Thursday, November 13, 2014

Oil Falling

Oil prices continue their downward spiral on Thursday. Brent crude futures lost more than $2, now trading at $77.92 a barrel.


Mark Pyruz said...

Splendid news for U.S. consumers, as the Energy Department predicts avg. cost of regular for 2015 to dip below $3 a gallon.

Might be the best news in over 10 years.

Mark Pyruz said...

So will the falling price of Brent crude coerce the Iranians into forsaking their ambition for an industrial-scale nuclear power program? Unlikely, in my opinion.

The effect on Iran will be to scale back progress on its numerous public works, still further. Even so, they've so far done a remarkable job in accomplishing what many here in the West would have deemed impossible.

A potential effect-- albeit an undesirable one-- would be to undermine the current, moderate administration in Iran. Without discernible improvement in the daily lives of ordinary Iranians, the executive branch may swing back to the conservatives in the 2017 presidential election.

Nader Uskowi said...

Falling oil prices will have immediate effects in countries where oil make up a significant portion of their revenues and their current budgets are based on $100/barrel oil, such as Iran, Iraq, Venezuela and Russia. Their governments need to make hard decisions where to spend the dwindling hard currency.

The hope would be that the falling prices would serve as a wake up call (for the nth time, it seems) that they need to restructure their economies. If low prices persist through 2015, then all other OPEC members will face the same dilemma. In the U.S., the shale oil revolution will come to a halt too.

Anonymous said...

" If low prices persist through 2015, then all other OPEC members will face the same dilemma. In the U.S., the shale oil revolution will come to a halt too."

the Saudis aren't suffering and can ride the low prices for several years as their market share and small population insulates them.

the US doesn't really require the money earned from oil exports and other considerations trump the cash. gaining further independence from the madness of the Gulf nations is far more valuable.

Nader Uskowi said...

U.S. shale oil revolution is an important factor in oversupply of oil. If the low prices persist for another year, shale producers will stop or cut back production, which will tighten the supplies.

Saudis can cope much better than other producers for the factors you have pointed out, but even Riyadh prefers not to use its reserved funds to pay for its growing bureaucracy and social security program.

Anonymous said...

if the Saudis see Iran's economy crumbling by being shut out of the market they'll persist in pumping.

the US shale producers will also persist for a while as they'll need even reduced income to recoup some of their investment costs.... and it's not at all unlikely that the US Congress will vote them some tax breaks deeming it worth it as promoting the national interest and energy independence.

there is little love for Iran in the US and a great deal of desire to not depend on Middle Eastern oil. all the Saudi oil that the US no longer imports makes it far easier for the rest of the world to continue to honor the sanctions....and compel Iran to give up the nuclear weapons development program.

Nader Uskowi said...

The falling oil prices is not about squeezing Iran, but a number of economic and technical factors are exerting downward influence on prices. Saudis could of course take advantage of the situation in their rivalry with Iran.

Shale oil under $80 cannot be produced for long. Again, this is business, not politics. But let's wait for few more weeks to see if the pricing trends are solidified. And thanks for your comments.