The Return of $150 Oil?

Believe it or not, there may be one compelling reason why we’d rather not crawl out too quickly from the economic crevasse into which we’ve fallen. Remember less than a year ago when crude was flirting with $150 a barrel? A sudden solution to our mounting economic difficulties in the face of declining oil production just might slingshot prices higher than we’d like to have them.

Crude slide has its negatives

Let’s look for a minute at some of the effects that the slide from $147 a barrel in July to around $50 today has had. The good news, of course, is that you’ve been able to pull up to the pump and fill up Ol’ Nellie for a pittance compared to what it would have cost a year ago. $4.00-a-gallon gasoline has fallen less to than $2.00, as crude oil has plunged by two-thirds.

However, there’s another effect to all this, one that hasn’t received major attention from the mainstream media, but is certain to nab us in our hindquarters once the economy begins to strengthen — which optimists are predicting could occur later this year. That effect involves the reduction in spending for the search for oil and gas by the exploration and production companies.

As such, millions of barrels a day likely are already being lost to the world’s supply. That probably seems inconsequential, with constant reports of declining energy demand in the developed nations. But add a little oomph to the global economy, and the results could be quite different.

Motley Fool