Price of oil

Oil peaked in July at $147/barrel.  Since then the price has drifted down.  Today it closed below $50.  That’s a 2/3 decline.  The fact is $147 was never a sustainable price… but $100 or even $120 probably was.

The price of oil is down because demand is down.  But that’s only half the story.  I read the local papers every day.  Each day there is a line from S.A. urging higher prices.  It’s a statement they have to make.  But actions speak louder than words and this drop in oil prices is absolutely supported by the Saudi’s.

They give reasons why lower oil prices are good.  In summary:

1.  High oil prices encourages new discoveries.  We don’t need new discoveries to compete with…

2.  High oil prices will push the green revolution into non-oil based cars.  Can’t let that happen.

and my favorite:
3.  Oil exporting nations that are dependent on oil revenue to provide basic services need to get their fiscal house in order.

Interpretation:  Saudi’s are saying, “Screw you Iran, Russia, and Venezuela.  You are so dependent on oil revenue you need prices at $90/barrel.  You don’t listen to us when we tell you to do something so we’re going to pump lots and lots of oil.  We can live well on $50 oil.  Can you?  Oh so sorry.”