$25 of the $60 decline was due to increased supply, $10 was due to decreased demand, which explains $35 of the $60 decline.

Shale oil mining turns out to be easier, less costly and less risky than expected.  “There is no such thing as drilling a dry hole.”  This reduced the cost of oil by another $25.

Improved, less expensive technology decreased the demand for capital needed to drill, leaving this industry over-capitalized.  I know that is a little nerdy, but it means a smaller share of revenue is due to capital, further reducing costs and ultimately prices.  The impact of this goes into the future, deferring a new point of equilibrium until early next year.

They believe oil will remain near $40/bbl most of this year, before establishing a new equilibrium price of about $65/bbl next year.  And, they should know!  After all, nobody ever said Goldman Sachs was not “oily”.

By the way, guess which legendary Wall Street investment bank just announced great quarterly earnings this morning, crushing forecasts . . .