cheap oil, share revolution and world of abundance

Bienvenido “Nonoy” Oplas Jr.

Cheap Oil, Shale Revolution

and World of Abudance

Presentation at Development Economics class

Management Engineering students

Ateneo de Manila University (ADMU), Quezon City

22 January 2015

World Oil Prices as of Yesterday, January 21, 2015

From Bloomberg, “Oil Prices”, December 31, 2014

“OPEC price war” only explains partially. Members did not really push

their oil output that high. Rather, the main explanation is this…

Four-week moving average of US oil output, thousands of barrels per day.

Source: http://www.businessinsider.com/us-energy-production-boom-

charts-2014-12

(US shale oil output

alone, from around 6.5

M bpd 2013 to 9+ M

bpd late 2014 until now.

Plus Canada shale…)

Sometimes conflicting

headlines from the same

media outlet, but largely

towards the optimistic side –

cheaper oil.

„Goldman Sachs researchers say

that oil prices would have to drop to

$40 per barrel for six months, down

another 15% from their current

level, to "keep capital sidelined." ‟

From Citywire.co.uk:

“'The key message from the Kingdom of Saudi is that they will

maintain production and tolerate low oil prices in order to drive (1)

market share and (2) to drive Iran to regime change. To be clear, we

believe this is all about Iran, and not about „hanging the US shale

assets out to dry‟,' Nomura said.

A beautiful (conspiracy?) theory with a good basis, part of the „OPEC

price war” thesis

“The biggest winner

would be

the Philippines,

whose economic

growth would

accelerate to 7.6

percent on average

over the next two

years if oil fell to $40,

while Russia would

contract 2.5 percent

over the same

period, according to

an Oxford

Economics Ltd.‟s

December analysis

of 45 national

economies.”

Bloomberg, “How $50

Oil Changes Almost

Everything”, Jan 7, 2015

• Cheap oil means lower cost for farm tractors and backhoes, fishing

boats and shipping lines, cars and buses, airplanes. Social and

economic savings will be big as the costs decline.

• We are better off now than yesterday, despite all the pessimism and

envy that many people exhibit.

• We have entered a

period of rising and

continuing world

abundance.

• The best is yet to

come. The young

people today are

lucky. But luckier

will be their

offspring.