Back on March 19, 2015, we posted an OCR blog post on the unprecedented price erosion in oil. It closed that day at $43/barrel.
Fast forward a little less than a year, and oil producers are begging for $43/barrel oil as the price closed today just a hair above $30, with some analysts betting it could get as low as $20!
So why is this happening? The short of it is that no one who plays in the global oil business is willing to give up market share. Many are more willing to draw oil out of the ground and sell it at a loss then risk losing their chunk of the market.
This is doubly true for nation-state producers with no other notable economics activity, like Saudi Arabia and Venezuela. In these places the stability of their entire political system depends on selling oil and using the proceeds to subsidize everything for their citizens. OPEC (which is largely run by Saudi) has basically stated it is ready to hold production (thereby keeping a glut of supply, unless demand somehow magically ramps up) until 2018. By then many of the US producers wont have a choice but to declare bankruptcy.
How does this all affect solar you might ask? It really doesn't. Solar is much closer tied to natural gas prices and policy. Natural gas is already basically free in most of the country, and solar is competing quite nicely. And on the policy front solar got a big gift from the Feds in December when the ITC was extended and clarified until 2022.
So what business would you rather own right now? A solar installation company, or an oil production company? Time to go start that solar installation company.