Dear Professor Kaufman,
How long will the oil supply overhang last? When will prices go back up and how much will they go up? Will Obama fire Yellen for failure to produce inflation? Or will he praise her for deflating oil? Poor people burn proportionally more gas and oil so they benefit when the price of gas drops. Rich investors who gambled on peak oil and expensive extraction technology will lose. We may be below $2 per gallon gasoline around here this morning. Even the tourist trap was $2.19 yesterday.I would guess that low prices will last most of next year.
Anyway, now is the time to fly or drive as much as possible while prices are low. Probably Saudi Arabia is trying to squeeze out higher cost countries, oil shale, fracking, oil sands, North Dakota, etc. After high cost producers go bankrupt then the low cost producers can jack up the price again and make enormous profits. This will also burn investors who have invested in fracking and other expensive processes. Saudi Arabia just has to stick a pipe in the ground and oil comes pouring out. They may still make a lot of money off low oil prices, just not as much as they will make after they eliminate their rivals. I am just guessing as I do not have ready access to reliable cost of production numbers.