Gas is cheap

Gas is cheap, in some places (Tennessee) $2.60 for regular and still falling.

If you’re wondering what’s up, here is the picture in a nutshell.

  1. Oil demand in the U.S. is down 2 million barrels a day from 21mbd to 19mbd.

That’s a huge number, 10% of U.S. demand or 2mbd is more than Iran or Libya regularly produce. In other words, we’ve reduced demand more than an entire small OPEC nation produces since 2008. Our economy has also retreated during this demand decline and that can be misleading since economic growth and/or decline generally influence oil consumption, meaning a recovery could reenergize demand — but I don’t think even that will start a price spiral because there are more factors at work here than just falling demand.

  1. Domestic production of oil, natural gas, and liquid fuels is spiking in the U.S., mostly from fraccking, horizontal drilling, and other new recovery technologies in the shale fields.
  1. The ISIL war. Typically news of war is the Middle East increases anxiety and pricing climbs as the market anticipates trouble with supply. But the reality is sometimes far different. Armies need money and selling oil is a good way to get it. ISIL is pumping flat out wherever they are in charge and the middle eastern countries like Saudi Arabia that are threatened by ISIL are leaving production up – even though the price is plummeting – because they can afford to make a little less on oil right now, but they’re betting their enemies cannot.
  1. The U.S. is also pressuring the Saudi’s and our own production base for increasing output since lower oil prices are also squeezing Putin real hard. The government policy makers must be giddy with joy, this is a triple witching surprise to the positive, the Saudi’s must pump, the Russians must pump and the American economy is using less and producing more. Can you say oil glut?





About karlspain

20 year Newspaperman. Lifelong Inventor. Wrote 2 books so far, working on more. The Revelation, 1st book, about your brain & the universe, and math. Hooked together! God I trust, America I love, 2nd book, is the biography of Aris Mardirossian, a great man. Also owned a software company, an IT integration company, a gas station and a fuzzy logic software title along the way.
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