Goodbye Barry - Welcome Home AMERICA!

Wednesday, December 10, 2014


Are you enjoying the LOWEST gasoline prices in 5+ years ($2.399 at Sam's Club today)? Wondering how they came to be so low all of a sudden? Well, enjoy it while you can… here's the bad news.

OPEC recently lowered their price per barrel from $100+ to $65.33. That was nice of them, wasn't it? Maybe, maybe not.  There are two things driving the price down -
1.      Reduced demand, and
2.      "Fracking" (fracturing) in the USA

Now, think about this - you are OPEC and you have about half the money in the world to work with. Your production costs (I'm just guessing here, impossible to find online) run $15-$20 per barrel, and you're selling it to the world at $100+ per barrel. Half-way around the world, U.S. companies begin fracturing oil shale - "Fracking" - and are retrieving oil at a production cost per barrel of $70. Also, understand that the fracking business began with several trillions of dollars of indebtedness to stock and bond holders.

How do you - as OPEC - maintain control of the market for the long run? By lowering the cost of your oil to 93% of the production cost of the upstart's oil. You're still gaining over 200% above the cost of production, and simultaneously driving the competition out of business. You (OPEC) can afford to do that until the frackers collapse under the weight of their debt. When that happens, you (OPEC) push the price up to $150 per barrel overnight.

The window of rejoicing WILL be limited - limited by how long the frackers can keep their collective head above water. According to published studies, we have approximately 3X the oil in western North Dakota's Bakken oil fields than all the OPEC countries combined!  I'm hoping that if things get "dicey", there will be a bailout by our government of an industry that is truly DESERVING of assistance.  In the long term, we WILL benefit from a bailout of fracking by becoming "energy independent" of imported fossil fuel. Which is precisely why the CURRENT administration won't permit it.

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