Ten Reasons Why a Severe Drop in Oil Prices is a Problem

12 12 2014

The low oil price has apparently already made its first victim…
http://www.abc.net.au/news/2014-12-11/oil-price-drop-claims-first-wa-victim-red-fork-energy/5962020

Where this will lead is anyone’s guess, but the ducks are all lining up on the wall for another crash…..

Our Finite World

Not long ago, I wrote Ten Reasons Why High Oil Prices are a Problem. If high oil prices can be a problem, how can low oil prices also be a problem? In particular, how can the steep drop in oil prices we have recently been experiencing also be a problem?

Let me explain some of the issues:

Issue 1. If the price of oil is too low, it will simply be left in the ground.

The world badly needs oil for many purposes: to power its cars, to plant it fields, to operate its oil-powered irrigation pumps, and to act as a raw material for making many kinds of products, including medicines and fabrics.

If the price of oil is too low, it will be left in the ground. With low oil prices, production may drop off rapidly. High price encourages more production and more substitutes; low price leads to a…

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