Concerns about a looming glut have weighed on the price of oil, which has been hovering around $70 a barrel in the United States. U.S. companies generally need prices above $60 a barrel to profitably drill new wells, according to the Federal Reserve Bank of Dallas.
Oil producers aren’t going to overproduce to the point that the price of a barrel of oil goes so low they can’t profitably drill new wells. Oil producers would be incentivized to increase production if demand increased significantly, but that’s not going to result in lower prices at the pump, or lower consumers prices down the supply chain.
You wanna see prices come down? You need a significant decline in demand, but that would lead to a recession.
Exactly this. No one is going to borrow $500 million to drill a bunch of new wells in order to drive down the selling price of the thing they need to sell in order to repay the loan.
Oil producers aren’t going to overproduce to the point that the price of a barrel of oil goes so low they can’t profitably drill new wells. Oil producers would be incentivized to increase production if demand increased significantly, but that’s not going to result in lower prices at the pump, or lower consumers prices down the supply chain.
You wanna see prices come down? You need a significant decline in demand, but that would lead to a recession.
Exactly this. No one is going to borrow $500 million to drill a bunch of new wells in order to drive down the selling price of the thing they need to sell in order to repay the loan.