Why exactly did oil prices tank in 2015-2016?

N

nxt7

The conventional explanations I'm always hearing are along the lines of "oversupply". Oversupply from whom and why? Saudi Arabia? Iran entering the market? So this oversupply argument caused a mass panic to short oil to below $50? I find this oversupply argument to be confusing because demand for oil is always rising,and will continue to rise as world population increases. Some of you may argue that oil demand is falling due to interest in renewable energies (RE), but I don't really buy into that hype yet. RE still has very high set up costs and have in general been poor performing investments over the past 10 years. Also in my opinion, the shift to RE lacks political will to change the status quo anytime soon. Despite all these fancy climate change conferences our world leaders have, the only thing that ever comes out of them are higher and higher taxes on existing industries. (Which then ironically get subsidized by government support anyway.) Or perhaps my assertion is wrong and there is real political interest in dismantling the global oil economy in favor of the RE economy?

I look forward to your thoughts and opinions.
 
Oil tanked because of Russia asserting itself in Ukraine, and when Oil tanked even more threatening Russian economic stability, Putin went into Syria to make those aware to not fuck with him(Saudi Arabia).. Saudi Arabia/Russia have a de facto deal to prop oil price up as much as possible on the condition that Russia stays out of the region.

It doesn't matter how much wealth a nation has, if you don't have the guns to hold onto it, you better play ball with nations that do.
 
nxt7 said:
The conventional explanations I'm always hearing are along the lines of "oversupply". Oversupply from whom and why? Saudi Arabia? Iran entering the market? So this oversupply argument caused a mass panic to short oil to below $50? I find this oversupply argument to be confusing because demand for oil is always rising,and will continue to rise as world population increases. Some of you may argue that oil demand is falling due to interest in renewable energies (RE), but I don't really buy into that hype yet. RE still has very high set up costs and have in general been poor performing investments over the past 10 years. Also in my opinion, the shift to RE lacks political will to change the status quo anytime soon. Despite all these fancy climate change conferences our world leaders have, the only thing that ever comes out of them are higher and higher taxes on existing industries. (Which then ironically get subsidized by government support anyway.) Or perhaps my assertion is wrong and there is real political interest in dismantling the global oil economy in favor of the RE economy?

I look forward to your thoughts and opinions.
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the price of oil is based on expectations of future supply and demand. Back then it looked like China would be growing at 7% and that requires a lot of oil. RE can put in a ceiling on CL but not a floor. So now all we are bickering about is how much is a barrel worth in 2016? We have plenty of supply for the forseen future, so it's just a matter of demand. And that demand number goes all the way down to the individual consumer which has gone AWOL. We are still waiting to see the consumer savings in gas prices being spent somewhere else.
 
While the dynamics are quite complicated, I think the biggest factor is the one mentioned by ET above. Prices of crude and other commodities were predicated on particular assumptions about EM (mostly China) growth. When people started to doubt these expectations, commodities reacted.
 
Seems to me it would be fracking, and cheap money... Over expansion boom from lower interest rates .. Fracking has increased productivity and demand has slowed since we are now anticipating slower growth with rising interest rates...
 
the one that cracks me up is Peak Oil. When you think about it, we were at Peak Oil the day Henry Ford drove Tin Lizzy out of his backyard garage. How much oil has the earth produced since that fateful day? And how much have we consumed?
 
Not to mention that almost all the available storage was filled to the brim and the cost of new storage facilities could not be justified by projected future price. You can shut down or decrease production but you still have to maintain an income stream because your expenses continue. You have to sell at a lower price, because if you don't someone else, i.e., Ecuador, will.
 
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ETcallhome said:
the one that cracks me up is Peak Oil. When you think about it, we were at Peak Oil the day Henry Ford drove Tin Lizzy out of his backyard garage. How much oil has the earth produced since that fateful day? And how much have we consumed?
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We will hit peak oil when some other resources becomes to advantageous to use oil as a energy source will slowly be priced out . no mass is selling their cars just because Tesla put out an electric... Batteries will have to become exponentially more efficient to really get off the grid without petro
 
The above (Russia & China) plus the Saudis wanted to bankrupt the frackers and tar sands folks in the US by allowing the price to fall enough to run them outta business.
 
Hehe, some idiot had to go there...

ETcallhome said:
the one that cracks me up is Peak Oil.
More...

Son, you don't know the definition of peak oil for one. For two, peak oil =/= peak price. For three, crude oil production peaked back in May 2008. For four, there are lots of different types of oil, but peak oil usually refers to crude....The reason you see bigger production charts because they include shale and shit....

Now the reason why the price collapsed because it should have never been above $100 in the first place. There were just way too many dollars chasing a finite supply, thus a bubble happened. And we know what happens to bubbles...
 
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