Crude Falls Below $30 a Barrel for the First Time in 12 Years

Our recession has other causes.

That's not really true. If you want to scare yourself look up what the "baltic dry index" is and what level it's at. Other transport indices (e.g. free space in harbours, train freight, ...) are all down hard.

Whatever the cause, but America and Europe have slowed down in ... pretty much everything they do. Goods transport is the clearest indication of that, but far from the only one. Somehow building in the US and Europe (and India) is down. A lot of economic activity is down in fact, the exception for now is very large debt-free services corporations.

That said, about half the article could be summed up in "commodity prices are falling because demand from most of the global working class is falling".

The article doesn't show at all that there are diminishing returns from human labor. What we have, instead, is that even if technology is making labor ever more productive, these gains in productivity are going more and more towards companies and investors (mostly thanks to the competition from Chinese laborers) instead of (western) non-elite workers. Just look at the big fat profits of most big companies.

The article is thought provoking, but as it usually happens when trying to find a simple explanation to complex phenomena, it doesn't stand to deeper scrutiny.

You can not pump it (with some risks of losing your capital), but you'll still need to pay interest on the money you spent creating your wheels, thus companies tend to pump it and sell even when they can't recover their investment, and pump faster the cheaper oil becomes.

Internationally it means states like Russia won't have the same economical and political clout they had at $100+, so instead will rely on other means to throw their weight around, such as military threat.

Economically it's good: lots of the saved money ends up in the hands of consumers.

Environmentally, it's less good of course. Alternative energy will be less attractive in the near future.

So it's not all rosy, but the downsides are mainly due to a falling oil price, rather than a low one. The volatility upsets budgets, which causes problems.

  Oil price slide may force new Russian budget, Medvedev says

Prices are set by supply and demand. A worldwide depression has a way of pushing the price down, even with restricted supply. And not that decreasing oil supply is supposed to cause it some of the times, leading to huge price instability, not simple price increases.

TLDR, this price is much more a gauge of our current depression than anything else.

I'd like to hear about this from anyone more qualified than me (which would really be anyone).

It wouldn't surprise me if 90% of all oil was never in an actual barrel, but even if so, I would imagine the barrels are reused, and so not factored in the price.

Other global factors have also contributed. Fracking has really had an impact on US production:

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...

Oil demand tends to be fairly inelastic. Almost all of oil pricing is supply driven. OPEC decides on a target price and produces to meet that price. The current price has happened because Saudi usually stops producing to keep prices stable and high, and for now they just haven't slowed down at all. Either they need money badly enough that they will take any profit at all or they are using oil prices as a weapon.

http://www.npr.org/2014/11/04/361204786/falling-oil-prices-m...

1. strategic decisions to keep the price low (in some cases below the cost of production) to make it uneconomic for competitors to invest in oil projects

2. time lags in the system. e.g. the global economy went into recession the last time the oil price spiked. that'd reduce oil demand in some cases. now as prices are much lower again we might expect demand to keep growing until supply isn't able to satisfy demand (again), then the price will spike again

3. (long term trend) oil is becoming genuinely more costly (in physical terms - i.e. required energy) to extract as we deplete the low hanging fruit. i guess this makes it much harder / impossible for supply to ramp up and satisfy demand in a short enough time period before another recession is triggered. this isn't necessarily a problem in itself but perhaps it influences the behaviour in item 2

This is probably only semi-coherent. I read the "limits to growth" book a couple of weeks ago, and one of the claims there (from a system dynamics perspective) was roughly that any system that combines both delays in feedback and erodible limits is expected to either behave like "overshoot and oscillation" or "overshoot and collapse".

On the other hand, one has to time production to ramp-up before renewables become too dominant. Interesting calculus.