Op-ed: Falling Gas Prices ... a Trend That Will End
Op-ed:
Falling Gas Prices...a Trend That Will End By: Diane Sori
As always...NO matter the international turmoil it's still all about the economy...and oil.
And now a gift from Santa has arrived as just in time for Christmas
gas prices have fallen to a five-year low...from roughly $3.68 a gallon
in June to now down below $2.60 in most markets... saving we
purchasers about $60+ a month. But like all good things this gift does
come with caveats that the current savings have blinded most to. So
while 'We the People' are happy dancing thinking we have triumphed over
the likes of OPEC nothing could be further from the truth for as the
price of oil falls political instability is increasing within the main
oil producing countries. And with that instability comes the fact that
reduced prices means less profit for the oil companies, and that is
something they will NOT allow to go on for too long for just like any
business the oil giants are as profit driven as the next guy.
Also remember, as oil prices per barrel fall...mostly because of a
slow-down in demand in Europe and Japan where there are worries about
deflation...this just adds to the worries about the ever-increasing demand
and need in other countries such as China. And this in turn raises serious concerns
for the oil companies NOT just about their earnings, but also about year-end
tax selling putting more pressure on them as well...pressure which they will take out on we consumer. And as OPEC continues
to manipulate oil prices...but with them NO longer having the
sole upper hand in price setting because they failed to stabilize falling
prices after their last meeting...it's the 'free market' itself who will now
for the most part be setting the global cost of oil.
But the good news...for the short term that is...is that this could
mean that crude prices might actually drop to $50 or less per barrel
over the next few months. In fact, OPEC could actually push prices down
as low as $40 per barrel in an attempt to regain said upper hand by
taking on Russia as well as the U.S. shale industry. But that move could put
the weakest oil producers out of business with the result being
producers like Nigeria actually going bankrupt as financial contagion
takes hold in western markets.
And even with oil shale production increasing big time out of North
Dakota...another good thing...there is still a downside to this because
there is a slowdown in production occurring in the Bakken
oil fields. And lest we forget that Russia also plays a part in
determining the price of oil as Russia supplies the oil for most of
Europe. And with the Russian ruble losing its value because of the
ongoing drop in oil prices along with its ongoing problems with Ukraine,
Putin is putting Russia's economy and military on a war-footing to try
and neutralize the hit Russia is taking due to the falling oil prices.
So,
the stage has now been set and the players are in place NOT for oil
prices to continue a long-term
drop but for oil prices to actually start rising by the second half of
next year and to rise high...very high and within an extremely short
period of
time.
So much for continuing happiness at the pump.
Also, what most do NOT realize is that there is currently an excess
of oil glutting the market and that is the main reason the price of gas
has dropped. And while it could possibly take six months or a bit
longer to run down the now one million barrels a day of excess oil, it
eventually will happen and happen sooner than most think as nations
experiencing an industrial boom...nations like China and India for
example who are dependent on their ability to import oil...will use up
more oil than would normally be using within a given period of time. And
that over-consumption of the oil supply...and that includes the excess
supply currently on the market...will create the beginnings of the next
oil shortage and its always corresponding price increase at the pump.
So, until that excess oil supply is run down...which most assuredly will
happen... some larger oil companies have been scaling back
plans for future oil drilling and exploration as they wisely wait to see
just when that run down happens and by how much the market and OPEC
will decide the price per barrel increase will be. And sadly it seems
they might NOT be waiting too long for some 'so-called' experts and
special analytical reports are predicting prices to start rising and
rebounding
to $80 or even $90 per barrel in, like I said, the second half of the
upcoming year.
In
fact, a friend of mine who is very close to the oil business
agrees that oil and gas prices will soon start to go up because the
above stated oversupply will indeed 'dry up' as the oil people say. But
he also said that as the price of oil comes down it will directly affect
the ongoing production costs which vary from company to
company... production costs as in what it costs to 'pull' the oil out of
the ground as it relates to price variations in infrastructure and labor
costs. And this in turn will force the shutting down of the more
expensive to run wells. Also he spoke of a fact that some might NOT
realize...as in the rise and fall in oil prices seems to run in six-year
cycles and that we are now in a period of cause
and effect with the cause being the market is glutted with extra
oil, and the effect being the oil companies are wisely
postponing projects to tighten their belts as they wait for the
oversupply to run down. Thus, the basic concept and application of the
principle of
supply and demand is now in effect as well.
And while U.S. crude oil prices did top $100 per barrel last summer
they have indeed now dropped to around $60 per barrel as a result of NOT
only this oversupply but also because of expanded domestic production.
And remember too, today the U.S. produces more oil than it
imports...actually we are sitting on more oil reserves than Saudi
Arabia...but unfortunately most of the oil we do produce does NOT stay
within this country but is exported out, a sad fact that keeps use
dependent on foreign...as in Arab...oil.
And that very dependency must end for like Sarah Palin said, America
must "Drill Baby Drill" and the sooner the better. It's way past time
for this country to stop being held hostage to the whims and wills of
both OPEC and the global market... and their puppets like Barack HUSSEIN
Obama who wants nothing better than to keep us dependent on them. So
please people do NOT think the relief at the pump we are now all
enjoying will be a forever trend for it won't, and we need to prepare
for the time when we again shake our heads as gas prices creep up and up
and up...ad nauseum.
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