The value of oil has long been a key signal of economic health and stability. And that index is tanking rapidly.
In the last few years, significant overproduction of oil has become a serious instrument of geopolitical discord.
As costs have plummeted from $110/barrel to $40, Americans have tapped large sources of fracking and flooded the market; OPEC and the Saudis have persisted pumping in spite of dropping prices; Russia, dependent upon oil for its economy, has been under siege by means of sanctions and bottom-level prices; ISIS and other terror organizations are undercutting everyone with illegitimate oil sales and China continues to be substantial in the whole affair.
Proxy wars and threats and rumors of world war have followed nasty economic warfare over currencies and energy. Currently, oil is at a record level of glut, and almost every storage facility in the world is filled past capacity.
The London Telegraph noted:
The world is running out of storage facilities for surging supplies of oil and may soon exhaust tanker space offshore, raising the chances of a violent plunge in crude prices over coming weeks, experts have warned.
Goldman Sachs told clients that the increasing glut of oil on the global market […] could send prices plummeting to $20 a barrel, the so-called ‘cash cost’ that forces drillers to abandon production. “Risks of a sharp leg lower remain elevated,” it said.
It is estimated that at least 100m barrels are now being stored on tankers offshore, waiting for better prices. A queue of 39 vessels carrying 28m barrels is laid up outside the Texas port of Galveston, while the Iranians have a further 30m barrels offshore ready to sell as soon as sanctions are lifted.
“The world is floating in oil, and commercial stocks on land are at a record high,” said David Hufton, head of oil brokers PVM Group.“The numbers we are facing now are dreadful. Stocks have been building continuously for two years. This is unprecedented.”
Presently $40 barrels of oil has put significant tension on the world, and right now tankers filled will oil are prepared off the coast of Galveston, Texas, and will be hanging around there indefinitely for many months. It is enough to drive oil and fracking firms out of business, and is right now resulting in a flood of layoffs – adding to to further joblessness and economic downturn, or perhaps outright catastrophe.
Hold on well, things may very well be getting bumpy without a doubt. Until then, delight in the straightforward pump prices.