Oil is so over supplied, they have run out of things to store it in.
Which means, there is just way too much of it being produced, and prices should plummet even more than the 31 USD per barrel they are at now.
This is great as it is applied economics: Oil, like iron ore, was in a situation where the demand exceeded supply in the early 2000’s, pushing prices up from ~30 per barrel/tonne up to almost 200 at their peak.
When prices go up, investment in mines/technology (fracking) etc kicks in, and everyone ramps up production to cash in. It’s genius in the short term, stoopidity in the medium term, as the investment in capacity leads, ironically, to a devaluation in that which they have invested so much in.
Saudi Arabia and Australia/Brazil are still viable producers due to world class resources which are able to be produced at less than the current prices.
The rest are operating at a loss and the market, god bless it, will send ’em broke. That will take excess supply out of the market, as will the exhaustion over time of high grade deposits, as will the fact that no one will touch a proposal to build a new iron ore mine, or oil pipeline or oil well right now, leading to a future supply shortfall.
The point is this: All the despotic countries relying on oil to make vast profits to appease the slaves and enable the authoritarian rulers, well they are being de-stabilized by economics.
I love it.
Unfortunately, Australia got lucky on the mining boom, and it doesn’t take a mine site truck driver to work out what comes after boom. Boom boom?
Photo by Tim Evanson 