Taking Advantage of the Pullback? Oil Will Average $115 Through 2012 -- Forbes

Link here.

I'll believe it when I see it.

Crude oil completely broke down in September, falling more than 10% as investors re-priced the new normal of lower growth and possible recession across several asset classes.

But underlying fundamentals will put a floor on oil’s possible fall, as producers rebalance supply and demand to keep the market tight, JPMorgan’s commodities research team says.

This is the important nugget for folks invested in the Bakken:

Looking at past recessions and the price movement in oil, the floor seems to be in the $80 to $95 per barrel range for Brent. A breakdown in prices below that level would occur in the case of a ’09-like crisis, which could push Brent down to the $60 to $70 per barrel range. At that point, cramped investment in alternative production methods like deep sea and ultra-deep sea drilling, oil sand, and other methods would become uneconomical, putting pressure on supply and once again setting markets up for bullish moves.

Two points:

• Folks are still talking about another recession close on the heels of the recent recession.
• Drillers can make money in the Bakken at much lower prices -- deep-sea drillers, oil sands, etc., are the ones at risk.

Despite all the local talk about man-camps, runaway growth, traffic, the roads, etc., compared to the alternatives, the Bakken is a pretty good place to be for an oil company.

Note: a drop below $75 will squeeze profits of Canadian tar sands operators --

By the way, which energy industry gets squeezed the most when oil prices fall? Conventional oil, oil sands, shale, oil service companies, deep sea drilling, US oil industry, non-US oil industry, OPEC?

None of the above.

Renewables. Wind and solar.