Thought I'd chime in a bit. I subscribe to a bunch of mostly resource oriented newsletters and spend a lot of time reading various related commentaries. If you read everything the spectrum of contradictory opinions tend to cancel out. Hard to sort out what to believe.
I've seen predictions of $20 oil. Haven't seen the $10 prediciton yet in publications i read, but I think the thesis about global depression has some merit.
A lot of money existed/exists as credit/derivatives. When a tranch of credit goes bad, that quantity of money basically disappears. The effect gets amplified by the 10:1 leverage provided by fractional reserve banking and 40:1 or whatever (who knows how high) leverage provided by all the derivitives.
Two things influence price of goods: Supply/demand in the physical market and inflation/deflation which "is at all times a monetary phenomona" according to classical economists.
Millions of people no longer having to drive to work and reduced transportation usage for goods no longer being bought has produced a loss of demand for oil and reduced industrial output has reduced demand for energy in general. Meanwhile, trillions of dollars have disappeared due to credit defaults and respective derivitives imploding.
Oil is still being produced and being stored in tankers, since Cushing is about full. At the moment nobody knows what to do with it all and it continues to pile up. It's possible that a further drop in energy prices could occur but i think that it will be temporary.
That is because global production is dropping. Exploration and future production projects are being delayed and cancelleed. That means any meaningful new production is being pushed years further into the future. Existing major production wells continue irreversable depletion and output decline.
Certain areas of activity will continue to use oil. For example, the various militaries. Politicians, bankers and environmentalists will do everything they can to support air travel since they need to jet back and forth to remote luxury resorts and so forth to conduct all the conspicious periodic hand-wringing sessions to reassure "the public". Anyway the point is that demand gets increasingly inflexible the further down the curve you go. At some point (soon), push comes to shove.
IMO, once the excess inventory starts coming down, that will signal a coming spike in energy. It will likely be made worse since actual production will have deteriorated and postpond to the point that it no longer meets demand.
The other thing happening is that central banks (notably our hallowed local franchise the FR) are fixing to "target inflation". I hear, 3%. Down in their dark bunkers, trillions are being shoveled into giant monetary cannons and fired off into the economy as fast as they can "print" it. So far nothing much has happened. I guess it is still all in flight. How good is their aim? Best not stand too close to the target. <g>
Think Zimbabwe, or Weimer Republic. Prices of things with intrinsic value such as oil or precious metal tend to spike way up once out-of-control hyperinflation ignites.
Trillions continue to disappear faster than the central banks can monetize debt to replace it. At some point, there will be a lull in writeoffs and everything will become unstuck (or unglued depending how you look at it). There is about equal cause for worry that they will "succeed" as there is for them to fail. there is a high speed monetary freight train in motion and it it unlikely that it can be stopped on a dime.
OK, what I think is going to happen: Energy will continue to drift down a bit more. Then all of a sudden, monetary "stimulus" will start to take hold, demand will go back up. Then prices will spike back up, throttling economic recovery, industrial production will contimue to slide with the added onus of commodity prices being high due to currency inflation (dilution). Foreigners will decline buying t-bonds and in desperation interest rates will finally be raised ( "to combat inflation", gee where did that come from?). Oil will be pegged to something other than the dollar. And with luck, Keynesian economics will be abandoned and a long slow climb back out of the hole will begin. Could take years.
This is the best time to own oil & gas properties and the worst time to try to sell, imo.
