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Economists at the Federal Reserve Bank of St. Louis recently took a look at the interplay between inflation expectations and oil prices, and built a model around that. What they found is that if the market’s current inflation expectations are correct, then oil prices are likely to fall all the way to $0 per barrel by mid-2019.
Oil prices are reflective of the economic condition of the world. While low prices may be good from the consumer aspect, the consequences are tens of thousands of lost jobs, trade dropping off a cliff, and the risk that some of the biggest players could go bankrupt.
I have a feeling some leaders will decide a full blown world war will be the solution. I hope I'm wrong.
What they found is that if the market’s current inflation expectations are correct, then oil prices are likely to fall all the way to $0 per barrel by mid-2019.
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To be clear, the St. Louis Fed economists are not predicting that oil will be free in three years.
Eventually, when the oil runs out and they can no longer pay off their religiously militant citizenry....the ruling family will flee to the US or Britain and the country will revert to what it was 100 years ago but that's beyond most of our lifetimes.
Oil prices will continue to fall as long as Saudi has money in the bank.
Your best bet is to watch Saudi's bank account for oil price predictions.
And according to some that do it's going to be a while before prices come up as Saudi has a mountain of cash.
Actually, there are economists who are saying the Saudi's are in a bit of predicament. They actually pay their people to maintain a content society. The low oil prices have forced them to drain their "mountain" of cash.
Something I found after doing a little more research. Though the US uses the most oil as a whole, we are well down the list at 15th per capita. Canada, Norway and Switzerland use more oil per person than we do. I'd say this is only going to continue as we move from a manufacturing to a technology based economy.
They're just looking at a model that would assume that nothing else changes in between now and 2019 and oil drops out the same rate. There's already moves by the Saudis and OPEC and Russia to freeze oil production levels so that prices don't fall even drastically lower. As it is, they're going to cut production at some point because they're not all going to commit economic suicide--it's a game of chicken.
Oil prices will continue to fall as long as Saudi has money in the bank.
Your best bet is to watch Saudi's bank account for oil price predictions.
And according to some that do it's going to be a while before prices come up as Saudi has a mountain of cash.
Well, Saudi's in recent years have thrown a whole lot of money and budget to social programs to avoid an Arab Spring type situation in their country..
So, while in general I agree with you,they have a whole lot of cash.. I don't think it lasts as long as some people think it might.
It'll last a whole lot longer than somewhere like Venezuela who raised the price of gas to a nickle a gallon or something like that and the population seems ready to revolt over it.
Not long ago, "the models" predicted a crude oil barrel at $1000. Economists, commentators, business people explained it : oil is a finite resource. The demand will only grow (perhaps exponentially). China and India manufacturing are growing all the time.
Q: Where are these "China's demand growing all the time" experts and their sophisticated models now? Yes, I know - they are forecasting oil prices going to the ground...
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