![]() ![]() On the other hand, in Iraq, where oil production has been expanding, experts fear that a civil war could erupt. If the new government in Teheran improves relations with the US, the lifting of the embargo would restore that production. Iran’s oil production is down by a quarter, presumably because of the embargo on shipments into the world market. Over the short run, departures from this uncertain long-run trend are vulnerable to political changes in unstable parts of the world. The upside for prices is more open ended, although very high prices would encourage the development of infrastructure to make natural gas a useful automobile fuel. As for how far prices might move, on the downside, there is some support to prices from the relatively high cost of producing shale oil. Political change, like the recent decision to replace the state oil monopoly in Mexico with private industry, may also make some difference. Had shale oil not come along, oil prices would be much higher today.įor the longer run, the future of oil prices will depend mainly on the race between growing demand in the emerging economies and growing supplies from shale oil deposits around the world. The development of shale oil has already raised North American production by nearly 5 million barrels a day, which is over 5 percent of today’s total global demand. Perhaps more importantly, it is also a dominant factor in the growth of world supplies and the world price of oil. Shale oil has been hailed as a move to energy independence for the region, a source of good jobs for US workers, and a major step in reducing the US trade deficit. On the supply side, the development of fracking as a new technology for getting oil and gas out of oil shale has reversed a long decline in North American oil production. But despite only tepid recoveries in the advanced economies, oil prices recovered promptly and have hovered near $100 since 2011. The Great Recession brought oil prices below $50 in 2009. On the demand side, the rapid development of China, India and Brazil quickened world GDP growth and oil demand, pushing oil prices from $25 to $125 a barrel between 2001 and early 2008. That relative calm changed over the past ten years, with both the demand and supply sides of the market changing in big ways. The price of oil fluctuated between $15 and $35 a barrel, which represented a substantial decline in the real price of oil. This crisis was followed by a movement to greater energy efficiency and two decades of relative calm in oil markets. ![]() And when Iran’s oil supplies were disrupted by the overthrow of the Shah of Iran by Muslim clerics in 1979, a new surge in oil prices led to a second round of even deeper recessions. When the oil producing countries of the Middle East nationalized their oil industries and formed the OPEC cartel that quadrupled world oil prices, they generated the steep recessions of the mid-1970s. are losing money at these prices, this trend is an unlikely scenario. Because current prices are at historical lows and many gas producers in the U.S. Forty years ago, historic disruptions to global oil supplies destabilized the world economy for a decade. Another disconnect the panel did not address was the IEA’s prediction that natural gas prices will remain low. Oil prices are hard to forecast because they are highly sensitive to shocks in both global demand and supply. ![]() But the most interesting miss was that the group was way too low on oil prices. Forecasting is notoriously difficult, and nobody guessed how high stock prices would be today. Siemens ( OTCPK:SIEGY) has denied that it has been commissioned to carry out the maintenance work on the Nord Stream 1 pipeline despite a Reuters report that Russia's Gazprom ( OTCPK:OGZPY) will not resume shipments until Siemens repairs the faulty equipment.At a recent annual retreat of elite Wall Street money managers, the hosts reported on how well last year’s attendees predicted various economic measures. In Hawaii, prices were hovering around 4. Strong inventory builds ahead of winter are easing the worst fears of European supply shortages but analysts warn of pain ahead for many energy intensive sectors including utilities, chemical, automotive and manufacturing. Since the start of October, Alaska’s average price per gallon is now back up to 5.34. Prices for Dutch TTF natural gas, the European gas benchmark, fell as much as 13% after soaring as much as 35% before closing with a 14% gain on Monday due to Russia's indefinite halt of the Nord Stream natural gas pipeline. ĮTFs: ( NYSEARCA: UNG), ( UGAZF), ( DGAZ), ( BOIL), ( FCG), ( KOLD) gas production is expected to remain near all-time highs, and cooler weather trends are picking up speed as the fall season approaches, although there are some notable exceptions such as the California heat wave. natural gas prices plunge following the holiday weekend, with the Nymex front-month contract for October delivery ( NG1:COM) -4.7% at $8.37/MMBtu. ![]()
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