My 2 cents ...

It is a matter of supply and demand. As a result of technological improvement of fracking and encouraged by high oil prices, the US has been able to substantially increase production. We are the gluttons of energy consumption in the world, but with OPEC and other countries maintaining production levels so far and the world demand softening, it led to an adequate supply of oil that forced prices lower.

Now, I will say that I believe the current drilling boom in the Bakken is bust because the present oil prices are too low to justify the cost of drilling. As the current rigs drilling reach their target depth, most will likely be laid down for now. All the oil wells currently producing will continue to do so as long as the price of oil exceeds the cost of pumping it. As the wells begin to dry up and need reworking, they will suspend production unless it is believed that by reworking them they will continue to be profitable at the expected price of oil. All these oil companies need to maintain cash flow to stay in business, and even if they go bankrupt the subsequent owners may need the cash flow also.

The tar sands are another issue because I believe it is an open pit mining process where the resulting sand is processed to remove the heavy oil. Since their costs are primary for production, not development, I expect them to suspend operations until the price of oil rises to a sustainable level.

In the meantime, the oil fields in Texas and the Permian Basin may continue drilling for a little while longer since their costs are lower in part due to far fewer weather, transportation and other logistics issues. I did here they have suspended drilling near Sweetwater, Texas because it was found the oil shale layer was twice as deep as competing fields. I don't expect there to be a huge change other than a loss of jobs in the north and an end to the frack sand and oil drilling supply transportation to the region, though the oil will continue to flow for now, but will gradually subside depending on well production and demand.

Now here is where it gets interesting. World events might either increase a demand for oil (China); or due to politics or conflicts some oil supplies might be disrupted (Middle East), either of which will cause the price of oil to rise. Since the drilling boom as apparently gone bust in the Bakken, there will be a mass exodus of unemployed leaving the region looking for other work. This in turn will drop the demand for housing, and rents, wages and other boom prices in the region will begin to drop towards pre-boom levels. This in turn means that the costs of drilling a well becomes lower, so at some point there may be a limited resumption of drilling on the more promising sites.

Basically we are on a roller coaster so the whole supply/demand and oil price/drilling and production cost thing has to find a new balance point. I would be more concerned about the idiots on Wall Street panicking and overreacting one way or the other (and why do we insist on this form of gambling?) The oil companies and OPEC already know we are willing to pay $5 a gallon for gas and no doubt they are trying to figure out how to manipulate the market and supply to return to their glory days.

I've already seen an article criticizing BNSF for continuing to invest $1.5 billion in capital projects instead of catering to Berkshire-Hathaway's investors. As I stated, the oil will continue flow, grain is a crapshoot, and BNSF can still use any extra capacity to recapture some of the traffic (primarily intermodal) they have lost. Also a good part of this investment is mandated to complete implementation of PTC.

Don't worry about oil prices - worry about whether PTC and Tier 4 will actually work on a consistent basis - the traffic pattern upheaval once the Panama Canal opens the third locks - and what happens in the 2016 elections and how it might affect the economy.