How Long Can U.S. Production Survive Low Oil Prices?

For the last 3 years, European Brent has mostly traded in a range of $100-$120 with West Texas intermediate selling at a $5 to $20 discount. But in September Brent started moving below $100 and now stands at $90 a barrel, and the spread over U.S. domestic crude has narrowed. Here I take a look at some of the factors behind these developments.

Price of crude oil in dollars per barrel, Jan 4 2005 to Oct 6 2014. Data source: EIA.

Price of Brent minus WTI, Jan 4 2005 to Oct 6 2014.
Prices of many other industrial commodities have also declined over the last year, silver and iron ore more than oil. One factor has been weakness in Europe and Japan, which means lower demand for commodities as well as a strengthening dollar. The decline over the last year in the price of oil when paid for with Japanese yen is only about half the size of the decline in the dollar price.  (more)
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