Future Oil Horror
December 22nd, 2008 by Robert | Word Count: 806 | Reading Time 3:12 | 2,388 views |
What a year it has been for gas and oil. What a past few years for that matter. Corporate profit records have been shattered while the individual’s bank account has been decimated. Commodity traders have become instant millionaires and the average commuter has had to trade in their vehicle at a loss for a compact car just to survive the strains on their wallets as gas went through the roof. We saw a horrific economic downturn “cure” the oil demand/supply problem. We have once again seen gas at our local station become affordable…
Oil has been trading below $50 for a while now and gas prices have plunged across the United States to levels we haven’t seen in five years. Even as OPEC continues to cut production in an effort to prop up falling oil prices, the bottom line still has not been found. OPEC nations built their fiscal year revenue models on $70+ per barrel prices. With the market price set much lower than that, their governments are having to dig deep into their coffers of cash to sustain their economy… it’s not like they are left wanting with the billions they have made in the last few years.
So, what we have right now is a massive global decline in demand for oil. Consumer demand for goods and services have eroded and many of the global economies have been in a state of freefall. Not only are the average people not spending money, but the wealthy are holding back on their investments and spending only on proven or guaranteed opportunities… the purse strings are tight everywhere. A continuing erosion of demand will lead to even softer prices for oil, no matter what OPEC does until they near the rock bottom oil production which is necessary to sustain the world’s most basic economic functions.
Are we close to that level? I don’t know, we may never find out. But, we could be finding out in our near future that we are entering into a much more horrific future regarding gas and oil prices than what we saw this summer. What will we see happen when the global recession begins to end and the demand for oil returns? What will we see happen when the cuts OPEC has made impacts the volatile and fledging economic upswings? Will the diminished production coupled with a reappearing demand for oil throw the market into upheaval?
How fast do you think OPEC will turn their spigots back on when the economies begin demanding more oil? Do you think they will be satisfied with a measly $70 per barrel or do you think they are like an animal after that once tasted sweet blood of $150 per barrel? If $150 was seen without OPEC reducing their supply, what do you think we’ll see with their levels cut and demand returning? Will we see $200, $250, or even $300? I’ve read reports from some lifelong oil traders who are throwing around the term super spike. I’m not all about doom and gloom, but the reality is that our global recession will end at some point and OPEC has cut millions of barrels of production already. They will likely cut more in the next year if things do not turn around sooner than later.
The only rational future is that of horrific oil and gas prices once again. We are living in what I equate to an oil remission. The future is not the present… the future is more of our past summer. Is that a horror show? I believe so.
You may say that the economies will succumb to the extreme costs and immediately withdraw into a minor recession and thus avert a super spike of oil and gas prices. That may well be true. The impending oil costs of our future could in fact destroy any gains we make as nations in an effort to dig ourselves out of our growing recession. If that day comes, the recession will be even worse than what we are experiencing now because it will be like a sledgehammer (oil prices) hitting a watermelon (weak economies on brittle standing). As nations reverse recessions, the economies must gain momentum and sustain consumer demand. If oil and gas immediately spike, any gains will be immediately killed and the economies could back away much further than necessary in a violent reactionary adjustment.
We want and are in dire need of an economic turnaround, but we must be prepared for the impending costs of oil and gas. If we fail to recognize a potential super spike on the way, we are destined to repeat our errors of the last few years and end up in a worse boat than now. Millions of jobs lost now? Tens of millions of jobs lost later. Be wary and watchful.
on December 25th, 2008 at 4:53 pm:
It’s pitiful that those greed-mongers can’t live with having a measly billions of dollars, because they got a taste of so much more than that. It’s beyond my comprehension.
on December 25th, 2008 at 5:28 pm:
Gas has dropped near $35 a barrel at the current time. OPEC has recently announced that they may have an “emergency” meeting in January to announce more cuts to their oil production. Don’t close your eyes.