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Updated almost 10 years ago on . Most recent reply

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Fred Heller
  • Real Estate Agent/Property Management
  • Houston, TX
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How will falling oil prices affect energy-heavy markets?

Fred Heller
  • Real Estate Agent/Property Management
  • Houston, TX
Posted

While reading this article about falling oil prices, I couldn't help but wonder what, if any, effect it would have on the real estate markets in energy-heavy local economies like Midland-Odessa and other West Texas cities, not to mention Oklahoma and the Dakotas.

The Atlantic: It's Coming: $65 Oil.

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Richard C.
  • Bedford, NH
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Richard C.
  • Bedford, NH
Replied

As soon as the Saudis succeed in destroying the Iranian economy and start cutting production to match demand, prices will start to rise.  Once some sort of meaningful economic recovery happens in the developing world, they will rise further.

The Saudis have not cut their production, for basically the first time ever when faced with sharply lower demand, because they are using oil as an economic weapon against Iran (and maybe Russia, at our behest).  Oil prices below $100 bbl are very, very bad for Russia and Iran.  Oil prices at $65 mean Iran cannot feed its people.

Thanks to increased US production and new technologies, there is a spread that the Saudis can exploit.  They can hurt the Iranians and Russians who need $100 bbl, while not angering the US, where producers will survive with $65.

And after that all plays out, prices will rise, probably by a lot.

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