With West Texas Crude under $47 this morning (West Cdn Select around $35), we must keep in mind the $10 to $40 range (green band below) where oil prices traded before the consumer credit bubble billowed them to anomalous heights from 2004-2008 (see my partner’s chart here.)
We should also understand how overly concentrated and dependent many economies have become on the oil and gas sector the past decade. Mean reversion in the space now, will have a negative impact far and wide, even while lower prices are better for consumers (reducing their expenses and allowing them to pay down debt faster than they could with higher energy costs).
Fadel Gheit, analyst at Oppenheimer & Co., examines the potential impact of cheap oil over a long-term timeframe on economics and oil producers. Here is a direct video link.