Oil prices plummeted overnight and the price for a barrel of oil now sits in the low to mid-30s.
Associate Director of the Tulane Energy Institute Dr. Eric Smith says COVID-19 fears and worldwide overproduction could lead to a prolonged period where prices stay in the upper 20s, lower 30s per barrel.
“It’s probably on the order of a six month type time table, with a pretty wide confident interval from three to nine months,” says Smith.
This morning’s price collapse is the biggest since 1991.
Smith says a big part of the collapse is news that Russia and OPEC will both ramp up oil production in an apparent price war, suppressing global prices.
“You have the potential for upwards of three million barrels of oil a day to be on the market that nobody needs and that is what will depress the prices to thirty dollars or conceivably even below,” says Smith.
That news led to a stock market collapse of seven percent, leading to the markets being halted for 15 minutes this morning.
Reports indicate the price war is partly an attack on American shale companies. Smith says it’s likely it’s many of them will consolidate with larger companies, or just go out of business.
“Many of these companies will be looking for the exits which will probably be a combination of bankruptcies and a forced sale of assets to the majors,” says Smith.
Smith adds it won’t harm all Louisiana drilling, as liquid natural gas exists in a separate market.
