Saturday, December 27, 2014

The economy - Oil!

The price of oil continues to fall. It is now under $55 a barrel. How low will it go? I believe it will go under $40 for sure (and quite possibly lower). The price of oil will continue to fall until production is reduced. That will only happen once the price of oil falls and remains below the cost of production, which in the U.S. is estimated at $70 a barrel. There already are stories of U.S. energy companies cutting costs and shedding jobs in an attempt to remain viable. If the fall in prices had been gradual and orderly, then the U.S. producers (and other western producers) could have adjusted, but the sudden collapse will mean that several of the oil production companies (and the related industries) will also collapse. Over the next few months there will be a bloodbath in the energy sector. Companies are going to shed jobs like mad and scale back in every conceivable way. The result will be a massive recession in the west and a new financial crises across the globe. The drop in oil prices is a precursor to economic calamity. Hey, at least we can enjoy lower gas prices for a while (till the dollar collapses and we can't even pay for a loaf of bread with a wheel barrel full of cash). This is not going to end well