OPEC aside... and they would be keen to keep prices at current levels.
there's 3 scenarios with oil pices initially falling from the current oil price of $117/barrel.
I argue that all these 3 scenarios will probably see the oil price rise straight back up with interest...i.e. may end up even higher.
1. oil falls to $60/barrel, the USD strengthens against other currencies.
so cheaper oil will encourage consumption from the US whilst the rest of the world there's status quo - no change. Also china's currency is pegged close to the USD and will make oil cheap for them too. So global oil demand will go up by say 10% in this scenario .. creating a 10% deficit .. and so oil goes straight back up in USD terms and for all consumers world wide.
2. oil price falls to $60/barrel, the USD exchange rate remains the same against other currencies.
In this scenario the US and Chinese consumers have cheaper oil again but so does the rest of the world. this could lead to a 20% rise in global demand and so straight back up up goes the price of oil again... way past the $100/oil mark.
3. oil price falls to $60/barrel, the USD weakens against other currencies.
So in this scenario the US will still have cheap oil (cheaper than the current $117/barrel price), so will china but for the rest of the world it will be even cheaper as their currencies have appreciated.
So the oil consumption goes up 30% .. leading to a 30% deficit and oil soars past $150 in the blink of an eye.
all scenarios lead to an immediate bounce back up past $100/barrel.
