Oil prices down 10% since the BP spill

We all know what the oil spill is doing to the environment. But have you seen what it's done to the market? I thought I'd take a look, and the answer is ... wait a minute, nothing at all??

The explosion was on April 20. On April 16, a barrel of light sweet crude cost $83. And 140 million spilled gallons later, it costs $75. Contracts for 2015 have also come down about 10% (see chart). 

How is that possible? The answer is: although the spill is massive, the market is massiver. I estimate that the spill so far is worth about 1% of 1% of the 21 billion barrels of proven reserves in the US alone. And of course Deepwater Horizon was an exploratory well, so the market never even knew this oil was there.  

I think traders are more interested in global economics. If prices have cooled off since April, it must mean the outlook for global growth has done the same. (Think public sector deficits, Greek debt crisis, Chinese currency appreciation ... ). 

All this makes sense, but there is one more observation. Prices for December 2015 are about $10 ahead of today's spot prices, so the market does expect oil to be more expensive in 5 years time. For most of June, this gap looked like it was rising to about $15, presumably because a proper approach to safety would make production costlier in the future. 

But in the last few days, the gap from spot price to Dec 2015 price has dropped back to $10 again. So much for talk of a safety premium. Happy 4th of July folks.

Energy prices are from the EIA and futures are from nymex.