Oil prices in U.S. drop to less than $66 per barrel. Why?

The graph below shows the price of oil for the past 3 years.  Okay, what does it mean?

Chances are you know almost nothing about the international oil business.  For example, how much oil do ya think the world both produces and consumes every day.  Say your guess aloud and then highlight the line to the right to find out->  About 104 million barrels every DAY.

Both the world supply and demand for oil are so huge, with thousands of players on the supply side, and millions of companies on the demand side--that oil is a classic example of a "commodity."  Thus it's excruciatingly sensitive to the balance between supply and demand.

SO...in May of 2022, with Americans angry about record high gas prices, and with Americans knowing bribem killed a huge pipeline from Canada on his first day in office, Dems were worried that they were gonna get clobbered in the November 2022 midterm elections.  Ahhh, but bribem's handlers had A Plan:  Back in 1975 congress created a "Strategic Petroleum Reserve" and slowly filled it with 700 million barrels of oil.  Bribem's cunning handlers realized that if they sold, say, a MILLION barrels a DAY from that "strategic reserve," that would cause the world price of oil to drop, reducing the price of gasoline.

If the price of oil dropped, gasoline should get less expensive, so voters would be happier and the Dens wouldn't lose seats in congress!  Brilliant!  So that's exactly what the Dems did.  And it's worth noting that the regime did NOT ask congress for permission to do it.

So bribem sold off about 230 million barrels of oil--about half of the amount in our "strategic" petroleum reserve.  The regime was quite open about WHY they were selling off half the oil (to drop the price of oil, thus gasoline, to bribe voters).  Republicans were furious, warning that the SPR was there for a damn good reason, and selling it off to make the price of oil and gasoline drop just before the midterms was NOT the reason!  

If the parties were reversed and a Republican president had ordered half the oil in the SPR sold to other countries to make voters less angry about $5-a-gallon gas, the Mainstream Media would have screamed bloody murder.  But since it was bribem, no Media outlet said a single critical word.

And of course the Repubs couldn't sue to block the huge sell-off of the "strategic reserve" because that would have played right into the Democrats' hands: "SEE, citizen, duh Rethuglicans wanna block ouah plan to reduce the price of gasoline!  Dey wanna keep the price of gasoline high cuz dey luuuv Big Oil!"

SO...In the graph above, the diagonal red line from the peak price of $120.67 per barrel to the trough just before the election, of about $80, is due to selling off half the SPR oil.  But after those sales ended, the green line shows the price of oil continuing to fall, without any bribem action at all.  So the question (and it's a great one) is, why has the price of oil continued to fall AFTER bribem's selloff of our SPR oil ended?

I'm not sure what the answer is.  What we do know is that historically the supply of oil is extremely closely matched to consumption (i.e. demand), and supply hasn't suddenly grown.  So let's look at the demand side:  The U.S. consumes roughly one-fifth of the world's oil--something the Left and Democrats wail endlessly about.  And about half of that is for transportation.  Consumer use--mostly gasoline--is almost constant, dropping slightly when the price of gasoline rises, and during winter in the northern hemisphere (since driving decreases).  But oil companies adjust to this by increasing stocks in the winter and drawing 'em down as summer approaches, so the world price of oil doesn't change much throughout the year.

But "almost constant" obviously isn't constant.  Duh.  And if you understand the laws of supply and demand (spoiler: not one American in a thousand has any idea), then since the world supply of oil is SO closely matched to demand, even a slight drop in consumption should cause prices to fall.  

And sure enough, U.S. consumption of gasoline is down four percent since 2019.  A great question is, why.

Those faaaabulous battery-powered EVs probably account for some of that drop.  

According to Experian Automotive, of the roughly 286 million cars on the road in 2023, 9.3% were EVs.  I think that's far too high (i.e. utter horseshit) based on other published numbers.  For example, Experian also claims that in the first quarter of 2024 7.9% of all new car registrations were EVs.  Since EVs didn't start doing much til 2021 or so, and claimed 2024 registrations are 7.9%, it's hard to see how the claim of 9.3% of all cars in the U.S. being EVs can be true. 

So I think those numbers are propaganda, likely paid for by the bribem regime (now gone) and parroted by the oil-hating Globull Worming leftists who infest the Mainstream Media and the Democrat-fellating Deep State.  And by automakers stuck with hundreds of thousands of faaaaabulous EVs no one wants to buy. 

But could EVs account for four percent of total U.S. vehicle mileage?  Sure.  So that could account for the fact that U.S. gasoline use was virtually flat from 2023 to 2024 (8.94 versus 8.97 million barrels per DAY).  Flat U.S. demand would reduce world oil demand by about 0.8% from the historic rate of increase (see below).  Question is, have we seen that?  Take a look at the graphic below.

U.S. oil use in 2019: EIA says 20 million bopd (AI says 19.4)  2024: 20.28 million bopd.  Virtually flat.

 

It shows world oil consumption thru 2023, and you can see both the historic trend (red line) and how much 2023's consumption (blue) fell off from the trend.  Turns out world demand (consumption) was about one percent less than the historic trend.  With just over 102 MILLION barrels per day for demand, that's about one million barrels per DAY.  And from the earlier graph you saw how much the bribem regime's sale of a million barrels of our SPR oil dropped the price, eh?

Now, do ya think any oil company that sees oil demand falling says "Let's reduce our production to keep the price from falling," eh?  Of course not.  OPEC has repeatedly tried, but member nations always cheat and produce more than the agreed quotas.  Funny thing, that.  So like all "commodities," the price falls.

Well at least that's according to classical economics.  But strangely, judging by their dumb policies, most Democrats apparently don't believe the laws of supply and demand are real.  Which is strange since they claim to be SO smaht!  Just like AOC, Adam Schiff, Chuckie Schumer, Jasmine Crockett et al.  Truly dumb people, but because they're Democrats the Lying Media thinks they're brilliant.  Wow.

Now, exploring for oil is unbelievably expensive:  just leasing a "semi-submersible" drilling rig (the normal type for deep water) costs about $370,000 per DAY, not including pipe, diamond drill bits, drilling "mud" and a hundred other operating costs.  So when the price of oil  falls, companies cut way back on exploration, which reduces the amount of new oil coming on-line, bringing supply back to current demand.  And prices then wander back up.

SO...it's possible that even though EV use in the U.S. only accounts for about four percent of total miles driven by Americans, that could account for keeping world oil demand from matching the historic rate of increase, which could account for oil prices being lower than expected.  Just a guess.