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Western OK | I posted this in tpp in its own thread when another thread brought up the gas price promise of the current administration. I meant to post it here, not to get in a political discussion, but to talk about the market and economy if these prices came to be.
Not saying it can't happen but If gas prices get that low I think our economy is going to be in trouble. I've read that the cost of refining and distribution alone in in the 1-1.50 per gallon range, and a barrel of oil makes around 27 gallons of gasoline. After refining and distribution that doesn't leave much room for the cost of the oil let alone all the road taxes on it.
If oil gets that cheap it will decimate our American production, they will dramatically cut drilling and shut wells in, only flowing enough to create enough cash flow to make business expenses. A lot of companies won't survive and further consolidation in the industry will happen.
Another problem with that is without the oil production you lose a bunch of gas production that comes along with it. This will drive us natural gas prices and will have an impact on utility rates. On the flip side, it would probably promote more drilling in the predominantly natural gas areas that have mostly been ignored the last few years, going back to traditional vertical drilling that was common place before the shale oil revolution.
Will this be enough to keep utilities down? I have no idea, but with all the export infrastructure that has been built to export lng it has turned natural gas into more of a world market. Before lng, our utility prices we completely insulated from the world market and that could be seen by our low utility rates compared to places like Europe.
All that said, I do believe the government can completely shut off all exports, and I'm pretty sure the president can with the stroke of a pen. What this would do long term I don't know, would it be good or bad, i don't know, but all of this is something that my busy mind thinks about. | |
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Low gas prices promise
