And right on point, Wall Street Journal’s Liam Denning comes up with another insightful article. See Oil’s $4.4 trillion hole:
A year ago, futures indicated an average Brent crude-oil price in 2016 through 2018 of about $101 a barrel. Today, that is just under $60.[DP note: actually today under $45] Estimates of future demand have also been marked down slightly. [more of that to come]
The implied hit to oil producers’ revenue is about $4.4 trillion spread across those three years.
The unifying theme: deflation. As so often the case with commodity industries, a cyclical boom—this time aided by ultralow interest rates—fueled massive expansion. This extra capacity and associated obligations to shareholders, creditors and suppliers has now run into a suddenly more austere environment.
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