Lots of people lose when oil prices are low. The whole supply chain that feeds the oil company suffers. Also states like Louisiana that get a good chunk of its revenue from oil suffer.
Just like when corn prices tank. Not only does the farmer suffer but the whole supply chain suffers also. $2 corn does not build a lot of new tractors.
But the average joe could care less. All he wants is cheap gasoline.
WHY is oil prices low? Lots of reasons but it boils down to supply and demand.
Over the past decade more non oil energy has come on line so oil demand is down. A warm winter has helped explode this. Then the U.S. and other countries have started producing more causing a glut. In the past OPEC would have just cut production to stabilize the price. But they can not do this now. The reason is some countries can not cut production because their economy depends on selling oil. If OPEC cut production now the price may stabilize some but with the glut of oil customers would just buy elsewhere. They would lose market share. In order to hold on to their market share they keep pumping out oil. Now places like Iran will start selling oil with the new nuclear deal. This will only make more of a glut on the world market.
I see oil going down more to we start to weed out the places that need higher prices to make a profit. Once we weed out those guys oil should go back to the $50 to $60 range and stabilize. But this may take another year to play out. I do not see oil going back to $100. If that were to happen then all the players we weeded out on this go around will be back in the game and we will be right back in the same boat we are now.
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