The drop in crude oil hasn’t been lost on anyone, whether you’re market aware or you drive a car (SUV owners rejoice!). Clearly, the question is now: How low can it go? Barrons makes the argument that it can go as low as $35, an unimaginable price that oil hadn’t hit since… February 2009. That’s right, it was only about 6 years ago when the price of oil was in the 30s. As crazy as it first sounded to me, the price of oil could fall that far.
The reality is that this drop in oil price is almost impossible to predict because of the political nature of oil supply. Many commentators (see Economist, WSJ, and my random assortment of podcasts) see this as OPEC playing chicken with shale oil producers. While it is almost impossible to find exactly how much the cost is to get the shale oil, the article notes that “more than a trillion barrels of crude oil from unconventional sources… have been discovered in the past five years, mostly recoverable at $70 a barrel or less. About a third are from shale, a third from deep drilling, and a third from oil sands.”
Energy companies are being beaten down now. For those who didn’t have any skin in the game, this could be the big one. For those were already in it, hold on and don’t let go.