Crude Oil Crashes Again

There was some relief in the oil markets when Brent went up to US60 per barrel.  On Thursday (Chinese New Year) the prices went down again. Brent went below US55 per barrel, even touching just below US50. West Texas settled around US52 per barrel. 

Here is some news:

Get ready for $10 oil
Bloomberg 

• At US$50 barrel, crude oil prices down by more than half from June '14 peak $107
• may fall more, perhaps even as low as $10 to $20
• growth in China slowing
• minimal in euro zone and negative in Japan. 
• large increase in U.S. vehicle gas mileage 
• global oil demand is weak and might even decline
• U.S. output rose 15 % in 12 months through November from year earlier
• eroding power of OPEC cartel
• chicken-out point is the marginal cost of production
• price at which cash flow for an additional barrel falls to zero
• 2,222 fields surveyed worldwide, only 1.6 % have negative cash flow at $40 
• won't be a lot of chickening out at $40. 
• marginal cost for U.S. shale-oil producers is $10 to $20 a barrel 
• about the same for oil produced in the Persian Gulf
• Russia and Venezuela need exports to service foreign debts and fund imports. 
• new discoveries, increasing drilling efficiency, global oil output will no doubt rise 
• U.S. production rise by 300,000 barrels next year from 9.1 million now.
• horizontal rigs are backbone of fracking industry. 
• Iraq another 550,000 barrels a day will enter the market
• forecast for oil at 14-year low of 28.2 million barrels a day in 2017
• International Energy Agency reduced 2015 global forecast for fourth time in 12 months 
• 230,000 barrels a day to 93.3 million 
• supply exceeding demand this year by 400,000 barrels a day
• consumers past few years bought most efficient blend of cars, trucks ever. 
• slowing growth in China 
• shift away from energy-intensive exports depressing demand. 
• China accounted for two-thirds of growth in oil in the past decade
• look for more big declines in crude oil and related energy prices
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My view is the fuel efficiency of the motorcars is incresing by leaps and bounds. There is now a salt water fueled car made in Germany.

Germany has made a conscious decision to shift its entire economy away from fossil fuels and nuclear energy towards renewable and alternative sources of energy in the next 20 years. The fourth largest economy in the world is going to be independent of fossll fuels.

May sound far fetched to some but do not underestimate the Germans. They do not make such policy decisions without studying carefully the science and the technoloy they have in their cupboard.  

We are seeing the end of the age of oil.   Our environment is going to become cleaner as well.  Folks, send your kids to study science and technology. In small quantities, in large doses, just make sure they pick up on science and technology.