Would like to hear from someone who can explain why the cost of a barrel of oil has gone down lately. I have read about many reasons but wonder what the real reason is.
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Thanks, still wonder why this has just happened recently. We have reduced our fuel consumption in the US by at least 15% since 2005 and increased our production of oil so based on this assumption we should have had lower cost of oil several years ago.The reason is somewhat simple... The US has dramatically increased production due to fracking; OPEC members recently refused to reduce production. More Supply + roughly the same demand = Lower prices. However the current cost of oil is near the production cost of many countries including fracking in the US so it's unlikely to last. The estimate I heard last night was ~6 months.
(Reuters) - Saudi Arabia's oil minister told fellow OPEC members they must combat the U.S. shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers.
Thanks for everyone's input, this makes sense. To bad most of the car buying public do not know about this, even more reason to get off oil.There's no need to resort to conspiracy theories. Read what top Saudi officials actually say.
More investors are beginning to worry that a large fraction of still-in-the-ground fossil fuels will become "stranded assets" due to the adoption of stricter climate policies:
Oil Investors at Brink of Losing Trillions of Dollars in Assets. Gore: It's That Road Runner Moment - Bloomberg
Interestingly, in their public statements, the large petroleum companies appear to be in denial.
The reason is somewhat simple... The US has dramatically increased production due to fracking; OPEC members recently refused to reduce production. More Supply + roughly the same demand = Lower prices. However the current cost of oil is near the production cost of many countries including fracking in the US so it's unlikely to last. The estimate I heard last night was ~6 months.
The payback on exploration is already appallingly low (there've been a bunch of articles about this) so that'll probably happen fairly soon regardless... though again, it's taking far too long for the major oil companies to figure this out, so they keep throwing investors' money down the rathole of exploration, despite getting no return on it.In this dynamic, new exploration for oil grinds to an almost immediate halt worldwide, so we'd see the first impact among those companies.