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Page added on December 21, 2014
Oil could drop as low as $20 per barrel
How low can it go — and how long will it last? The 50 percent slump in oil prices raises both those questions and while nobody can confidently answer the first question (I will try to in a moment), the second is pretty easy.
Low oil prices will last long enough for one of two events to happen. The first possibility, the one most traders and analysts seem to expect, is that Saudi Arabia will re-establish OPEC’s monopoly power once it achieves the true geopolitical or economic objectives that spurred it to trigger the slump. The second possibility, one I wrote about two weeks ago, is that the global oil market will move toward normal competitive conditions in which prices are set by the marginal production costs, rather than Saudi or OPEC monopoly power. This may seem like a far-fetched scenario, but it is more or less how the oil market worked for two decades from 1986 to 2004.
Whichever outcome finally puts a floor under prices, we can be confident that the process will take a long time to unfold. It is inconceivable that just a few months of falling prices will be enough time for the Saudis to either break the Iranian-Russian axis or reverse the growth of shale oil production in the United States. It is equally inconceivable that the oil market could quickly transition from OPEC domination to a normal competitive one. The many bullish oil investors who still expect prices to rebound quickly to their pre-slump trading range are likely to be disappointed. The best that oil bulls can hope for is that a new, and substantially lower, trading range may be established as the multi-year battles over Middle East dominance and oil-market share play out.
The key question is whether the present price of around $55 will prove closer to the floor or the ceiling of this new range. The history of inflation-adjusted oil prices, deflated by the U.S. Consumer Price Index, offers some intriguing hints. The 40 years since OPEC first flexed its muscles in 1974 can be divided into three distinct periods. From 1974 to 1985, West Texas Intermediate, the U.S. benchmark, fluctuated between $48 and $120 in today’s money. From 1986 to 2004, the price ranged from $21 to $48 (apart from two brief aberrations during the 1998 Russian crisis and the 1991 war in Iraq). And from 2005 until this year, oil has again traded in its 1974 to 1985 range of roughly $50 to $120, apart from two very brief spikes in the 2008-09 financial crisis.
What makes these three periods significant is that the trading range of the past 10 years was very similar to the 1974-85 first decade of OPEC domination, but the 19 years from 1986 to 2004 represented a totally different regime. It seems plausible that the difference between these two regimes can be explained by the breakdown of OPEC power in 1985 and the shift from monopolistic to competitive pricing for the next 20 years, followed by the restoration of monopoly pricing in 2005 as OPEC took advantage of surging Chinese demand.
In view of this history, the demarcation line between the monopolistic and competitive regimes at a little below $50 a barrel seems a reasonable estimate of where one boundary of the new long-term trading range might end up. But will $50 be a floor or a ceiling for the oil price in the years ahead?
There are several reasons to expect a new trading range as low as $20 to $50, as in the period from 1986 to 2004. Technological and environmental pressures are reducing long-term oil demand and threatening to turn much of the high-cost oil outside the Middle East into a “stranded asset” similar to the earth’s vast unwanted coal reserves. Additional pressures for low oil prices in the long term include the possible lifting of sanctions on Iran and Russia and the ending of civil wars in Iraq and Libya, which between them would release additional oil reserves bigger than Saudi Arabia’s on to the world markets.
The U.S. shale revolution is perhaps the strongest argument for a return to competitive pricing instead of the OPEC-dominated monopoly regimes of 1974-85 and 2005-14. Although shale oil is relatively costly, production can be turned on and off much more easily – and cheaply – than from conventional oilfields. This means that shale prospectors should now be the “swing producers” in global oil markets instead of the Saudis. In a truly competitive market, the Saudis and other low-cost producers would always be pumping at maximum output, while shale shuts off when demand is weak and ramps up when demand is strong. This competitive logic suggests that marginal costs of U.S. shale oil, generally estimated at $40 to $50, should in the future be a ceiling for global oil prices, not a floor.
On the other hand, there are also good arguments for OPEC-monopoly pricing of $50 to $120 to be re-established once markets test the bottom of this range. OPEC members have a strong interest in preventing a return to competitive pricing and could learn to function again as an effective cartel. Although price-fixing becomes more difficult as U.S. producers increase market share, OPEC could try to impose pricing “discipline” if it can knock out many U.S. shale producers next year. The macro-economic impact of low oil prices on global growth could help this effort by boosting economic activity and energy demand.
So which of these arguments will prove right: The bearish case for a $20 to $50 trading-range based on competitive market pricing? Or the bullish one for $50 to $120 based on resumed OPEC dominance?
Ask me again once the price of oil has fallen to $50 – and stayed there for a year or so.
34 Comments on "Oil could drop as low as $20 per barrel"
Bandits on Sun, 21st Dec 2014 6:25 am
A wordy essay with no explanation as to what is causing the price drop, except a vague reference to claiming SA “spurred the slump”. So it all seems like a bullshit essay to me. And if OPEC or SA “spurred the slump”, then it stands to reason that the price was held high and steady by OPEC. Who believes that?
Makati1 on Sun, 21st Dec 2014 7:01 am
Same old bullshit re-churned by an imperial mouthpiece.
Apneaman on Sun, 21st Dec 2014 7:12 am
Every time I read trash like this, I cannot help but think of the classic essay by George Orwell that applies to all MSM and government bullshit.
Politics and the English Language
http://www.orwell.ru/library/essays/politics/english/e_polit
bobinget on Sun, 21st Dec 2014 7:45 am
Continued crude oil price weakness, already having devastating effects on the poorest of the poor oil exporting nations.
Only the largest oil monopolies are survivable leading to further ‘consolidation’. Translation: China, Russia, Saudi Arabia, US,India and Japan, to a lesser degree, buy up the world’s exportable assets.
The only question remains; Will scare tactics like this “$20 oil” article become a self fulfilling prophecy?
NO.
Such preposterous articles are “junk-journalism”
authored by– youngish male English majored prostitutes.
For– Inexperienced newbies who should know better and theorists like our own shortonoil.
In rebuttal, I’ll once again list just a few counter factors;
Japan, China, India, in spite of massive population gain, in this temporary oil price environment, will surprise almost all with growth spurts approaching
10%. in that order, btw.
US; transportation, fertilizer, (agricultural), cement
(construction), manufacturing, housing will show growth rates above 4% (because of lower oil/NG pricing. Unemployment will continue fall.
Highly mechanized, oil intensive wars in Asia, Africa and the MidEast show signs of expansion, NOT diminishment.
Often ignored today; Conflicts over oil (water, farmland) in Africa and Asia in particular.
Finally, the world’s automotive industries are slated to grow a smashing 38% mostly in Asia.
shortonoil on Sun, 21st Dec 2014 7:57 am
This competitive logic suggests that marginal costs of U.S. shale oil, generally estimated at $40 to $50, should in the future be a ceiling for global oil prices, not a floor.
Of the 4,598 wells in the Bakken that we reviewed the average drilling cost was $53/barrel. How this author comes up with $40 to $50 dollars is a bit of a mystery. Perhaps he thinks that some of these wells spit out $100 bills along with oil.
But the real failure is similar to most articles of such nature. They never get around to asking the most important question concerning the price of oil: How much can the economy afford to pay for it? Every marketable item has a maximum price that the end user can afford to pay. It is the point where they run out of money. Since most of these authors apparently lack the ambition to do the math, we did it for them and posted it on a web page:
http://www.thehillsgroup.org/depletion2_022.htm
These curves give the maximum price that the economy can pay for oil at any point in time. It went up for a while, and now it is going down. Will oil hit $20/ barrel? Eventually, but its not going to happen this year, or next. Maybe what the world needs is more authors who can also add, and subtract. A few that could multiply, and divide would also be nice.
http://www.thehillsgroup.org/
Plantagenet on Sun, 21st Dec 2014 8:04 am
I doubt the current oil glut is severe enough to take oil prices down to $20 bbl but we could see $40 bbl oil
Rodster on Sun, 21st Dec 2014 8:11 am
Holy sh*t Batman, by 2020 the NEG price is around $15-20. 😯
oskar valenzuela on Sun, 21st Dec 2014 9:17 am
Future oil prices at $40 a barrel are more in line with the expansion and growth of renewable s energy . Solar ,win ,fuel cell ,nuclear etc. will replace oil .
bobinget on Sun, 21st Dec 2014 9:30 am
AS oil prices recede, currency, USD currency ‘value’
rises. (without clicking just slide you cursor over any commodity for an yearly chart).
http://finviz.com/futures.ashx
AS proof, click “FOREX” just above the colored
horizontal boxes.
Now, slide your cursor over the USD. Next crude.
Note, they are almost perfectly reversed.
AS oil prices drop, dollar goes higher.
So much for petrol dollar eulogies.
Oil and many listed natural resources are, as everyone knows priced in dollars.
Russia or Venezuela sell oil in dollars not ruble or yen or god forbid bolivars. Those dollars as we can plainly see are going higher proportional to crude’s decline.
I find shortonoil’s commitment to lower price crude
commendable in the face of conventional economic wisdom, (supply/demand).
Makes a person think, it does.
Problems, that, on first look, have nothing to do with fossil fuels; Food cultivation, distribution, water quality/ scarcity, climate insecurity— poverty: the worst inequitable wealth distribution in history.
Almost the world over we are seeing the largest
migrant, refugee, moments in 70 years.
All, except less accessible developed nations are experiencing major controversy over ‘illegal’
immigration.
None of these climate, economic and conflict related refugees can afford unsubsidized fuels.
The greater number of climate or war refugees
the less oil consumed.
https://uk.news.yahoo.com/drug-violence-climate-change-create-ceaseless-wave-latin-145359005.html#LJ4VXnU
steven garcia on Sun, 21st Dec 2014 9:36 am
Okay ,, the end is nigh .. when the
rediculus predictions start to roll in,
either high or low … not saying that
oil will not go lower , i believe that
it will , but not to 20 … mid 30’s , then 1 or 2 failed rallies , then up
to a stable range …
Terry on Sun, 21st Dec 2014 9:38 am
Our Country has always flourished on falling oil prices and always will. The last time we experienced oil below $20 dollars a barrel was in the President Clinton days and our country Boomed from those prices. Politicians have been controlling oil prices since the 70s if we over inflated its because oil is to low, so they push oil high we deflate its that simple. watch and see.
jaime on Sun, 21st Dec 2014 9:47 am
oil wont get to $20.during 2007 recession minimum was $35 that’s the floor now in extreme recession
rockman on Sun, 21st Dec 2014 9:56 am
I wonder how many folks in 1997 thought the average price of a bbl of oil would fall to $11.91($17.26 adjusted for inflation) in 1998? IMHO some folks really need to get their heads out of their ass and understand how economic conditions have far greater control over prices then any other single factor. As shorty points again: folks buy what they can afford. Not what they need, what they want or what’s available to them.
Nony on Sun, 21st Dec 2014 10:18 am
There has not been a dramatic recession, Rock. IF anything we are slowly pulling out of the 2008 nightmare. Every time price drops you blame it on demand. Every time it rises, you claim depletion “POD”. Biased, biased.
You also routinely confuse movement ALONG the demand curve with a shift of the curve itself. Econ 101 mistake.
I really don’t trust you on the technical aspects of oil extraction either. Rocdoc has kicked your butt enough times when you got salty and pridefull.
brad on Sun, 21st Dec 2014 10:34 am
More middle class people in emerging countries, particular in southeast Asia will buy cars and trucks to replace bike and motorcycles. If oil price stay low, they will save more and they will be able to afford cars and truck. What happen if more expensive oil producers shut down and demand pick? What happen if the world oil production cut back too far due to high cost? Can you say, Panic Button? They will shoot oil price right back to the top!
brad on Sun, 21st Dec 2014 10:36 am
More middle class people in emerging countries, particular in southeast Asia will buy cars and trucks to replace bike and motorcycles. If oil price stay low, they will save more and they will be able to afford cars and truck. What happen if more expensive oil producers shut down and demand up pick? What happen if the world oil production cut back too far due to high cost? Can you say, Panic Button? They will shoot oil price right back to the top!
bobinget on Sun, 21st Dec 2014 11:09 am
IS “Gains” in greater African Nations.
Libya is by the day becoming an IS ‘failed state”
Boko Haram, once thought of as’ just a band of insane criminals’ in now feared to become a government of insane criminals displacing more or less sane crooks in Nigeria and surrounding countries.
==========================================
Boko Haram Slaughters Mass Of Captives In Horrific New Video
AP | By HARUNA UMAR
Posted: 12/21/2014 7:19 am EST Updated: 3 hours ago
IDUGURI, Nigeria (AP) — A new video from Nigeria’s home-grown Boko Haram extremists shows gunmen mowing down civilians lying face down in a dorm, and a leader saying they are being killed because they are “infidels” or non-believers.
There are so many corpses the gunmen have difficulty stepping to reach bodies still twitching with life. Most appear to be adult men.
“We have made sure the floor of this hall is turned red with blood, and this is how it is going to be in all future attacks and arrests of infidels,” the group leader says in a message. “From now, killing, slaughtering, destructions and bombing will be our religious duty anywhere we invade.”
The video released to journalists late Saturday comes two days after fleeing villagers reported that the extremists are rounding up elderly people and killing them in two schools in Gwoza, in northeast Nigeria.
The setting of the latest video appears to be a school, a long dormitory furnished with bunk beds which the leader says is in Bama, a town 60 kilometers (40 miles) north of Gwoza. Students and schools are frequently targeted by Boko Haram, which means “Western education is sinful” in the Hausa language.
Ed on Sun, 21st Dec 2014 11:28 am
Wow you guys are tough on the writer.
I thought it was insightful and not a rehash of other articles I’ve been reading on oil lately. Everybody knows what’s happening now and why. Question is… where to from here?
The historical price relationship of oil compared to when the oil market is subject to “monopolistic and competitive” regimes is useful historical fundamental information. Couple this with some technical analysis and now we are talking about useful price points to speculate on.
I think at this point crude oil can at least test the $35 – $40 range based on the fast momentum of the current decline. This will be a strong support area from a traders point of view and where I would look to speculate on a bounce. But caution always in order. Picking a bottom in any market is tough. Like catching a falling knife. A break thru this level and we can see $20 a barrel really fast. Its called a crash, after all.
Eitherway we can expect a consolidation process. But dont count OPEC out. Cartels have a way of sticking around and at least getting noisy before relinquishing power.
Not to mention the “geo-political volatility” unfolding on the world stage. All it takes are a few variables to shift and a little time… and oil will be marching right back up to 100 and beyond.
And finally the speculators market. The world is awash in derivatives. Trillions sloshing around here and there. The banker gangsters routinely inflate and deflate asset values. They make there money on the ride up and down. The combination of herd mentality and enormous leverage can reflate a market pretty quick. So the question is.. at what point will the bankers and hedge funds step in as buyers and start pumping up market again? If history has anything to say about it, its after the crash and burn, when there’s “blood on the street”. The oil producers have yet to feel the full pain of this rout. Like any other industry… we need more bad news, shutdowns, consolidations and or mergers and acquisitions. I would say this can take a year or two… but seems like TIME has sped up in the markets. Institutions and industries react and make there moves faster. And why not? This is the age of volatility. The age of extremes. Fear and greed is magnified with increase in volatility. And yeah, the world looks pretty volatile to me!
I’m hoping to be a heavy buyer at under $40 sometime in the next 1-3 months. Scaling in initially on weakness.. and adding to the position if and when I get a technical reading on the charts of a bottom / emerging trend.
Oil at $20? I doubt I would get that lucky. That would make a mighty fine entry point on a longer term, bullish position. But one thing I believe with every fiber in my being is that we will see oil at 100+ again within 12 to 18 months, if not sooner. Why? because somehow, someway wall street will make it happen. Thats how they make there money. Our job is to see beyond the news and follow the smart money. And the smart money says we are going own lower. And the smart money wont buy into this oil market until there’s a good bargain on the table.
Good article. Food for thought.
J-Gav on Sun, 21st Dec 2014 11:28 am
Hell, let’s go whole-hog! I predict that by the end of next week, they won’t be able to give that shit away (fossil fuels) – they’ll be paying you to take it!
bobinget on Sun, 21st Dec 2014 11:30 am
Sorry if that last post was disturbing.
You all can get back to arguing over needs vs.
price while I remain concerned over what ‘oil induced poverty’ doing to millions in Nigeria.
There is no way Nigeria’s army, ill trained, unpaid,
reluctant to die for the few families profiting from
Nigeria’s (or Libya’s) oil resources.
Nigeria
Nigeria Price per gallon of gasoline: $2.32*
Price change since last quarter: -0.4%
Most-expensive-gas rank: #55
Pain-at-the-pump rank: #4
Nigeria has some of the cheapest gas, yet it’s out of reach for the nation’s poor population. Africa’s biggest oil producer spent all the revenue it received from the oil industry last year — $8 billion — on subsidizing the price of gasoline, according to central bank Governor Lamido Sanusi. The subsidies have drained government coffers and contributed to corruption.
A parliamentary probe this year found as much as $7 billion had been paid illegally since 2009 to gasoline importers. The country’s Economic and Financial Crimes Commission is investigating more than 140 companies and individuals and said it plans to start criminal proceedings.
Nigeria relies on imports for about 70 percent of its fuel because it lacks the refining capacity to turn its oil into gasoline. The average daily income in Nigeria is $4.53. The share of a day’s wages needed to buy a gallon of gas is 51 percent.
Rodster on Sun, 21st Dec 2014 11:37 am
@Bob “I find shortonoil’s commitment to lower price crude
commendable in the face of conventional economic wisdom, (supply/demand).
Makes a person think, it does.”
What you just said can be applied to Gold and the COMEX, it can be applied to the US GDP, the US unemployment data.
The entire system is now held together with lies and you have the inmates running the asylum. If anyone wants to believe that up is down or left is right or black is white, then go right ahead. I don’t and all I see is the US Govt and MSM along with the financial outlets just lying and covering over the facts.
They have no choice to keep BAU going because the alternative is a full blown global economic collapse.
bobinget on Sun, 21st Dec 2014 11:40 am
We need to look at other consumers world-wide when talking oil affordability.
IN the UK oil because of heavy taxation has been selling for ten dollars a gallon. $10.00 a gallon.
Most of Europe, pricing, about the same.
Could Europe’s slowdown even impending implosion be due to continued unaffordable oil prices? We always wondered, even 50 years ago
how Europe’s wage earners could afford such high priced gasoline when living standards, pay, were far lower the then in NA
Now, today, in Venezuelan gasoline is selling for
.11 cents for regular and .17 high-test.
Surly, Venezuelans could afford to pay more?
Needless to say, Venezuela’s economy is slipping down a porcillin parkway even with .17 cent gasoline.
Obviously, massive corruption is partially to blame.
No doubt, in another time and place folks will be wondering why, when oil prices were low they did not understand the why’s and obvious outcomes.
bobinget on Sun, 21st Dec 2014 12:18 pm
Ed, an obvious investor (like myself) has or intends to have ‘skin in the game’.
Categorically it’s impossible to predict oil prices for many of the issues Ed states. I, and a few others, have been saying Saudi Arabia, Iran and Russia are having a three-way. (one where non percipients get fucked)
Others, sticking to the script, are calling falling oil prices foretelling economic collapse.
Never-mind the fact that demand increases yearly with supply diminishing at roughly the same rate.
“Never allow fact to get in the way of a good argument”.
If Ed is a long time investor he knows some energy stocks will be big winners, most so-so, others perish. It’s his job to pick the winners or short losers.
I have a suggestion. Look at solar and wind, (GE< FSLR)
Natural gas pipelines, GRID, ethanol stocks…
Corn Ethanol is10% of gasoline sold in US.
I expect consumption, in spring to be over
22, 000,000 barrels a day. Ten percent over will be ethanol down stream, at the pumps. IOW's the US is consuming more gasoline today then before 10% ethanol was mandated. Not to mention ethanol consumes more energy then it saves, OK I did mention that.
Some ethanol plays may not be the one's you expect; GMO seeds, CAT, DEER, land speculation REITS, water rights ETFs, midwest pipelines and refineries, fertilizers, Canadian and US.
Corn is a huge, wasteful, feeder. Needs lots of water, fertilizers.
Look at irrigation equipment makers as water tables inevitably fall. More GMO.
Watch copper futures, they are an crude oil bellwether, immune to some degree from
Saudi and Russian oil markets manipulations.
IMO, before solar and wind (the same thing actually)
are ubiquitous, natural gas will become profitable.
tahoe1780 on Sun, 21st Dec 2014 12:29 pm
Bobinget – “Unemployment will continue to fall” Manipulated headline numbers, yes; real-world numbers, not so much: http://research.stlouisfed.org/fred2/series/CIVPART especially with the oil patch contracting with lower prices.
Bobby on Sun, 21st Dec 2014 12:52 pm
To many words I have just 1,TECHNOLOGY.
Roger on Sun, 21st Dec 2014 2:12 pm
Why did oil actually go down – was there any huge changes in the last 4 months to explain why it went down then we have an idea why and somewhat when it will go back up –
1. Saudis in concert with Obama of U.S. wanted the price of oil to go down – Saudis to pressure Iran and Venezuela while the U.S. wanted it to go down to pressure Russia, and as a side benefit pressure Iran, Venezuela, and Libya as all of them get their money from oil.
2. U.S. ramped up its own oil production through fracking due to the high cost of oil that was thought to approach $110 – $150 a barrel so a huge amount of investment dollars were spent to get the oil.
So from that we can see that the pressure on these countries grows with low oil prices which the Saudies could reduce production and make prices head back up if the Iran and Russian obstacles are reduced through cooperation and regarding #2 – we already have seen Conoco Phillips reduce cap ex budgets by 20% and others are following that trend thus leading to potential higher prices.
bobinget on Sun, 21st Dec 2014 3:45 pm
I know geopolitics is daunting. We prefer to look for
more practical answers to complicated issues.
A proxy war between Russia/Iran & Saudi Arabia
for almost four years. Might it be time to find out why?
http://www.fairobserver.com/region/middle_east_north_africa/the-geopolitics-of-the-syrian-civil-war-01932/
http://en.wikipedia.org/wiki/Foreign_involvement_in_the_Syrian_Civil_War
Geek on Sun, 21st Dec 2014 5:33 pm
I am not dismissive of the article.
Peak Oil in my opinion not the issue but rather Peak Price.
Fracking and horizontal drilling are game changers and on it’s heels is tar sands.
The classic geopolitical drama and the conventional players have lost their trump card and clout.
The price bubble for oil has burst and if anyone thinks we will return I have a large supply of foreclosed houses for you to buy.
What the new price range will be is unknown but it is difficult to believe that it will be above $70.
Speculawyer on Sun, 21st Dec 2014 7:48 pm
Not likely but it is certainly possible. Markets tend to overshoot all the time. And drillers tend to hedged such that many are still making money right now. And the current wells will still keep producing for a year or so.
gary on Sun, 21st Dec 2014 8:38 pm
the price of oil will stablelize soon,probaly around 55.00,the storage problems will arise very soon,so it will take awhile for that to work it self out and production will drop,but make no mistake,there will be no 20.00 oil,or even 30.00,we use to much gas and diesel.
tahoe1780 on Sun, 21st Dec 2014 10:58 pm
Bobby, make that PRICE http://www.zerohedge.com/news/2014-12-21/drilling-our-way-oblivion-shale-was-about-land-gambling-cheap-debt-not-technological
bobinget on Mon, 22nd Dec 2014 6:56 am
tahoe,
Wringing oil from tight rock is an amazing bit of science. Why can’t we celebrate this short vacation from $80 plus crude?
Instead, we are like the entertainer who worries constantly, she won’t please an audience
in a few years, because of aging.
Getting older, a show biz problem for women more then men.
While young she makes four, sometimes six million a picture. Because movies are a youth market, she knows, everyone knows, the next film might flop
because it didn’t hit current themes at all or hard enough. Was this actor a failure grossing 12 million a year for only five years?
What about the thousands of actors who wait on table or get a single TV shot once a season? (dry holes)
Kenz300 on Mon, 22nd Dec 2014 12:57 pm
“Technological and environmental pressures are reducing long-term oil demand and threatening to turn much of the high-cost oil outside the Middle East into a “stranded asset” similar to the earth’s vast unwanted coal reserves.”
“The U.S. shale revolution is perhaps the strongest argument for a return to competitive pricing instead of the OPEC-dominated monopoly regimes of 1974-85 and 2005-14. Although shale oil is relatively costly, production can be turned on and off much more easily – and cheaply – than from conventional oilfields. This means that shale prospectors should now be the “swing producers” in global oil markets instead of the Saudis.”
————————–
High oil prices set in motion many long term changes…….. these will continue despite the temporary drop in oil prices.
Climate change is real……. we can deal with the cause or we will deal with the impact from it. It will affect all of us.
alokin on Mon, 22nd Dec 2014 6:37 pm
It is very simple how Europeans can afford a much higher petrol price: more public transport. A lot less people have to rely on the car alone for getting to work and not a lot are communing great distances. I was often asked by the employer were I live because they would not take anyone with a long commute.