This has taken the Russian Rouble to the doldrums, and Nicolas Maduro (Venezuela's President) calling former Spain's President Aznar a bloody assassin.
We've seen the first attempts for consolidation: Halliburton and Baker Hughes on the services side (a $34.6bn deal). Repsol just agreed to buy Talisman for $8.3bn this week, a deal that would double their upstream exposure. Maybe the more exciting, if not desperate attempts have been found among the pure-players in exploration: Ophir managed to get their hands on Salamander after being rebuffed by Premier Oil.
They haven't fared particularly well as a group. Tullow, the European bellwether for the African explorers has under-performed Exxon by almost 50%. Those geared to high-cost barrels, whether shale oil in the States, arctic or deep-water, or to riskier production areas in Africa have been the biggest losers. The oil majors have held significantly well: Exxon has only lost 15 pct from its peak at 104.8 (adj for divs.). I assume this means there is some level of optimism among investors, probably anticipating that oil prices will be roaring back higher within the next couple of years after having fixed both sides of the equation:
On the demand side, a lower oil price is as good a stimuli as anyone can ask for: it goes directly to consumers' pockets. The biggest economic beneficiaries will be the found in Japan (highly geared to energy prices since shutting down its nuclear plants), Europe, Turkey, India and China. This is also the perfect opportunity to slash subsidies wherever they exist: India, Brazil, Indonesia, etc.
On the supply side, the cost of production has creeped up materially in the last few years. The cheap barrels are long gone even for the most advantaged countries. The Ghawar oil field in KSA has a breakeven price of ca $80/bl. The production curves in the shale oil fields in the US are steep: those production tails don't last more than a couple of years, and in practical terms they need continuous drilling.
My belief is that both of these sides will be fixed within the next two / three years. What will not revert is the level of technology: self-driven cars should be significantly more fuel efficient than human-driven cars, both in the city as in the high-ways --where they will drift as cyclists in the Tour de France.
The manufacturers will not get any tailwinds from technology: the sharing economy should also allow consumers to achieve higher usage and occupancy rates from our car parks. I believe that the winning bet will continue to be the american and the international consumer.
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