Follow the Money? No, the Politics.
Oil: Cui Bono?
On January 22 Clifford Krauss, writing in the New York Times, claimed that the recent drop in crude oil prices can easily be explained by simple economics: Supply is overwhelming demand. End of discussion.
It’s true that U.S. producers, despite having cut their rig count by 60 percent and having laid off an estimated 250,000 roughnecks in the nation’s oil patch, continue to produce at levels barely off all-time record highs recorded last year. It’s also true that Iran is planning to add some 500,000 barrels per day (bpd) to the glut, with some estimating that by summer new production from Iran will be closer to a million bpd. Deep-water projects begun years ago in the Gulf of Mexico will be coming online later this year as well.
Krauss is also correct in noting that increased automobile fuel efficiency and struggling European and Asian economies are reducing demand significantly.
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