Not to be cynical, but I can't help but notice that Georgia gas prices have dropped below $3/gal for the first time in years. In the last month, suddenly they fell from $3.30 a gallon to well under three bucks, and as low as ~$2.50 in some places. There was very little fluctuation over the whole previous year, but at the same time that this hotly-contested election comes up, gas prices drop and become substantially cheaper for the whole month before election day.
Doubtless a coincidence, but a curious one.
2 comments:
Most speculation I've seen centers around OPEC trying to kill American oil production. The shale oil and oil sands resources we're developing have a break even price point of around $85-90 per barrel. By putting the price below that level, they make it economically unfeasible for us to pump oil. So the thought is, by depressing the cost per barrel, they strangle those resources and can go back to monopolistic practices.
And there's some evidence to support this supposition. Primarily, they're not cutting supply. The OPEC nations are taking a real hit on these prices, and the normal response to such price drops is to turn off the taps a bit. Decreased supply increases prices, but they're not doing it. Why? Well, if they're trying to choke American oil production, that could explain it.
But, I personally have a problem with this theory. Namely, why did they wait so long? Shale oil and oil sands exploration is complete (mostly). We've got the equipment in place to pump it, and all the costly preliminary work is done. At this point, we could stop operation, mothball the equipment and lose very little. Then, if the price goes back north of the break even point, operations can be spun back up fairly quickly. If the desire was to kill production in infancy, they waited too long. Now that the heavy lifting is over, stopping and starting production is MUCH more economical. If they had pulled this before production started, then they could have scared off investors and spinning it back up would be much more difficult.
So bottom line? I dunno. I will default to my regular position that you never attribute to malice what can be explained by incompetence. I think this is a little of both. They debated dropping prices too long (the incompetence) but now have no better plan, so they're hoping to kill American oil development. And long term they're going to fail because they didn't act when they needed to.
The cattle needs to be stroked before the collar of mastery is placed on the livestock.
They might stampede otherwise, and in the wrong direction.
Post a Comment