So, most people can't help wondering about the reason, the impact to other industry and future price.
http://www.economist.com/blogs/economist-explains/2014/12/economist-explains-4
If i may summarize their points, the reason comes from four.
- Global demand is low
- Turmoil keeps on pumping crude oil stably
- US increase oil production due to fracking
- OPEC failed to reach agreement to reduce production
The impact to upstream will be,
- US fracking
- Weston oil company with projects to drill expansively
- Countries export a lot
Then Economist explores some downstream impact in later issues.
If i may summarize these. The impact to downstream will be,
- Countries get the opportunities to restructure their economy
- Reduce subsidy for gas with less resistance from voters
- Add carbon taxes with less resistance from voters.
- Trend of renewable energy will not be hindered
- most renewable energy go to electricity generation, while crude oil goes to transportation and industry
- Biofuel will be impacted
- Consumers get some relief
- Trend of energy efficiency will not be reversed
- Consumers' mindset has changed
One interesting I found during research is the oil price trend since 1946. Considering inflation, real price exclude inflation impact makes more sense.
Reading from the chart,
- historically, when global economy increases stably, crude oil price is low.
- Mideast war (early 80's) bumps oil price
- Speculation (late 00's) bumps oil price
- Stimulation (early 10's) support oil price in higher level
So, the future crude oil price might stay in a relative low level considering the following
- There is seldom wars between mideast countries.
- There is less speculation due to finance regulation.
- Stimulation runs out of steam
IMF forecast it will be around 65 at the end of 2015.
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