What we need is a commentary from the silver-haired oracle, no, not WB, but Louis Rukeyser -- but like that's going to happen. He died one year before the Bakken boom began in North Dakota.
If not Louis Rukeyser, then how about Peggy Noonan? She would get it right. She could probably take one of her old columns and substitute "slump in oil price" for "George W. Bush" or "Barack Obama." I'm thinking of those columns in which she said, "there's something not right with Barack Obama's platitudes." She could just say, "there's something not right with the slump in oil prices this time."
Out here in California, gasoline seems as expensive as ever, about $3.00/gallon, but that's because when I was last here I saw signs for $5-gasoline in west Los Angeles and out in the desert. Back in Oklahoma and 17 other states, gasoline is selling at/below $1.99, or so I've read.
I think the reason the slump in oil prices feels weird this time: no one believes that Saudi Arabia is going to give their only resource away for the next ten years. The question is whether they continue to give it away for the next ten months?
See also: losing $110 million/day.
From OilPrice.com:
The nearly 50 percent plunge in the price of oil during the past six months is expected to leave oil-rich Saudi Arabia with its first budget deficit since 2011 and the largest in its history.
The budget, announced on Dec. 25, will include spending during fiscal 2015 of $229.3 billion, higher than in 2014, despite revenues estimated at only $190.7 billion, lower than in the current fiscal year. That would leave a deficit of $38.6 billion.
Oil prices have been dropping since June because of a market glut, caused in part because of prodigious oil extraction in the United States from shale formations.
As a result of this glut, OPEC was urged to cut production levels at its Nov. 27 meeting in Vienna in an effort to shore up prices, but wealthy members of the cartel, led by Saudi Arabia, decided to keep production at its nearly two-year-old level of 30 million barrels a day.
Saudi Oil Minister Ali al-Naimi has since explained that the OPEC strategy was to reclaim market share. Fracking has made the United States, once the cartel’s largest customer, nearly self-sufficient in oil. But fracking is expensive, and many believe it can’t be profitable if the price of oil falls much below its current level of around $60 per barrel.
Oil is the principal, if not the only, resource in Saudi Arabia, so it’s clear that the price of oil has a strong influence on how the country’s annual budget is drawn up. Different analyses, however, provide different answers to how Riyadh has forecast the commodity’s value. Four of these reports say the Saudi budget is predicated on oil averaging $55 to $63 per barrel in 2015.
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