Posted By Bryan1978 on 16 Dec 2014 08:43 PM
I didn't think Obama had the power to change oil prices much but when he released our reserves years ago it brought down the price of oil some. And doesn't matter what China does, they too will do anything to avoid conflicts. Anyway, just saying we were told this will only last till summer at the latest. And btw, our invoice for deliveries hasn't changed much in the last 6 months, went up .02 cents a mile.
Told by whom? Based on what data, therory, or WAG?
Predictions are tough to get right, especially predictions about the future.
I too believe that the dip in oil price is temporary, but don't see enough evidence to put an absolute time frame on it. But if drilling slows to a dribble in the US shale plays (as it must at a sustained $55/bbl price point), it will have a measurable impact on world production volumes within very short years, and with it, a new price floor. I'd frame the tail-end at about three years, but would be loathe to suggest the blip will be done by summer, and if the European economy continues to slide through the winter that would be an unduly optimistic (for oil producers) view.
Of course the wild card is what happens within OPEC. They're in disarray now, but even the suggestion that they might actually be able to firm up production limits could initiate a rising price.
As the worlds largest fast-growing market for oil (and energy from all sources) of COURSE it matters what China does! Seriously? China has been where nearly ALL the demand growth has been coming from over the past 5 years! China's total oil consumption is currently over 10 Mbbl/day (and rising), only exceeded by USA's ~18 Mbbl/day (and falling). It's just sillly to think the second largest consumer, with the largest average growth over the past decade "doesn't matter".
Car sales in China are already on par with car sales in North America, and both sales and annual driver-miles are growing there, whereas total volume sales here are fairly flat (despite year on year volatility), with miles/year slowly falling. The fact that China is investing in electric vehicle charging infrastructure (primarily to address local urban air pollution in the large cities) makes a difference in the intermediate and long term prospects for oil prices, even though they don't have their act fully together on that yet. (There are currently workarounds on diesel-electric buses, where the bus companies take the subsidy, but never actually charge the battery from the grid.) The trajectory on Chinese oil demand is still up if looking at 3 year rolling averages, but the rate of rise has slipped well below projections of just a couple of years ago. China's ability to implement policy decisions quickly is unmatched by free-market economies, and lower than expected economic growth has also slowed demand growth. With the change in Chinese policy oil demand growth has slowed to a crawl, to the point where
India's growth in Mbbl/day oil demand now exceeds that of China's, though India's total demand is currently only about 1/3 that of China's.
Of course the Chinese economy could pick up and resume it's double-digit growth rates, and policy could also change in light of the new low price, but don't hold your breath on either of those evenualities.
Demand will begin to grow again, at which point the price will too, but predicting when is a wildly speculative business, with way too many moving parts to tell for sure.
Releasing oil from stored reserves (as Obama did) at a point when demand is outstripping the world's pumping capacity can blunt the trajectory on a rising price of oil by increasing the marginal per-day world supply. But its very hard to buy up and stash oil at a rate fast enough to have much of an effect on supporting oil prices. Cutting production to where demand can start slurping up the mini-glut and better match demand will though.