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How does the current oil price plummet rank?

It’s a crude reality, but the state of oil and gas production in America is in the midst of a heavy slump. Veterans of the game will tell you they’ve seen this before, and a few years of prosperity followed by a slowdown is the way it goes. The United States has produced oil for well over a century with countless market forces impacting oil booms throughout U.S. history. As for the current go round, its bad, but we’ve been through worse.

Last week, The Business Times released an infographic which compared the big drops in oil prices over the past 26 years. In total, there were 13 significant decreases (not including our current decline) in oil price since 1988. Oil slumps were based on how much prices changed from six months earlier and later from a specific value. Additionally, the length of time of the slumps were taken into context.

BT Graphics: Ludwig Ilio Sources: Bloomberg, International Energy Agency, World Bank. Origianlly Published by The Buisness Times/Kenneth Linn

BT Graphics: Ludwig Ilio Sources: Bloomberg, International Energy Agency, World Bank. Origianlly Published by The Buisness Times/Kenneth Linn

The largest drop over the past 26 years lasted from June 2008 to Dec. 2008. Crude oil dropped 67.4 percent in value. However, the slump lasting from December of 1996 to November of 1998 was by far the longest out of the observed declines. Prices during nearly two year dive fell 56.1 percent. Overall, prices from June 2014 to Dec. 2014 were reduced by 49 percent. In that respect, the price depletion is the fourth worst witnessed since 1988. Given that the slump is ongoing, we won’t have a full understanding of how severe current value reductions are until roughly a two year mark is passed. The U.S. Energy Information Administration recently estimated that in 2016, oil prices would make a gain to the $70-$80 per barrel range. This would make our current slump just a sliver better than the aforementioned decline of 1996 to 1998.

According to analysis, the biggest slumps were largely demand driven, coinciding with major economic downturns. In the 96 to 98 stretch, the Asian Financial Crisis crippled the region’s markets-slowing demand and sent shock waves through the global economy. In the 2000 slump, many saw the dot-com bubble burst as a correlated event with low oil prices.

However, in our current reality production was a major player, making our current downturn somewhat unique. The energy producers overestimated demand and underestimated supply in 2014. All the while, the decision from the Organization of Petroleum Exporting Countries to not cut production is a continuing factor in petroleum value.

Information for the infographics were obtained by The Business Times from Bloomberg, the International Energy Agency and the World Bank. Check out the original posts of the infographic here.

10 comments

  1. Why are we slowing down when US companies are profitable down to $45/barrel? Keep producing and drive the Saudi’s out.

  2. Better for the company to get a 100% return than a 10%. Sucks for workers but its business.

  3. I think it’s as low as its gonna go. I’m hearing to many rumors about $200.00 a barrel oil. I hope it’s not true.. $8.00 a gallon gas isn’t going to be good for anyone.

  4. Hopefully the infrastructure can catch up before it Booms again. …

  5. The U.S. producers could never “drive the Saudi’s out”. The Saudi’s cost of production is less than 1/2 of the cost of US production. The Saudis could conceivably put us producers out of business.

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