Deja vu Oil Over Again

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Why this downturn will be just like, and nothing at all like, the last one

In the mid-1980s, the price of crude oil dropped by more than half in a matter of months. By 1986, oil was trading around $10 a barrel, down from a high of $35 a barrel a few years earlier. There were a number of reasons for the collapse in prices.

Slowing economies in the United States, Europe and Japan led to a decrease in demand. But production continued at the same, uninterrupted pace. Oil from non-OPEC countries flooded the market. The OPEC countries failed to curtail production. Indeed, Saudi Arabia actually increased production, partly in response to instability in the Middle East. The United States set out to end its dependence on oil imports. Inventories accumulated. Prices plunged.

James H. Billingsley is a shareholder at Polsinelli where he advises clients in Texas and nationally on complex litigation and bankruptcy matters. He has more than 20 years of experience in courtrooms and boardrooms across the country in a wide variety of industries including upstream, midstream and downstream energy. James can be reached at jbillingsley@polsinelli.com

Article was first published in Oil & Gas Monitor, 11/19/2015

http://www.oilgasmonitor.com/deja-vu-oil-over-again/10454/

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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