Oil Prices Keep Falling

Mooney watched as oil dipped below $50 per barrel yesterday:

So when does the oil price decline actually stop? Brian Youngberg, a senior analyst at Edward Jones who focuses on the energy sector, says he’s expecting an oil price bottom in the first half of 2015 — but more downside pressures are definitely possible in the interim. The reason is simple: supply, supply, supply.

“Russia is producing at the highest levels since the Soviet Era, and Iraq is producing at its highest levels since the 80s,” says Youngberg. “There’s just plenty of oil to go around right now, and not enough places to put it.”

Plumer says much the same:

Whenever new data shows an unexpected boost in oil production or an unexpected drop in oil demand, prices go down. For oil prices to go up, we’d need to see either an unexpected drop in supply — say, new fighting flares up in Iraq, or US shale projects start going offline faster than expected, or Saudi Arabia switches its stance and decides to cut back on output to prop up prices. Or we’d need to see a surprising rise in demand — say, China starts growing faster than expected or the euro zone somehow fixes its economic woes.

Drum imagines how this will impact the fight over Keystone XL:

Prices have plunged, OPEC is engaged in a production war, and gasoline is selling for two bucks a gallon. Does the American public really care very much right now about a pipeline that makes it easier for Canadians to ship their oil to Japan via the Gulf of Mexico?

I’m not sure, but I suspect Republicans may be choosing the wrong moment to take a stand on Keystone XL. Democrats can probably hold it up in the Senate without paying any real price, and even if they can’t, Obama can veto it without paying any real price. It’s lost its salience for the time being.