Oil Prices

History suggests that the current oil glut and the associated price decline will be a temporary phenomenon, and the economics and petro-physics of unconventional oil production—fracking in particular—further suggest that the domestic glut will be eroded sooner than most prognosticators believe.

Since 2011, domestic oil production has increased by 4.5 million barrels per day (bpd), and over the last 12 months alone production has increased by 1.4 million bpd. Meanwhile, Russian production hit a post-Soviet era high in November, and oil exports from Iraq are growing at a record pace.

The biggest oil and fuel market story of 2014 was the 30+ percent decline in global crude oil prices experienced in the second half of the year. West Texas Intermediate (WTI) spot prices fell from just under $110 to $74 per barrel—a level not seen since the global recession cut a whopping 6 percent from global consumption back in 2009. This price decline has come largely at the hands of surging U.S. oil production and the fact that global demand has lagged due to...

IHS Energy experts say oil markets have turned their attention squarely to Iraq and the fast-moving attacks of the Islamic State in Iraq and Syria (ISIS). The impact on global supply chains has yet to be measured.

An analysis of natural gas storage volumes strongly suggests that natural gas prices will rise significantly towards the end of the year; and as they rise, so too will the price for CNG and LNG.

Natural gas prices have risen 40 percent to over $6 per thousand cubic feet (Mcf) since the beginning of the year. As a regular reader of this column, rising prices should come as no surprise. In July of last year, when the price was just $3.52 per Mcf, I predicted that prices would rise to between $4.00 and $4.25 per Mcf by the end of the year.

In Lewis Carroll’s hallucinogenic novella, Through the Looking Glass, the Red Queen explains to Alice that she too can become a queen by reaching the opposite side of the playing board. But Alice, who has been running as fast as she can, finds that, despite her efforts, she remains in the same spot.

Interest in alternative fuel vehicles skyrocketed in 2013, with successful pilot programs for compressed natural gas (CNG) and liquefied natural gas (LNG) trucks being deployed in both private and for-hire truck fleets.

The natural gas market outlook has been a frequent topic covered in this column over the last two years. Over this time, I have consistently argued that although natural gas is abundant, natural gas prices will inevitably rise because the costs of production do not support the “glut” prices that have resulted from the fracking boom.

One needs to look no further than the futures market for evidence that analysts’ forecasts are rarely correct. In every trade, the buyer believes that prices will rise, and the seller believes the exact opposite. Not often do you see an analyst publicly reflect on a prior forecast—except, of course, when their goal is to make a “victory lap.”

Seventy-eight percent of former NFL players learn the hard way that bills remain long after incomes have dried up and are broke within five years of retirement. A similar force is at play among the world’s oil exporting nations.

Upon retiring, Pope Benedict XVI took up temporary residence at the spectacular Castel Gandolfo, which is also home to the Vatican Observatory Research Group recently headed by astrophysicist Father George Coyne, Ph.D.

The price per gallon of diesel fell 4.9 cents to $4.086 per gallon, marking the single largest weekly decline since falling 5.1 cents to $3.678 per gallon the week of June 25.

While diesel and other fuel rates have been in steep decline recently, supply chain managers should continue to keep their guard up.