Oil Plunge Raises Fears of Societal Unrest

[Freewill]

We have an ethanol plant here in Burley, idaho.
If gasoline drops below a certain level over a period of time the plant will have to shut down.

I thought that the adding of ethanol was mandated by law, is that incorrect?

 

[konradv]

Who know's why the price of oil has plunged. One thing I do know is, obama has had nothing to do with it.

He only has something to do with it when it goes up, right? Since he'd get the blame, I'll give him the credit. Everyone's going to have a better Xmas because of Obamagas.

 

[JakeStarkey]

Thank you, Mr. President, if only to put my foot in the face of the far right nutters who are going to lose on Trump as well.

 

[tyroneweaver]

We have an ethanol plant here in Burley, idaho.
If gasoline drops below a certain level over a period of time the plant will have to shut down.

I thought that the adding of ethanol was mandated by law, is that incorrect?

True ethanol is mandated, But you can't force these companies to operate in the red. Gasoline has to be above a certain price to justify production.
When I was driving truck I would pick up boxes from Boise Cascade, which was right across from Pacific Ethanol. Sometimes it would be shut down, and when I asked why they said it was because when the price of fuel was to low it wasn't profitable. I think the price was around $1.60

 

[tyroneweaver]

Thank you, Mr. President, if only to put my foot in the face of the far right nutters who are going to lose on Trump as well.

Well you certainly know what losing is all about don't you. scoreboard.

 

[KissMy]

Who know's why the price of oil has plunged.
One thing I do know is, obama has had nothing to do with it.

Wrong! - Saudi's love Obama. Al Saud and other top officials showered the Obama family with more than $1.3 million in gifts throughout 2014. Plus Saudi Arabia & other OPEC countries are pumping record amounts of oil during Obama's administration just like they did under Clinton. They hated Bush's devaluing the US Dollars oil is sold in. The US dollar has been on a steady climb under Obama.

 

[tyroneweaver]

Who know's why the price of oil has plunged. One thing I do know is, obama has had nothing to do with it.

He only has something to do with it when it goes up, right? Since he'd get the blame, I'll give him the credit. Everyone's going to have a better Xmas because of Obamagas.

No, it's cause you're not well read.
1. They want to put American shale production out of business
2. They don't want isis profiting from oil sales
3. They like sticking their thumb in Russia's eye.

Did The Saudis And The US Collude In Dropping Oil Prices? | OilPrice.com

 

[martybegan]

The linked article reminded me that Saudi Arabia made stance not to limit production. Seems nobody wants to cut back and lose market share.
Scant signs of Russia-OPEC output cut deal ahead of Vienna meeting

Saudi Arabia bet that continued high production would force out Shale Oil producers, as their cost per barrel is higher. What they didn't count on was the Shale guys figuring out how to lower their costs, and that shale production can be mothballed, and re-started once prices go back up.

Add in the fact that while OPEC countries like Venezuela would love for prices to go up, they don't want to cut production and lose revenue, particularly in Venezuela, where the upcoming elections are making people very very nervous.

China's slow down has had an impact on demand, but the real issue is Shale Oil has made the US a big supplier again.

 

[tyroneweaver]

Thank you, Mr. President, if only to put my foot in the face of the far right nutters who are going to lose on Trump as well.

at the expense of putting oil shale producers out of business. obama hates oil shale, so do the saudis

 

[KissMy]

We have an ethanol plant here in Burley, idaho.
If gasoline drops below a certain level over a period of time the plant will have to shut down.

It must be a poorly managed ethanol plant. POET Ethanol has been making record profits & paying higher dividends every year. POET Ethanol sells Feed, Corn Syrup, Electricity, CO2 & Ethanol.

 

[tyroneweaver]

We have an ethanol plant here in Burley, idaho.
If gasoline drops below a certain level over a period of time the plant will have to shut down.

It must be a poorly managed ethanol plant. POET Ethanol has been making record profits & paying higher dividends every year. POET Ethanol sells Feed, Corn Syrup, Electricity, CO2 & Ethanol.

The railroad corn all the way from Nebraska to burley Idaho. So figure that one out.

 

[tyroneweaver]

Who know's why the price of oil has plunged.
One thing I do know is, obama has had nothing to do with it.

Wrong! - Saudi's love Obama. Al Saud and other top officials showered the Obama family with more than $1.3 million in gifts throughout 2014. Plus Saudi Arabia & other OPEC countries are pumping record amounts of oil during Obama's administration just like they did under Clinton. They hated Bush's devaluing the US Dollars oil is sold in. The US dollar has been on a steady climb under Obama.

ya and the 2 hate oil shale.

 

[whitehall]

Too bad about "fringe countries" that remain unstable even during the good times but others would say cheap energy would result in soaring economy for stable nations.

 

[TNHarley]

The Saudis have been throwing cheap crude all over the market

 

[Moonglow]

Other OPEC members and Russia are not lowering production to protect the markets they have..

 

[TNHarley]

Who know's why the price of oil has plunged.
One thing I do know is, obama has had nothing to do with it.

Then why did you blame him when gas prices were at all time highs?

Jr. had gas prices at a pretty decent level (around 1.50 to 2.00/gal) when he took office. At one time, during the end of his 2nd term, they were at about 5.00/gal.

Obama inherited that mess, and under his administration, they have returned to what they were under Jr.

Why can't you give him at least a little credit for the good, when you are going to tie him to all the bad?

A president doesn't inherit gas prices, silly

 

[FJO]

We have an ethanol plant here in Burley, idaho.
If gasoline drops below a certain level over a period of time the plant will have to shut down.

It is about time to shut all of them down. It takes more energy to convert corn - i.e. FOOD - into gasoline than that gasoline provides. It has always been a fool's errand.

 

[KissMy]

Who know's why the price of oil has plunged.
One thing I do know is, obama has had nothing to do with it.

Wrong! - Saudi's love Obama. Al Saud and other top officials showered the Obama family with more than $1.3 million in gifts throughout 2014. Plus Saudi Arabia & other OPEC countries are pumping record amounts of oil during Obama's administration just like they did under Clinton. They hated Bush's devaluing the US Dollars oil is sold in. The US dollar has been on a steady climb under Obama.

ya and the 2 hate oil shale.

Wrong! - Carter signed the Energy Security Act, allotting billions of dollars for the creation of a Synthetic Fuels Corporation that would provide loans, price guarantees, and other financial incentives to stimulate synthetic fuel development projects. A dozen companies immediately applied for money to support their oil shale endeavors and began gearing up for production.

Reagan & Bush killed oil shale. US oil production fell under Nixon, Reagan, Bush 1 & 2. It rose under Carter & Obama. Nearly all the US fracking boom happened after setback boundaries were removed for EcoPad drillers after Obama took office. This made fracking cleaner, cheaper & $15/barrel more profitable, unlike under Republicans. EPA regulations for Environmentally Clean Solvent Extraction cut US Oil Sands production cost to under $25/barrel vastly undercutting Canadian Dirty Tar Sands production cost.

 

[SwimExpert]

Does anyone know why the price of oil is so low? If I recall the left wing told us that increases in US oil production would not make a dent in world prices. So with all the SUVs and trucks I see on the road why has the price of oil dropped so much?

Oil Plunge Raises Fears of Societal Unrest

With Wall Street shops like Goldman Sachs (GS) and government officials in Venezuela signaling oil could go to the mid-$20 per barrel range next year, analysts at places like RBC Capital Markets have been warning that chronically low oil prices plunging towards seven-year lows means increasing social chaos in countries on the edge—including those battling ISIS.

Five countries are high on the radar screen for societal risks from low oil prices, which RBC Capital Markets has labeled the “Fragile Five.” They are Algeria, Iraq, Libya, Nigeria, and Venezuela. ISIS operatives are believed to be in most of these countries.

Increased domestic production vs OPEC manipulation. Some argued that increasing domestic production would not make a significant difference in prices because US production would not be able to be significant to the total supply, and that OPEC would adjust production to maintain optimum pricing anyway. It was actually a reasonable argument for quite a long time. It was true that the US ability to increase production was marginal to the global supply, and the entire reason OPEC exists is to manipulate prices to the advantage of its members.

The development of fracking changed the landscape and allowed for substantial increases in domestic production, and forced OPEC to reevaluate it's strategy. Most OPEC nations want to limit production in order to send prices back up. The key member who has thus far stopped them from going is is Saudi Arabia. The Saudis are in a much different situation than most other OPEC nations. Between their higher volume, and their more diversified economy, Saudi Arabia has the ability to weather lower prices and can do so for much longer than its other colleagues. Other OPEC nations are highly dependent on their oil exports selling at high prices and are desperate to see the prices return to where they were a couple years ago. Furthermore, Saudi Arabia recognizes that in the long run it benefits them more to maintain market share and ride low prices for a while, then to give up market share and try to recapture it later.

Thus, with the Saudis taking the lead, the current OPEC strategy has been to try starving the American beast. Because fracking is a more expensive production method, the increase in domestic production is in a financial situation comparable to many OPEC nations; in order to be feasible higher prices are required. Saudi Arabia's plan is to allow domestic production to drop barrel prices below a profitable threshold for fracking, so that stateside producers will drive themselves out of business.

The main flaw in this strategy is that Saudi Arabia's estimates of production costs associated with fracking have been too high. American frackers have developed their methods to the point where product costs aren't so much more than traditional drilling. It's still a more expensive method. But the previous notion that fracking stops being profitable when oil reaches $75 a barrel is no longer true. The question which remains to be seen is just how low can crude prices go before US domestic production takes serious damage? From what I've heard, the thinking is that we start to face danger if barrel prices fall into the $30s. The average cost for production in the US is $36 a barrel. But fracking costs more. With crude currently trading at $41 a barrel, we're starting to approach the danger zone.

In alot of ways, it's a bit of a game of chicken. Several other countries are already in the red (or right at the line) on their oil production, because their production costs are higher than the current price of crude. Saudi Arabia is gambling that it can withstand low prices long enough that other producers somewhere are driven out of the market. But it's going to take the next five years to watch how it plays out.

 

[martybegan]

Does anyone know why the price of oil is so low? If I recall the left wing told us that increases in US oil production would not make a dent in world prices. So with all the SUVs and trucks I see on the road why has the price of oil dropped so much?

Oil Plunge Raises Fears of Societal Unrest

With Wall Street shops like Goldman Sachs (GS) and government officials in Venezuela signaling oil could go to the mid-$20 per barrel range next year, analysts at places like RBC Capital Markets have been warning that chronically low oil prices plunging towards seven-year lows means increasing social chaos in countries on the edge—including those battling ISIS.

Five countries are high on the radar screen for societal risks from low oil prices, which RBC Capital Markets has labeled the “Fragile Five.” They are Algeria, Iraq, Libya, Nigeria, and Venezuela. ISIS operatives are believed to be in most of these countries.

Increased domestic production vs OPEC manipulation. Some argued that increasing domestic production would not make a significant difference in prices because US production would not be able to be significant to the total supply, and that OPEC would adjust production to maintain optimum pricing anyway. It was actually a reasonable argument for quite a long time. It was true that the US ability to increase production was marginal to the global supply, and the entire reason OPEC exists is to manipulate prices to the advantage of its members.

The development of fracking changed the landscape and allowed for substantial increases in domestic production, and forced OPEC to reevaluate it's strategy. Most OPEC nations want to limit production in order to send prices back up. The key member who has thus far stopped them from going is is Saudi Arabia. The Saudis are in a much different situation than most other OPEC nations. Between their higher volume, and their more diversified economy, Saudi Arabia has the ability to weather lower prices and can do so for much longer than its other colleagues. Other OPEC nations are highly dependent on their oil exports selling at high prices and are desperate to see the prices return to where they were a couple years ago. Furthermore, Saudi Arabia recognizes that in the long run it benefits them more to maintain market share and ride low prices for a while, then to give up market share and try to recapture it later.

Thus, with the Saudis taking the lead, the current OPEC strategy has been to try starving the American beast. Because fracking is a more expensive production method, the increase in domestic production is in a financial situation comparable to many OPEC nations; in order to be feasible higher prices are required. Saudi Arabia's plan is to allow domestic production to drop barrel prices below a profitable threshold for fracking, so that stateside producers will drive themselves out of business.

The main flaw in this strategy is that Saudi Arabia's estimates of production costs associated with fracking have been too high. American frackers have developed their methods to the point where product costs aren't so much more than traditional drilling. It's still a more expensive method. But the previous notion that fracking stops being profitable when oil reaches $75 a barrel is no longer true. The question which remains to be seen is just how low can crude prices go before US domestic production takes serious damage? From what I've heard, the thinking is that we start to face danger if barrel prices fall into the $30s. The average cost for production in the US is $36 a barrel. But fracking costs more. With crude currently trading at $41 a barrel, we're starting to approach the danger zone.

In alot of ways, it's a bit of a game of chicken. Several other countries are already in the red (or right at the line) on their oil production, because their production costs are higher than the current price of crude. Saudi Arabia is gambling that it can withstand low prices long enough that other producers somewhere are driven out of the market. But it's going to take the next five years to watch how it plays out.

it's also gambling that once mothballed, the US fracking/Shale wells will be difficult to get back into service. From what I know about the process, they should be pretty quick to clean up and turn back on, thus softening any rise in prices.