The law of unintended consequences is the only real law of history. - Niall Ferguson
Considering second and third-order effects in a dynamic and volatile environment is an important tool for any investor to learn. I wrote recently on oil storage dynamics and how they are impacting short-term WTI futures markets. Using the framework that the best solution for low prices is low prices, the question then becomes: what does that solution look like?
It's clear that the U.S. domestic oil market is oversupplied. As a result, rig counts have recently plummeted as shown below: