honalieh
UKC Forum Member
Registered: Jul 2003
Location: PA
Posts: 2161 |
Shortages
This is a long-term thing that was planned out a few years ago.
(1) We had a natural gas/oil drilling boom a few years back.
(2) OPEC saw the US boom in drilling as a threat, and pumped up the volume, driving down prices. This was around 2017/2018. It had the desired effect. New drilling came to a halt. Already drilled wells were being capped. As long as oil prices were low, the US companies did not want to invest in drilling, and did not want to release the assets of their already drilled wells at a low rate (that's where the capping comes into play).
(3) Covid hit 2020. A lot of work from home (myself included), school from home. Demand tanked.
(4) We now had a massive surplus, and low demand. This kept prices way down. There was actually a problem of where to store this surplus oil, to the point it was actually trading in the negative for a brief period.
(5) 2021 comes. About mid-year, the work from home people start going back to the office everyday (myself included). Kids start going back to school everyday. Demand starts going back up, and as a result, prices start creeping back up.
(6) 2022 comes. We have the Russian invasion of Ukraine, and NATO sanctions against Russia. This rocks the world market. Prices start to boom, but demand doesn't slow. At that point, we start to see the release of reserves, which does help some. But, that can only help for so long.
(7) I have mixed feelings on all of this.
(a) I don't like paying higher gasoline prices.
(b) I have gas/oil leases. As prices go up, my return goes up.
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