Finally oil has gone below the $40/barrel price. Gas is estimated at $1.45/gallon (not at your pump) and the supply continues to increase. OPEC doesn’t show any intention of slowing it’s supply into the market, China is demanding less, and the U.S. added two more drill rigs this week. The lows are taking us back to over 70 months, and the question is if the rest of the economy- the American, let alone the Alaskan- can continue to add wells justified by further efficiencies from particular sites in this glut. It has been said that it takes the markets to recover in quarters rather than months from bruises of oversupply. We shall see….does this mean substitute products for space heating (but primarily transportation markets) will need to search for their own efficiencies and prioritizing production sites to stay as competitive? It has been a boon in Alaska this summer for tourism in many places, yet when the seasonal demand drops what signals will that give to those handling the refinement and distribution of the oversupply?
This year’s Permanent Fund Dividends, being on a 5 year moving average, won’t show this glut yet near off years certainly will!