the dropping oil price

[william the wie]

While there are disagreements as to importance there are three forces driving oil prices down:

Iraq has 1/5 of the world's known oil reserves and if run even semi-competently oil could hit $15/bbl so Saudi Arabia and other oil states are funding ISIS and putting on a price war to get out of oil and into cash.(other reasons may also exist for this strategy such as alternative energy, opposition to Iran and other things.)

Demand for imported oil in emerging markets is declining in part due to slowing growth but also due to stabilization making drilling possible in more of the world. That last bit tends to be ignored but it more directly means that less oil needs to be imported.

Drilling technology is getting cheaper. Hydraulic fracking gets the publicity but increasingly artillery and shaped charges are giving more bang for the buck. Also artificial diamonds are getting cheaper to make so diamond rather than diamond tipped drills will also be coming online in the not too distant future.

There is no reason to believe that any of these trends will reverse prior to He3 mines in outer space making energy really cheap. So, what consequences can be expected?

 

[Treeshepherd]

America is in the process of becoming energy independent. What consequences can be expected?
The word 'ontology' comes to mind. We're coming back into our own as an energy producing nation. We went globalism, and now we're coming back toward nationalism. That's the ongoing duet we have with the international community.
It's like the ontology we have as individuals; union with mother, separation at birth, reunion with mother, the independence movement of the terrible two's, worshipping of parents, the off putting teenage years, returning to respect for the effort of our parents, rebellion from parents as we become parents of our own, reunion as we take on the role of taking care of our parents in their old age. It's the ontological process.
The world goes global (Rome) , and then it decouples (Dark Ages) and then it reunites ( Renaissance) and then we get the great wars. And then we have the globalism of the last 50 years. We're now re-entering a decoupling process.

And incidentally, the fantasy of mining outer space is totally delusional.

 

[waltky]

Iran kickin' `bout low oil prices...

Iraq says OPEC may need to step in if oil prices drop further
Fri, Dec 26, 2014 - OPEC will need to “step in” amid further declines in oil prices, which are fair at US$70 to US$80 a barrel, according to the group’s second-biggest producer.

The organization could still hold back from intervening in the market for one or two years, Iraqi Minister of Oil Adel Abdul-Mahdi said in an interview. Brent oil dropped about 20 percent since OPEC decided to maintain output at its meeting in Vienna last month.

Global oil supply is growing as the highest US output in at least three decades led to a glut that Qatar estimates at 2 million barrels. Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi said on Sunday that high-cost producers will have to make cuts if oil prices keep falling while United Arab Emirates Minister of Energy Suhail al-Mazrouei urged producers from outside OPEC to trim output. Iraq’s budget for next year assumes a US$60 per barrel oil price. “If prices keep falling to very low levels where the whole equation is not balanced, then definitely OPEC has to step in,” Abdul-Mahdi said. He did not say if that would mean cutting production.

OPEC’s decision to hold production was taken after al-Naimi said the 12-nation group must protect its market share and let prices fall to trim output elsewhere, Abdul-Mahdi said. “We accepted the Saudi theory to correct the situation in the market as it made sense to all of us,” he said.

The “fair price” of oil that was US$100 to US$105 a barrel is now closer to US$70 to US$80 a barrel, Abdul-Mahdi said. The Iraqi Cabinet two days ago approved a budget based on US$60. Global crude prices dropped about 45 percent this year, heading for the biggest annual decline since 2008. Saudi Arabia does not plan to pump less “whatever the price is,” al-Naimi told the Middle East Economic Survey in report published on Monday.

Iraq says OPEC may need to step in if oil prices drop further - Taipei Times

 

[Politico]

How silly. America will never be energy independent as long as they continue to import oil and ship what they produce out to other countries.

 

[DGS49]

Well, the dynamics of falling oil prices are very interesting indeed. There are some very powerful countries and very powerful companies and very powerful politicians who are very unhappy about falling oil prices, and if history is any guide we are likely to see some "crazy shit" happening in 2015. Any significant threats to oil-producing countries and facilities will spike prices; shutdowns of production or refining facilities will do the same. Putin is the one person most harmed by the falling prices and he's a crazy bastard.

My sense is that the $2/gal gas will have about the same lifespan as the Federal Government's surplus did when Newt was running Congress. By the end of 2015 it will be back up to $4.

 

[william the wie]

Well the dropping price does mean that high wages in the oil patch will decline.

 

[initforme]

We want oil prices to drop to $30 a barrel do we not? That means lower gas prices. That's what America wants... less profits for oil companies too but that is alright with me.

 

[william the wie]

We want oil prices to drop to $30 a barrel do we not? That means lower gas prices. That's what America wants... less profits for oil companies too but that is alright with me.

It depends on the knock on effects. The smart money is on wild gyrations.

 

[Mr. H.]

The smart money is on wild gyrations.

YEAH BABY!

 

[william the wie]

even wilder like say $0.25- 4.00 a gallon every 2-4 years as far as the eye can see.

 

[waltky]

Good thing Uncle Ferd gassed up the pick-`em-up truck last night...

Falling U.S. inventories boost oil prices
Wed Nov 18, 2015 - Oil rose on Wednesday on reports of falling stockpiles and rising refinery activity in the United States, but analysts said a global supply glut would keep prices under pressure.

Brent crude futures LCOc1 were up $1.06 at $44.63 per barrel by 0527 ET after settling 99 cents lower the day before. U.S. crude futures CLc1 were up 75 cents at $41.42 a barrel. The American Petroleum Institute (API), an industry group, said on Tuesday that U.S. crude stockpiles fell last week by 482,000 barrels due partly to higher refinery runs. Official inventory data is due at 1030 ET from the U.S. government's Energy Information Administration (EIA). A poll of eight analysts predicted a crude stock build of 1.9 million barrels on average in the week ended Nov. 13 <EIA/S>.

Despite the gains on Wednesday, most analysts expect prices to remain low for the rest of the year and into 2016 as production continues to outpace demand. "It's a bullish signal for macro traders," said Virendra Chauhan, analyst at Energy Aspects. "But if you look beyond the day-to-day, the fundamentals are bearish. There's talk of floating storage and if you look at differentials for physical oil in the North Sea, for Urals and for West Africa they are very low." Also adding to a picture of a well-supplied market, Saudi Arabia raised its oil exports in September by 113,000 barrels per day (bpd) to 7.111 million bpd from 6.998 million bpd in the previous month, official data showed on Wednesday. A trader said that investors who had sold heavily on the back of the growing glut were covering short positions ahead of the EIA data.

Onshore inventories across the world are on the brink of being full, while offshore tanker storage requires prices on the far end of the curve to be higher than prompt deliveries in order to warrant storage. "The market is actively seeking storage solutions," Jefferies said in a note, but with January 2017 prices around $6 a barrel above those for January 2016, the spread is too low to make floating storage attractive as freight costs still have to be included. An economic slowdown in Asia, and China in particular, is also hitting other commodities. Copper fell towards six-year lows on Wednesday as traders increased their bets on waning demand in top user China.

Falling U.S. inventories boost oil prices

 

[EdwardBaiamonte]

. So, what consequences can be expected?

actually, its been happening for 2-3 years so few consequences really. Less coal, a rebounding international economy, and global warming should keep prices about where they are.

 

[Toddsterpatriot]

While there are disagreements as to importance there are three forces driving oil prices down:

Iraq has 1/5 of the world's known oil reserves and if run even semi-competently oil could hit $15/bbl so Saudi Arabia and other oil states are funding ISIS and putting on a price war to get out of oil and into cash.(other reasons may also exist for this strategy such as alternative energy, opposition to Iran and other things.)

Demand for imported oil in emerging markets is declining in part due to slowing growth but also due to stabilization making drilling possible in more of the world. That last bit tends to be ignored but it more directly means that less oil needs to be imported.

Drilling technology is getting cheaper. Hydraulic fracking gets the publicity but increasingly artillery and shaped charges are giving more bang for the buck. Also artificial diamonds are getting cheaper to make so diamond rather than diamond tipped drills will also be coming online in the not too distant future.

There is no reason to believe that any of these trends will reverse prior to He3 mines in outer space making energy really cheap. So, what consequences can be expected?

Saudi Arabia and other oil states are funding ISIS and putting on a price war to get out of oil and into cash.

They're driving down the price of oil to get into cash?
Why not keep the price high, to get more cash?
And with their huge reserves, just how do they "get out of oil"?

 

[EdwardBaiamonte]

Why not keep the price high, to get more cash?

GM makes more than Rolls because GM keeps the price low!

 

[Toddsterpatriot]

Why not keep the price high, to get more cash?

GM makes more than Rolls because GM keeps the price low!

Is GM trying to get out of cars?

 

[EdwardBaiamonte]

Why not keep the price high, to get more cash?

GM makes more than Rolls because GM keeps the price low!

Is GM trying to get out of cars?

GM is trying to make as much money as possible by having low prices that everyone can afford. If they only sold expensive cars that few could afford they would make less money. Do you understand?

 

[waltky]

EdwardB. wrote: actually, its been happening for 2-3 years so few consequences really. Less coal, a rebounding international economy, and global warming should keep prices about where they are.

Provided of course, that the domestic supply stays domestic...

... and isn't shipped overseas to places like Lithuania, etc....

... siphoning off the supply here.

 

[EdwardBaiamonte]

EdwardB. wrote: actually, its been happening for 2-3 years so few consequences really. Less coal, a rebounding international economy, and global warming should keep prices about where they are.

Provided of course, that the domestic supply stays domestic...

... and isn't shipped overseas to places like Lithuania, etc....

... shrinking the supply here.

oil is fungible so world prices tend to stay very close.

 

[Toddsterpatriot]

Why not keep the price high, to get more cash?

GM makes more than Rolls because GM keeps the price low!

Is GM trying to get out of cars?

GM is trying to make as much money as possible by having low prices that everyone can afford. If they only sold expensive cars that few could afford they would make less money. Do you understand?

GM is trying to make as much money as possible by having low prices that everyone can afford.

Do you feel that the Saudi strategy with oil is in any way equivalent? LOL!

You're funny! If only you understood economics.

 

[Toddsterpatriot]

EdwardB. wrote: actually, its been happening for 2-3 years so few consequences really. Less coal, a rebounding international economy, and global warming should keep prices about where they are.

Provided of course, that the domestic supply stays domestic...

... and isn't shipped overseas to places like Lithuania, etc....

... siphoning off the supply here.

Why would anyone ship US oil to Lithuania?