Lets face it, their are no real experts on oil prices, as we know that no one predicted this sharp fall from over $100 a barrel to $65 a barrel. None of us, besides some investors and countries that depend on high oil prices are complaining. So from a layman’s perspective here are some reasons for the fall that I think have been building up for years and are now coming to fruition.
1. Smarter Consumers – Lets face it, with all the technology at our finger tips consumers are just so much smarter. Yes, we now figure things out without always having to call on other people. We have apps that tell us shorter routes, where the cheapest gas prices are, how to do things at home ( DIY ) without driving to the store to buy stuff we don’t need ( i.e. plastics that are made of oil etc). Being an all around smarter consumer we allocate less dollars to oil backed commodities whether it be gasoline or other products or services produced with oil or a component thereof.
2. Lack of Demand – Do to some of the above mentioned factors as well as alternative energy sources there is less demand today than there was previously. We all know what happens when demand decreases across the supply chain.
3. Alternative Energy Sources – Solar, wind, hybrid vehicles, natural gas and even ocean energy are all on the rise and are starting to be adopted. Especially solar – if you look around your town, you will see many more homes going solar, it is becoming extremely affordable and the cost / benefit equation is really starting to make sense.
I would argue that the combination of these three fundamental changes in society, along with other global forces I wont get into here are driving the price of oil down. The key word is fundamental, and I’m making the argument that this is something that will keep oil prices low for years to come.
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