I am somewhat worried because the actual amount of increase in supply doesn't justify this fast and deep a drop. There has been a very large decrease in demand. Why? I am not sure of all the why details but one very large part is that China is starting to reap the results of its top down command and control version of "capitalism". Its misinvestments and printing of money are coming home hard. A lot of the Chinese explosize growth is slowing and this is hitting commodities across the board including oil. It is also rippling out to other banks and businesses and countries deeply dependent on Chinese high demand. That imho is no small part of what is happening.

I feel a bit like one does standing at the ocean seeing the water line much much further out than normal. Beware.

Here in OK, we breathe the energy market, non-stop. The reality is that the profit point for shale oil is $36/barrel, while Russia can make some small profit at $24/barrel, and the Saudis can manage $13/barrel, as can Iran.

While the profit picture isn't good for the American suppliers right now, the important thing is maintaining the cash flow to cover debt and expenses. We have a glut of oversupply sitting in Cushing, OK, so releasing that supply to overseas markets will keep the cash coming in, for the short term. If the doomsayers are correct, and the price remains at $20 or less per barrel for the next couple of years, the industry will be in dire straits, unable to generate profit from their most productive wells.

While we like to think of the U.S. as primarily an industrial supplier of finished products, the reality is that commodities are still a major source of income. Oil, natural gas, coal, minerals, crops, and animal products are big export items, and a dramatic drop in demand for any of those items can put a big dent in our GDP.

With "friends" like the Saudis, we need few enemies, as their purposeful distortion of the market, generating oversupply against a shrinking demand is as damaging an assault on our national interest as a military strike. Ironically, the best thing for the U.S. right now would be a shooting war in the Gulf of Oman, stopping Saudi and Iranian oil delivery.

Thank you for asking this question, richrobinson. I have been wondering if there were something I was missing when I read the alarming news reports. I think that 'low oil prices' are good. That means we can do more stuff with oil and then sell it at a cheaper price.

When people quote the 'cost' of oil from overseas, from Saudi for example, does that include the transportation cost to get it to the US?

Jan, not an economist

Supply and demand doesn't work so long as government manipulation is involved in any way. Even in the slightest of involvement. It throws the nature of things askew and never accounts for peripheral damage.

if oil in general is not selling and that is causing the price to drop the effect also takes place on all products made from oil other than fuel, such as polyester. The amount of polyester made from oil by products in in the millions of pounds so the millions of pounds is reduced. The trickle down effect is under way.

Those pundits would be totally freaked out of government spending declined.

My guess is there are at least 2 reasons.

First, many people have bought paper oil at $80 a barrel or greater and are losing big on it now.

Second and the bigger issue is the governments that set budgets on selling $80 oil and will not have the money to fund all their handouts with low oil prices. Not much different than our own government that spends every single dime + it takes in on programs that we cannot afford.

I am not so sure you have to accept it, it just is. Didn't Clinton pardon the same guy he hangs out with that has the island with the supposed young girls Bill likes so much? I don't think he was even at trila yet, just indicted, and of course, is still a close "friend".

This is not the free market working. Demand has not fallen. It is deliberate manipulation by the big nationalized oil producers, especially Saudi Aramco, who want to bankrupt our producers so we'll have to buy from them. (Most of the top 20 oil companies in the world are governments.)

Beware if the federal government offers bailouts. I'm sure they would like to nationalize the oil fields and shut them down to please the eco-nuts and freeze us.

Great comments. I always get an education in the Gulch. What about the underground cash economy? In Ukraine and other former Soviet Union Countries much of the economy is cash based to avoid paying taxes. I suspect the same in the US - especially for services in the small business sector. Any data on the subject?

the price levels that oil has reached will cause major problems for the energy industry...major layoffs and bankruptcy here in the u.s....overseas it will mean civil turmoil in middle eastern countries and aggressiveness from russia...world conflict...

...and oil is expected to drop further...the market is dropping with it...we have broken key support levels and a 50% drop like 1932...2000...& 2007 are on horizon...

It's the inevitable end of conflating politics, both on a national and a global scale, and market actions. The laws of capitalism, most importantly markets punishing foolish transactions, are disregarded because too many politicians are invested in a positive income which they've talked up.

A sudden free fall in the price of oil is cause for concern. It indicates weak demand for oil. It seems like things are heading to the point where you might be able to give oil away. Keep in mind, in the past falling oil price would lead to increase consumption and that's not happening and that's what is scary.

For years, government has tried to get americans to use LESS oil and gas. So now its here- cars get better mileage, homes are better insulated, and demand drops. At the same time, supplies increase through innovation. The government's response is to try to increase THEIR income through a $1 tax per gallon. I say they can go fu&& themselves.

It's the same scenario if prices were rising. They should state their personal favorite price.

They shouldn't be too worried. I've had to study this a bit. Some people find negative in everything. The low oil prices are not a cause, but a result. They have resulted in a glut of production and drop in demand. The drop in demand, largely, is from a slowing economy. I could say a few things about how this could affect those seeking high-yield, fixed-income products....but I won't.

They are the sheep that have been wearing blinders, and only listening to the bleating of the other sheep around them, not to the howling of the wolves that's been going on in the distance for a loooong time now. When the down went over 10K... I knew the "correction" would be coming. They forgot the lesson of the 1920's and 30's... so they are repeating it.

because they had their chips on the wrong spot!