Yes, I'm still ruminating on a long term deflation of oil prices. I know, it seems a ridiculous perspective on the issue at this point, but I find it entertaining.

Yesterday, while The Dub was speakalating from his podiator oil tanked. Ended the day with the biggest drop in 17 years, to be exact. Of course, if you're a dark pool kind of person, this drop in price could be due to large investment banks selling off to cover losses in other sectors, or Fed manipulation through something akin to their oft rumored Plunge Protection Team. YMMV.

But anyways, back to my theory here. I always assumed it would be baby steps over the course of a few years that would get us to a drop in oil prices, but Kudlow caught something I hadn't been anticipating:

A new report from Wall Street research house Sanford C. Bernstein says that California actually could start producing new oil within one year if the moratorium were lifted. The California oil is under shallow water and already has been explored. Drilling platforms have been in place since before the moratorium. TheyÂ’re talking about 10 billion barrels worth off the coast of California.

Yowza. Domestic demand is decreasing, and we could be on the verge of increasing domestic supply. Of course, we still have a few kinks in the supply chain to unwind; and those will take time too.

But let's do some imaginatin' here. If talk of ramping up production in the US was responsible for even half of yesterday's decrease in the price of oil; what do we think actual increase of production will do?

Update:
Related? Mini nuclear reactors.

Updated Again:
Crude, Gas, Distillate inventories show unexpeceted increases, oil prices drop another $6 in trading. Invisbile hand, consumer response to (possibly manipulated) high prices both unavailable for comment. It'll be interesting to see how the crude price ends today. Most times, these initial reactions backpedal over the course of the day.

Posted by: shank at 07:37 AM | Comments (5) | Add Comment
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