Oil is now trading at slightly below $50 a barrel, less than half of what it was worth last June. And some believe that conditions of oversupply coupled with weakening demand from Europe and Asia could send prices down further.
 
Such a move could imperil the nascent fracking boom in the United States and further pressure a host of U.S. energy stocks.
 
On Thursday, investor Carl Icahn said on CNBC that he thinks that “oil actually will probably go lower,” at least in the short term. And earlier this week, Bank of America put out a research note saying that oil prices both in the U.S. and overseas could fall to between $35 to $40 a barrel in the coming months.
In a piece for the Fiscal Times, veteran financial writer Anthony Mirhaydari makes the supply-demand case for why a further drop in oil is highly plausible.
“It’s clear that a quick reversal isn’t coming,” he argues, referring to oil’s price decline. “ OPEC is showing steely resolve in its effort to recapture market share from U.S. shale oil producers. Most oil exporting nations are trapped in a prisoners’ dilemma: They all want higher prices as their national budgets feel the pinch. But none of them want to make the production cuts needed to align supply with the depressed demand that has resulted from economic weakness across much of Europe and Asia.
 
As for the demand side of the equation, Mirhaydari adds that “demand is unlikely to soak up the excess supply anytime soon, with Europe stalled, Japan picking up the pieces from its recent sales tax hike and China still trying to control its runaway housing and fixed-asset investment bubbles without pricking its bad debt problem.”
 
Of course, not everyone is so pessimistic about oil. None other than T. Boone Pickens, a legendary U.S. oil explorer, argues that oil could return to $100 a barrel in the next 12 to 18 months because low prices will invariably lead to more demand combined with tightened supplies.
 
But writing on the Forbes site, energy analyst Michal Lynch points out that such forecasts are often weighed down by the personal biases of the handicapper.
 
“People almost always start from their particular beliefs and preferences before analyzing the facts,” writes Lynch. “Few in the industry, or governments that rely on oil revenues, considered the possibility that prices could drop below the $100/barrel level for any length of time.”
 
Lynch adds: “When I suggested, at a 2012 OPEC conference, that long-term prices were likely to be in the $50-60/barrel range, not only was it suggested (from the audience) that I was joking, or (from a panel member) that I was possibly an idiot, but no one seemed to think such a decline even worthy of consideration.”
 
Assuming that oil is incapable of recovering in the coming year or two, what will it mean for America’s oil and gas boom, built both on technologies such as hydraulic fracturing (or fracking) along with a better price for the end product.
 
Writing for Fortune, veteran writer Shawn Tully argues that the shale oil revolution is in serious trouble.
                 
“The recent drop in oil prices poses a major challenge to the frackers. But oil producers, Wall Street analysts, and most industry experts claim the setback will be brief and minor,” writes Tully. “Don’t believe them.”
 
Tully argues that “at best,” today’s producers may be able to hold production close to current levels.
 
“What’s gravely endangered is the advertised bonanza that virtually everyone deemed inevitable just a few short months ago.”
 
He writes that on average, the “all-in,” breakeven cost for U.S. hydraulic shale is $65 per barrel, according to a study by Rystad Energy and Morgan Stanley Commodity Research. “So, with the current price at $48, the industry is under siege,” he writes.
 
“Right now, all signs are pointing to retreat. The count of rotary rigs in use—a proxy for new drilling—has fallen from 1,930 to 1,881 since October, after soaring during most of 2014. Continental Resources, a major force in shale, has announced that it will lower its drilling budget by 40% in 2015.

Because of the constant need to drill, frackers are always raising more and more money by selling equity, securing bank loans, and selling junk bonds. Many are already heavily indebted. It’s unclear if banks and investors will keep the capital flowing at these prices.”
 
Of course, this reversal of fortunes for fracking, along with conventional oil and gas exploration, is not good news for many services stocks that are the handmaidens to enterprises extracting fossil fuels from the land and sea.
 
A piece on the CNNMoney site warns that investors should shun a variety of oilfield services companies, including Haliburton and Schlumberger, which have already fallen hard in recent months.
 
“Despite the recent retreat, the pain may not be over for shareholders of oilfield service companies,” writes CNNMoney.