Oil has now dropped dramatically to under $60 a barrel. What is the Austrian explanation for this big switch? Was it just a bubble that burst?
This is easy: Oil producers have supplied too much oil to maintain a higher price.
Oil producers have been trying to get as much of their product as possible to the customers as the customers were paying historically high prices for the stuff. Along the way the customers became increasingly more efficient and refused to pay the prices for the oil.
Dirty little secret:
The real “good guys” in this price drop are the SPECULATORS. Speculators pay for future deliveries. The oil producers took this money and loaded up their inventories. Now the inventories are too high and prices are dropping. But the oil companies (at least the ones that sold contracts at prices higher than the spot prices) are basking in the glory of taking the money from the speculators.