A glut of oil?

A glut of oil?.

So here’s the basic picture. The current surplus of oil was brought about primarily by the success of unconventional oil production in North America, most new investments in which are not sustainable at current prices. Without that production, the price of oil could not remain at current levels. It’s just a matter of how long it takes for the high-cost North American producers to cut back in response to current incentives. And when they do, the price has to go back up.

Emphasis Mine

So much for the invisible hand of the market. The economic incentives for new oil production from more ecological environments (oil sand; oil shale; tight oil; deep water oil) are not currently there at the present moment. And this production cost does not include the environmental costs.

Most of the recent glut appears to be due to some geo-political stability. However, the excess production can be gone once instability returns in such places as Libya, Nigeria, and Iraq. And, of course, the elephant in the room is Saudi Arabia where an oppressive government is sitting on a very big time bomb.

The the predictions of peak oil back in 2004/2005 were pre-mature. As the price of oil goes up, the more difficult oil can be extracted economically (if one ignores environmental costs).

In our industrial civilization that heavily relies on motor vehicles, such a rise in costs affects economic growth which is the golden calf of the Abbott Government.

On the negative side, the lower prices are affecting the Bolivaran Revolution in Venezuela. Lower national income is beginning to affect the social programs of the government. So, it is not all bad from the Capitalist's point of view. Temporary economic pain in order to destroy an alternative to Capitalism.