Oil prices

[lamboguy]

the price of West Texas fell to $45 per barrel earlier this morning, down from $54 a month ago. this thing looks like its setting up to go below $30 now even though we are approaching driving season. i don't expect the gasoline prices at the pump to come down much now, but probably if we go below $30 next January the gas prices should be below $1.00 a gallon

[davew]

Even though gas prices 'should' get that low, they probably won't. The major refinery's in the country will have brown outs. There will be reasons to have localized closures or slowdowns. In this country the refinery's seem to be an oligopoly.

[lamboguy]

Originally Posted by davew

Even though gas prices 'should' get that low, they probably won't. The major refinery's in the country will have brown outs. There will be reasons to have localized closures or slowdowns. In this country the refinery's seem to be an oligopoly.

its wild, they have nowhere to put the oil now. a friend of mine has a high volume gas station and he tells me his gasoline business is down 35% this year from last year. but we had some unusually large snowfalls in that period. for whatever reason, consumption is still way down.

[Greyfox]

Low oil prices are fine for most of us consumers who drive cars and trucks or ship products to market.

However, these falling prices are false in that they are below cost of production. They are that low because this is Saudi Arabia's way of:
1. putting the squeeze on Russia's economy
2. putting the genie of Iran back in the bottle, which Obama has been unable to do
3. putting the squeeze on American drilling activities and effectively putting thousands of people related to the oil industry out of work

If you are a driver, enjoy these prices while you can - except be aware that in the long run pain will be inflicted on some parts of the economy.

[badcompany]

Originally Posted by Greyfox

Low oil prices are fine for most of us consumers who drive cars and trucks or ship products to market.

However, these falling prices are false in that they are below cost of production. They are that low because this is Saudi Arabia's way of:
1. putting the squeeze on Russia's economy
2. putting the genie of Iran back in the bottle, which Obama has been unable to do
3. putting the squeeze on American drilling activities and effectively putting thousands of people related to the oil industry out of work

If you are a driver, enjoy these prices while you can - except be aware that in the long run pain will be inflicted on some parts of the economy.

I'd don't know where you're getting this info, but everything I've seen and read has Saudi oil production costs in the $20 a barrel range.

[Clocker]

Originally Posted by davew

In this country the refinery's seem to be an oligopoly.

Between the regulators and the tree huggers, it is about as easy to build a new refinery as to build a nuclear plant in this country. Last I heard, there hasn't been one built in about 30 years. I did hear that an Indian tribe in ND was in the process of building one on reservation land. More red man's revenge.

[FantasticDan]

Originally Posted by Clocker

Between the regulators and the tree huggers, it is about as easy to build a new refinery as to build a nuclear plant in this country. Last I heard, there hasn't been one built in about 30 years.

Many existing refineries have made substantial upgrades along with new construction to increase capacity, so it's not just like there's total stagnation.

[Clocker]

Originally Posted by FantasticDan

Many existing refineries have made substantial upgrades along with new construction to increase capacity, so it's not just like there's total stagnation.

And many have been shut down due to the prohibitive cost of upgrading to meet ever-increasing regulatory standards, especially in California. Total capacity today is about what it was in the early 1980s.

[davew]

Originally Posted by lamboguy

its wild, they have nowhere to put the oil now. a friend of mine has a high volume gas station and he tells me his gasoline business is down 35% this year from last year. but we had some unusually large snowfalls in that period. for whatever reason, consumption is still way down.

Storage is not an issue for the refinery's if they are buying on cash market - they will just let someone else hold it and lower the cash market even more. I remember when the 'traders' ran the price to near $150, tankers were sitting full as the refiney's did not really ant to buy at that price.

[_______]

Originally Posted by badcompany

I'd don't know where you're getting this info, but everything I've seen and read has Saudi oil production costs in the $20 a barrel range.

Ex social costs, the cost per barrel of Saudi oil is as low as $12 and as high as mid-40's depending on the field. An average price would be in the 20's. That's extraction.

If you factor in what it costs for the social programs run by the Saudi government, I've seen a break even point of $86 barrel. Otherwise they run a deficit.

But if you think $45 oil is a problem for the Saudi's, you'd have to wait a long time to be proven right. They have been shoveling $ into their sovereign investment funds for years at $100 plus oil. Huge surplus which is why they feel they can endure any pain longer than U.S. shale.

Meanwhile, U.S. oil production continues to rise. You "might" see a drop beginning in 2H 2015. Core positions remain profitable across U.S. shale where the drilling cost has been paid. Rig counts have dropped in marginal areas, not core. Shale remains a low cost on/off switch compared to other oil projects. The storage issue, on the other hand, is ridiculous. Every year at this time, Cushing begins to approach capacity. Winter months are low usage. Summer is higher. It'll all get processed a lot faster starting in April.

Anyone who looks at all the moving parts and has a handle on price is a lot smarter than me. i would guess low prices are with us for at least a few more months but that's based on admittedly low information.

[reckless]

The markets always overshoots well beyond the prevailing expert predictions and thinking --in both up and down markets-- so who really knows how low oil could go.

The untold story of oil's plunge is simply lack of demand, here and abroad that is the real driver and it began last summer when oil started the descent from its high around $140. The hedge funds, wildcatters, the Saudis, Wall Street traders and speculators originally caused the precipitous drop this past summer/fall but it is the world-wide depression/recession that has caused this lower price in oil in continue and to now, drop further.

We have no demand and we have advanced technology as the main drivers forcing oil down. Horizontal drilling and lower costs thanks to technology has made the USA an energy production leader and envy of the world.

Yes, the production dialogue has been out there for years. The Saudis and OPEC going into production overdrive is a geo-political move as much as a (bad) economic move. If the Saudis didn't hate and fear Iran, Russia, Syria, and nat gas and fracking states here as they do, then they'd have stopped this overproduction by now.

The USA has not grown economically to any respectable levels for the past six or so years, especially when compared against the GDP bottom in 2008-09. There seems to be an anemic bump up lately, but a lot of that is political hokus-pokus vis-à-vis all the phony jobs numbers 'advances', house buying 'boom' (?), and so-called GDP growth.

All a lie, helped in part by the chickie-poos and the boys on CNBC, Fox Business and Bloomberg. The media has devolved into carrying the water for both Obama and the sell-side Wall Street firms that make their money speculating.

If there was indeed real growth, there would no longer be any QE in Europe, Japan and now China. Descending interest rates is another clue that tells the real story -- the USA and world economy is stuck.... therefore, no demand for all commodities, especially oil. Canada is now telling the world that their growth is stalled too due to lack of demand. Australia has been in a funk for a while too. Two of the world's leading commodity producers are quite sick right now because of a lack of demand for oil and other commodities .

The EU is still in a depression thanks to failed socialist governments and their Central Banks. It's the worst there in close to 90 years! In Germany, an investor pays the government for the right to buy their bonds and paper -- negative interest rates. This is the leading manufacturing country in the EU! Are you kidding me?

Japan is a joke, plain and simple. Abenomics is an abject failure yet the prime minister gets reelected. He promises more intervention. The billions didn't work the first time so he's now talking trillions! Their 30-year plus depression is another example of a lack of demand.

China has stopped growing to anywhere near previous levels and that has been another cause and driver for the big drop in all commodities. This has hurt all producing nations but especially Australia, Canada and the USA, of course.

The markets will stabilize market oil prices at times but until there is real free-market growth, and not lies and stunts played by all central governments, oil prices will continue its descend, in my opinion.

[lamboguy]

west texas just printed with a $42 handle. i have been following oil for 40 years and have never seen the price go down this time of the year. the price of gas will be pretty low this summer and there will be plenty of traffic jams.

[Saratoga_Mike]

Originally Posted by lamboguy

west texas just printed with a $42 handle. i have been following oil for 40 years and have never seen the price go down this time of the year. the price of gas will be pretty low this summer and there will be plenty of traffic jams.

See March 2012 to June 2012 - three short years ago.

[Marshall Bennett]

Iran to open flood-gates. Storage stateside is near capacity. This could really get interesting.
Loss of energy related jobs could be monumental over the next 1-2 years.

[davew]

Originally Posted by Marshall Bennett

Iran to open flood-gates. Storage stateside is near capacity. This could really get interesting.
Loss of energy related jobs could be monumental over the next 1-2 years.

Does the US still have salt mine holes in ground to fill for reserve?