The reason that crude oil price crashed

[johnyj]

I think most of the QE money did not reach real economy, they went into crude oil instead (oil is also a good store of value). So now when QE has stopped, suddenly the oil market lose the continuous injection of QE money and crashed

Unlike housing, the oil crash does not hurt average consumers, but oil exporters. FED does not have to bailout those oil companies. However, the crashing oil price indicated that there are much more goods/services than dollar, so those extra oil will compete for the limited USD liquidity on the market and drag the price of everything else down in the process. Maybe eventually FED have to restart the QE again

[waaat?]

sooner or later the house of cards is coming down

[AJinNYC]

The reason oil prices have come down is because OPEC has cut prices arbitrarily. They were artificially high to begin with. On average it costs an OPEC nation ~$30 to produce a barrel of crude. They're still making a shitload of profit.

[Febo]

The reason oil prices have come down is because OPEC has cut prices arbitrarily. They were artificially high to begin with. On average it costs an OPEC nation ~$30 to produce a barrel of crude. They're still making a shitload of profit.

Yes OPEC makes profit. But many countries depend on that profit. They organize education, .... with that money.

Reason why oil price come down is not opec is companies in USA using that new technology to get oil. But that is expensive method and at some point those companies will close. Opec is smart and will not try to maintain price artificially high. Lets teh market do and take off those that produce with to big costs.

Those companies took loans in banks. And when they will bankrupt and will not be able to pay off debts. Guess who will pay this?

[AJinNYC]

Guess who will pay this?

No one...

Their creditors will get their assets and sell them off to other companies. That's how bankruptcy works. Unless the government takes the company into receivership and/or bails them out.

[picolo]

The reason oil prices have come down is because OPEC has cut prices arbitrarily. They were artificially high to begin with. On average it costs an OPEC nation ~$30 to produce a barrel of crude. They're still making a shitload of profit.

Oil Demand is going down so prices are going down.

[NUFCrichard]

The price is being moved down to punish Russia for what's going on with Ukraine.
Sanctions + low oil price makes for the Russian economy collapsing, if and when they fall into line, then the price will magically rise again, but I'm sure the press will attribute it to something else.

[AJinNYC]

The price is being moved down to punish Russia for what's going on with Ukraine.
Sanctions + low oil price makes for the Russian economy collapsing, if and when they fall into line, then the price will magically rise again, but I'm sure the press will attribute it to something else.

This is also definitely true.

[RodeoX]

The price is being moved down to punish Russia for what's going on with Ukraine.
Sanctions + low oil price makes for the Russian economy collapsing, if and when they fall into line, then the price will magically rise again, but I'm sure the press will attribute it to something else.

This is also definitely true.

This plus lower demand. I also wonder about the impact of lower cost solar electric products. They were starting to compete with petrol and that is the oil companies worst nightmare. People producing their own free power on site. It would ruin them. 

[panju1]

Additional shale oil supply from the US has upset the demand-supply balance in the oil market.

Once confronted with lower crude prices and lower revenues, OPEC members decided to increase production thereby effectively ending the cartel. The gulf countries might be worried, but the rest of the world is rejoicing.

[HeroCat]

If oil price is going down, that means that someone start to deliver oil in a market in big quantity or demand go down for oil. But just think - how can oil demand go down ? May be big wholasalers have some oil reserves, and then oil price for limited time go down and then go up.

[NewLiberty]

The reason oil prices have come down is because OPEC has cut prices arbitrarily. They were artificially high to begin with. On average it costs an OPEC nation ~$30 to produce a barrel of crude. They're still making a shitload of profit.

Oil Demand is going down so prices are going down.

This is the opposite of the truth.  Demand is not falling, supply is increased.  Demand ALSO is increased, but the balance is shifted to supply.
This depresses the price, which then INCREASES demand (because some uses of the oil are suddenly profitable now).
When demand at the lower price increases, price will rise, and there will be more consumption.

Econ 101 anyone?





You should expect increased use, and increased demand.  New car sales will rise also.  Airlines will do well.

[Martijnvdc]

Now how does the "peak oil" theory fit in here? Lowering prices to push up the demand makes no sense at all...

[grappa_barricata]

As long as OIL is denominated in USD, the oil price is determined by the OPEC countries as well as the USG!!!
Why it is crashing so badly, and more importantly why now?
Because the USG was the one inflating the price at will, in the last decades, as a way to 'export inflation' (also, sometimes, for geopolitical reasons).
And now this machine is slowing down, the clunks fading away, the masters getting sloppy and the mastered getting smarter.

[criptix]

Now how does the "peak oil" theory fit in here? Lowering prices to push up the demand makes no sense at all...

oil demand is increasing, just in india and china alone are around atleast 1 billion people who cant wait to live like we do in the western hemisphere.

higher oil prices will push people to invent and invest in alternate technologies, lower prices can and probaly will therefore push the demand.

[worle1bm]

Oil prices are falling because oil producing nations are not cutting supply. Supply is rising with demand remaining stagnant, and even dropping off some.

This has nothing to do with QE. Can you substantiate that claim with any evidence? Is there any hard numerical data to support your claim?

[Bit_Happy]

Now how does the "peak oil" theory fit in here? Lowering prices to push up the demand makes no sense at all...

"Peak oil" theory is unproven, and some parts of the world still have a truly Huge amount of oil in the ground.
We are not running out of oil in the near future.

[Zer0Sum]

The price is being moved down to punish Russia for what's going on with Ukraine.
Sanctions + low oil price makes for the Russian economy collapsing, if and when they fall into line, then the price will magically rise again, but I'm sure the press will attribute it to something else.

This is def happening...
Obama is steadily playing the Long Game with Russia...
And the Saudis helped out by flooding the market with oil (on top of an existing glut).

This also caused Alternative Energy companies to collapse in value (see PBW).

And since energy issues are 20% of the Bond Market...
You will soon see a wave of high yield defaults that could cascade and become destabilizing.

Could be the start of what Central Banks feared while printing trillions... unmanagable DEFLATION.

[panju1]

The price is being moved down to punish Russia for what's going on with Ukraine.
Sanctions + low oil price makes for the Russian economy collapsing, if and when they fall into line, then the price will magically rise again, but I'm sure the press will attribute it to something else.

This is def happening...
Obama is steadily playing the Long Game with Russia...
And the Saudis helped out by flooding the market with oil (on top of an existing glut).

This also caused Alternative Energy companies to collapse in value (see PBW).

And since energy issues are 20% of the Bond Market...
You will soon see a wave of high yield defaults that could cascade and become destabilizing.

Could be the start of what Central Banks feared while printing trillions... unmanagable DEFLATION.

For once, non oil producing companies will be supported by moderate crude oil prices.
Until now, oil producing countries exhibited typical oligopolistic behaviour - jacking up prices and constraining production.
Now the tables have been turned. There are some countries whose break even price is higher than the current market price. These countries will have to curtail production.

[NewLiberty]

This is a strange discussion.  Must oil prices be a grand conspiracy that is only about some politics?
Is it impossible that there are new oil extraction methods that have become cheaper with technical advancements.
No one has heard of "fracking"?
(It is very controversial, possibly polluting ground water, but it produces oil where it was previously impossible.)

Commodities markets tend to over-react before they balance out.

Or maybe it is all just a few people playing global chess over some imagined strange excuses that make everything happen?
People look for complex excuses instead of looking at simple data.

The conspiracy is the market conspiring to find the clearing price.
Today Saudi announced it is reducing deliveries, the fracking is not economical at prices below the $60 barrels. 
At this price, new demand will arise and price will rise, then Saudi may increase delivery (or not).

Maybe many people assume that governments control everything always.  Does it feel helpless to live in such a world?

People were less shocked when prices soared for the last few years then when they fall.  They went up from war and rumors of war which are certainly political.  (Or a failure of politics)  But now it is a conspiracy when they come down?  Maybe there is a conspiracy for peace?