More on what’s in store for the world in 2016. There are another three weeks remaining in 2015 before I have to finally make a stab at my best guess prediction for next year.
Here is a major contender for the title: ‘2016 – the year the oil industry closed down’. Think about what that would mean… then read this article from The Telegraph: Paralysed Opec pleads for allies as oil price crumbles.
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A few guiding points to consider:
- The world is producing 2 million barrels of oil a day more than it is consuming. Now, apart from the question of where all that extra oil is going (the article tells us), what is not clear to me is why? Is it:
a) the world is gamely trying to divest from oil use?
b) the producers are trying to get as much oil out of the ground as quickly as they possibly can before someone tells them they can’t do it any more because of the climate effect?
c) no-one wants to lose their share of the oil revenue to some other nation – profit before good sense?
- Whatever the cause or reason, the net effect is that due to the glut of oil (the world is awash in oil, the quote says) the price per barrel is consistently going down. It has fallen from a high of (can’t quite remember) $120-$140 per barrel a couple of years or so ago, down to around $40 per barrel. It is predicted to further fall to the $20 per barrel range next year. No wonder the oil industry is in distress and panic.
- Most producing nations can only break even at prices between $120 down to $80 per barrel and over the last year or so have needed to sell assets just to keep up appearances. Nobody can sustain credibility at prices of $40 per barrel let alone $20.
Over the next year, expect to see many bankruptcies in this sector and a remarkable fall in production. In fact, if we are lucky, it may mean the whole industry packs up and goes home. Of course, that would not really be lucky for us, at least for most of us. Most of us would die.
Hmm… that gives me an idea. How about ‘2016 – the year the great die-off begins’? I like that one, but on reflection I think I would like to save it for another time.
Still, if nothing better comes to mind in the next few weeks…