One critical issue is absent in this election year. Well, actually all critical issues are absent, but that’s another point. This time around absolutely no one is talking about one thing that has dominated US politics since the early 1970s – the price of oil. Gasoline is cheap and everyone is happy.
Everyone, that is, except the oil and gas industry. The crash in oil prices in 2014 has confounded the business of drilling, baby, drilling and left oil prices if anything too low – a concern if your job is to make the bubblin’ crude come out of the ground.
It’s been a mystery since the crash just where oil prices will finally land. Today, however, most experts finally agree – we are probably right now in the range that oil will stay at for at least the next year, if not beyond. That’s great for the US, but terrible for other oil producing nations.
The price of oil depends on many things. These include the thickness, or how pumpable it is, the content of sulfur which has to be removed, and where it is located. The benchmark for oil prices is thus the price paid for West Texas Intermediate (WTI) as delivered to Cushing, Oklahoma. It’s a medium thickness low sulfur grade oil and the location is right in the heart of America’s Oil Patch.
Using WTI as a guide we can see what a crazy ride oil prices have been on for the last few years. From a high of over $106 per barrel (42 gallons) to a low of about $27 it’s been almost impossible to tell just where it was going from one day to the next, let alone where it might be in a year or more:
Barataria infamously predicted at the start of the crash that oil couldn’t go below $80 per barrel because that would shut down US production, crimping supply. Then came word that automation and better control lowered that number to about $50. Then the bottom fell out and everyone just shut up for a while after their draws dropped as low as WTI.
That includes me. Barataria has been silent, mostly out of embarrassment, for a while.
Everything does seem to have stabilized, however, in a range that it will likely stay in for a while. That doesn’t mean that most major oil producers are happy. Saudi Arabia has tried to corral OPEC into production cuts to keep the price high. Russia, sounding a little more desperate, has called for a six month shutdown of all oil production in order to burn up record high global inventory. But all of this ignores two major oil producers.
The first oil producer who isn’t going to play ball is Iran. They have just rejoined the world economy after the nuclear weapons treaty and have no interest in turning off the newly opened taps. Their plan is to quickly become one of the world’s major suppliers again with 4 million barrels per day.
The other oil producer is the world’s largest – the United States. Production here never dropped significantly as the price fall, defying all expectations. It seems that something out of a well was better than nothing as well operators held on. Better days are now here as WTI has hit $50 and it’s all good.
The consensus is that WTI will be between $50 and $60 per barrel for at least a year, which is to say that gasoline should fluctuate between where it is now and a quarter higher. It’s a good range for consumers and the industry alike, and all appears to be in balance.
Will oil ever be a political issue again? It goes without saying that renewable energy is going to be needed sometime in the future so it remains a good investment for the long haul. We can also be certain that with higher US production there is a need for more pipelines, and as long as these are stupidly routed through sensitive areas there will be something worth protesting.
But this is nothing compared with the dire warnings back in 2008. At that time, it was a popular mantra among some that if we didn’t unleash the oil industry we’d all be paying $10 a the pump for a gallon in no time.
For all of us who were wrong about the price of oil, it’s good to take special glee in those predictions by Republican politicians. But more than this shameful joy we should note that no one is making anything from the price of oil today.
That’s a good thing. It was always a stupid political issue in the first place, and now we have time to talk about other things like …. well, we’ll always have dumb things even without oil.