I was taught that if a thing seems too good to be true it probably is. Cheap gas seems to fall squarely into that category. It seems unnatural. Then again, I am a chicken. I’m genetically wired to alert the masses when the sky is falling. Or at least when I THINK it is falling. Perhaps I only need someone to explain to me-in plain language, thanks-how cheap gas is a positive, not unnatural, trend.
Seriously, what happened in the world to justify a 60% drop in the per barrel price of crude oil over the course of several months? Was a new mega source discovered? Did the members of OPEC skype one morning and decide to hold a clearance sale on all the dusty barrels in their warehouses?
By most accounts, there is an abundance of supply driving down the price. However, according to the general press, some members of OPEC, such as Venezuela and Iran, are desperate for the price of oil to turn around. They and other countries, most likely including the US, were counting on Saudi Arabia to cut back on production, as they have done in the past, to stabilize prices. The Saudis aren’t cooperating.
One factor affecting the supply/demand equation of oil is the efforts of America and other countries to become less reliant on foreign oil. Not only are we Americans looking for our own oil via fracking and horizontal drilling, we’re also developing and using alternatives to oil, like solar panels and wind energy. And don’t underestimate our efforts to just cut back. We are, some of us, evolving into conscientious consumers. The Crown Prince and his brothers and all their brothers-in-law, and nephews and cousins, they don’t like that shit. But what can they do? They can’t MAKE us buy their oil. They can’t kidnap us and shoot us up with crude oil until we’re addicted. So how can they increase our reliance on foreign oil? “I know, I know”, one bright shiny prince might have called out, his arm waving above a sea of other royal princes, or so I imagine, “We can let the price bottom out!”. At first, perhaps, they laughed, all the older, wiser sheikhs, because, clearly, the price of oil can’t go lower if they are to get richer. But then, maybe, they saw that the little prince was correct. Why should they have to always be the ones to cut production? Why not let other countries share the burden? You have to admit, they have a point.
Some sources predict that Saudi Arabia is in a position to weather the storm while eliminating competition, while other countries, like Iran and Venezuela, and even bigger countries, like Russia and the United States, are likely to endure serious consequences. This is because each operation has a number which represents the average cost of producing a barrel of oil. If the price of crude oil consistently slips below their number, companies can’t turn a profit. If they can’t turn a profit, they can’t maintain their operations and pay their debts. If they can’t maintain their operations and pay their debts, their loans go into default, and if that happens, their investors will suffer. And investors don’t like that shit. In America, many operations reportedly carry huge debt loads. Who are their investors? Mostly banks? The government? The public? Who? What will happen when the investors suffer? For certain, operations will shut down and people will lose jobs. If enough go out of business, a shortage of oil will result. If there’s a shortage of oil, the price will go up. And up. And if investors are losing money, people are losing jobs, and economies are becoming unstable, won’t that be the worst possible timing?
As if this isn’t anxiety inducing enough for a mentally fragile hen, I have another unresolved issue. Fracking sounds horrible for the environment. If a bunch of fracking operations get shut down, is that really a bad thing? Are the jobs of some worth the wear and tear on the environment we all share? Are there other ways those jobs could be replaced? And I’d also like to know, while we’re at it, if the situation is being downplayed because the President vowed to reduce unemployment and our dependence on foreign oil? Taken at face value, that does seem to be happening. Is it happening really? Or Is the tail wagging the dog? Politics is such a wormhole that it seems impossible to drill down to the bottom of any issue and find a clear choice. I guess you need to decide what’s most important to you and make your stand based on those ideals. What do you think? Is the sky falling? Are we fracked? Or should I buy an RV and enjoy the oil industry’s limbo party while it lasts?