Will low prices continue?

It looks like it. Some high-cost production is closing, but once wells are drilled, it usually makes sense to keep pumping, even at a loss. It is better to make a little money rather than none. And the shale revolution is marching on.

How low can the price go?

If your correspondent could forecast that, he would be on a yacht reading The Economist rather than at a desk writing for it. But much below $40 will sharply increase bankruptcies, and the pressure on OPEC to curb production. Cheap energy also leads to higher demand.

What happens next?

The debate about lifting America’s ban on crude exports is firing up. The petrochemical and steel lobbies are fighting a rear-guard action against big oil. America’s domestic crude (light and sweet) is unsuited for the nation’s refineries (configured for sour and heavy imported oil)—but would make a lucrative export.

Who benefits from low prices?

Winners necessarily outnumber losers (imagine a world in which energy was free). Consumers have more cash in their pockets; industry enjoys lower energy costs, makes bigger profits, and pays more taxes. And it is a great time for companies with strong balance-sheets to make acquisitions.

And who suffers?

The oil industry’s immediate reaction is to squeeze costs out of its supply chain. So wages and margins are falling fast. Highly indebted companies are going bust, with knock-on effects on investors. But lower costs help the industry adapt and increase efficiency.

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