What’s up with the price of oil?

Good day all. As you have probably noticed, the price of gasoline has dropped in many places below $3.00 a gallon for the first time in years. This is due to the price of crude oil dropping way below $100 per barrel.

When I checked the prices for a barrel of crude, (and there are different grades), I found that it was WAY below $100 a barrel. How far below? Brent Crude, (The good stuff), is running about $70 a barrel as of this posting. While this is good for people on a personal level, (Lower energy costs), this isn’t so great for oil producers like Russia and Iran. Here are some of the details from Bloomberg:

Oil’s decline is proving to be the worst since the collapse of the financial system in 2008 and threatening to have the same global impact of falling prices three decades ago that led to the Mexican debt crisis and the end of the Soviet Union. Russia, the world’s largest producer, can no longer rely on the same oil revenues to rescue an economy suffering from European and U.S. sanctions.

One problem Russia, I mean the “Federated States of Russia” has is Vladimir Putin. He’s been spending money he doesn’t have on, for lack of a better term, conquest and empire building. Then we have Iran and their plans to establish the new Persian Islamic Empire and nuking anyone who won’t submit. And we also have all the other oil producers.

Nigeria, fighting an Islamic insurgency, and Venezuela, crippled by failing political and economic policies, also rank among the biggest losers from the decision by the Organization of Petroleum Exporting Countries last week to let the force of the market determine what some experts say will be the first free-fall in decades.

“This is a big shock in Caracas, it’s a shock in Tehran, it’s a shock in Abuja,” Daniel Yergin, vice chairman of Englewood, Colorado-based consultant IHS Inc. and author of a Pulitzer Prize-winning history of oil, told Bloomberg Radio. “There’s a change in psychology. There’s going to be a higher degree of uncertainty.”

I’m sure you’re wondering how all this happened? The answer can be summed up in three letters. USA.

Few expected the extent or speed of the U.S. oil resurgence. As wildcatters unlocked new energy supplies, some oil exporters abroad failed to invest in diversifying their economies.

Nobody expects the Spanish Inquisition the drive of the American entrepreneur! Despite the interference by the Obama administration, massive new oil and gas fields, along with new ways to get more product from old fields have been coming down the pike for years. Is it our fault that the other countries, many of them having nationalized, read stolen, oil fields decades ago and used them as their national piggy bank instead of reinvesting and upgrading the technology? Now we are seeing what happens when you don’t plan for the future and live in the moment.

Coddled by years of $100 crude, governments instead spent that windfall subsidizing everything from 5 cents-per-gallon gasoline to cheap housing that kept a growing population of underemployed citizens content. Those handouts are now at risk.

“If the governments aren’t able to spend to keep the kids off the streets they will go back to the streets, and we could start to see political disruption and upheaval,” said Paul Stevens, distinguished fellow for energy, environment and resources at Chatham House in London, a U.K. policy group. “The majority of members of OPEC need well over $100 a barrel to balance their budgets. If they start cutting expenditure, this is likely to cause problems.”

And frankly, I don’t give a damn. There are reports that oil could drop as low as $35 a barrel before rebounding back to around $70 a barrel. That should translate into gas prices being below $2.00 a gallon. Be advised, my math skills suck, so I’m probably off by a bit.

The oil industry in the United States could probably get it’s costs even lower per barrel if we could get the regulatory system cut back to a more reasonable size. I don’t mean letting the do whatever they want of course, but reasonable rules that are cost effective, make sense and don’t require an army of lawyers to comply with. Of course, with the current regime, I don’t see that happening anytime soon. Still, it’s been a long time since I saw a collapse in oil prices, back in the late 90’s in fact, and frankly, I’m going to sit back and enjoy it for as long as I can.

Thatisall

~The Angry Webmaster~

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