we find ourselves in. ......produce our own oil and stop the flow of money to our enemies  But if the monarchies collapse, things may get much worse.

Permalink Reply by Trapper on October 4, 2014 at 1:21pm
http://inflationdata.com/Inflation/Inflation_Rate/Gasoline_vs_Oil_P...

Interesting chart showing correlation between gasoline and crude prices.
Permalink Reply by Frank Walker on October 5, 2014 at 8:56am

Jim

America today is saddled with a President  who actually invites and encourages entry into our country of sick foreigners carrying a variety of diseases, including some which target and KILL our kids and grand kids.  Already $18T in debt, we are nevertheless expected to bear the health risks and cost burden associated with providing medical services for these outsiders.

Up against such an overwhelming Presidential millstone as this, I am unable to agree with the following:

". . . we should rejoice that HVHF and those evil oil companies have insulated us from the affects of global crisis"

Of course I favor HVHF and appreciate all the good it does.  But I do not believe HVHF is powerful enough to protect us from Obama, and the damage he has inflicted and plans to inflict upon us as Americans.  It's gonna take more that HVHF to save us.   Next time we elect a President, it might be smart to elect one who puts Americans first.

 

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