Saturday, December 6, 2014

Slump In Oil Price, October 1, 2014 -- December 31, 2014: Pricing, Part I

Musings on pricing.

There are two questions to ponder:
  • what is the right price for oil?
  • when will we see the right price of oil?
For now I will just cut to the chase, and develop the argument at a later date, if the spirit moves me.

  • oil is not a typical commodity: one producer has historically been able to affect global supply and prices to a greater extent than other producers; a relative monopoly
  • the US is or soon will be the world's #1 producer of oil; and the US, by law, cannot export oil (there are exceptions)
One of many unknowns:
My conclusions:
  • more and more, "like" oils, regardless of origin, will be driven by market (supply and demand) forces
  • the "right" price for Brent, OPEC, and WTI oil is $100/bbl (baseline year, 2014)
  • we will see the "right" price not earlier than December, 2015
Other media links:
Updates and News

December 30, 2014: break-even points for five largest producers in the Bakken.  

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