I had to agree with Jim that the number is possible, even though there is upwards of 25 million barrels a day of production that is uneconomic at such a tiny price. But just because the fundamentals do not support a market price is no reason to believe that it won't be reached.
That is the wild nature of markets and particularly the oil market, which has a strong history of overdoing fundamental price boundaries. It clearly overdid it to the upside in 2007, when prices breached $145 dollars a barrel. And it is also clearly overdoing it again, with prices already under $50 a barrel.
There are five inputs I pointed out to Jim that have led to the massive and rapid drop in oil prices: the dollar, overproduction here in the U.S., slow growth in China and Europe, Saudi Arabia and OPEC and the end of speculative trading by investment banks.
Of those five, only one of them is likely to reverse any time soon -- the production targets here in the United States.
But Jim pointed out to me, correctly, that production numbers will take a very long time to come down. In the world of oil the one thing you cannot readily admit to is a drop in production targets.
I put it simply for Jim in the video above: "Those that are the first to admit their production is crashing will be the first to see their stock go to zero."
That's a tough game of chicken to be playing.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.