Consider OPEC as a Central Banker
OPEC will no longer have the ability to manage supply, and oil prices could drop precipitously and even drop through the fixed cost of production, at which point oil production will stop by necessity and the process reverse.
This vicious spiral is not yet a foregone conclusion, but as global economic activity slows, driving down demand for oil, and the price as a result, simultaneously with increasing revenue requirements of cartel members, most importantly Saudi Arabia, the potential for such a spiral also grows.
Although this would be advantageous for consumers and for economic activity globally, it would wreak havoc on countries that rely on oil exports and on companies that are involved in high-cost oil production -- shale, tar sands, deep water and those that require fracking.
As the price of oil at current levels is very close to the price necessary for these new and alternative technologies to be viable and for Saudi Arabia to meet its financial commitments, any further reduction in oil prices increases the probability of a vicious spiral of oil production and reduced prices.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV