Let's talk about ratings downgrades.
Ratings agency Standard and Poors has lowered its 2015 forecast for oil prices to US$55 per barrel, some 10% above where Brent crude is trading at the moment.
The lower price obviously sees companies like Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) forecast to earn a lot less money this year than they have in recent times.
Lower income also leads to the possibility of debt-laden companies like Santos seeing their credit rating downgraded again (Santos has already been cut from BBB+ to BBB), which would see the companies affected paying higher interest costs and finding it harder to secure additional funding.
They could also be forced to conduct capital raisings to pay for projects, like Santos' unfinished GLNG project in Queensland.
The next step down for Santos is to the grade BBB-, which is seen as the lowest 'investment quality' grade there is.
With Santos having already lost nearly 50% in the past twelve months, further credit downgrades could see things get even uglier.
For companies with no debt like Senex Energy Ltd (ASX: SXY) the impact of rating cuts is likely to be limited, although as a junior producer Senex does suffer from the real risk of running out of money.
However this looks to be unlikely thanks to Senex hedging its oil production at $70 a barrel for the rest of 2015, and cutting capital expenditure to focus on lower risk gas projects in Queensland.
Other companies like Origin Energy Ltd (ASX: ORG) have also been hit hard by price falls, although as an energy retailer and generator, Origin does have some insulation from the market shock.
All in all, the whole show depends upon the price of oil, which is in turn heavily contingent on supply, demand, sentiment, and OPEC, the twelve-nation oil cartel lead by Saudi Arabia.
With OPEC not set to meet again until June to discuss its production levels, low prices are likely to persist, although some major oil players are already hiring supertankers to stockpile oil in the wait for stronger prices.
It's tough to say whether further credit downgrades for companies will actually be forthcoming, with Standard and Poors expecting oil to rebound to US$80 a barrel in 2016.
Low oil prices are also leaving massive holes in the budget of OPEC nations, (who have kept the price of oil up around US$100/barrel in recent years) which could lead to a normalisation sooner.
On the other hand, if OPEC nations don't see the improvement in their market share of world oil sales as they hoped, the price of oil could be lower for longer.
It's an interesting space, but not one that I think investors should have significant money invested in for the time being.
