Putting numbers behind it, with worldwide production running some 95 million barrels per day, and assuming $55 per barrel for oil, the market for crude oil is about $5.2 billion per day. Each $10/Barrel change is worth nearly $1 billion/day or $365 Billion/year for the worldwide crude oil market. Add the worldwide equity market caps of oil and oil related equities and debt you have a scandal that is in the trillions.
A technological revolution spurred the U.S. oil boom that resulted in the greatest increase in domestic oil production in a century, and while that has stuttered in the face of a major oil price slump and an OPEC campaign to maintain a grip on market share, the American response could be another technological revolution that demonstrates that the first one was merely an impressive embryonic experiment.
If demand in China continues to weaken or if the Greek tragedy drags Europe and the rest of the world into the mire, then energy stocks would be hard hit. That is why protecting positions with stop loss orders is essential if you buy into the sector here.
Demand for oil is heading towards record levels both internationally and in the U.S. The Greek issue is not new and it has not changed. It is just popular now as deadlines are pushed. It will fade and its drag on oil prices will ease.
The revival of the US oil industry will occur after the upcoming consolidation and will reduce the number of cost inefficient players as well as the short selling in group while ultimately, self-healing the industry by improving cash flows, given the likelihood of oil remaining below $100.
The shale oil bust may not turn to boom again anytime soon, but with WTI crude oil now in the $60 territory, many are hoping the worst is over.
A new wave of innovation is hitting the oil patch, allowing for a significant reduction in drilling costs. If efficiency gains continue at this pace, the US may weather the onslaught of Saudi oil much better than many expected.
Coal-burning power plants that capture carbon aren’t worth the expense.
The US oil rig count has plummeted since October 2014, falling from 1,609 down to 668 as of May 8. If oil companies oscillate between cutting back and adding more rigs as the price of oil bobs above and below the $60 mark, they won’t exactly be raking in the profits.
Unfortunately, as helpful as the energy sector was in buoying the U.S. during the Recession of 2008, the energy sector may now hold down the economic expansion just as the economy is starting to pick up steam.