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How Low Will Oil Go?  
User currently offlineBmacleod From Canada, joined Aug 2001, 2264 posts, RR: 0
Posted (5 years 8 months 1 week 6 days 11 hours ago) and read 3777 times:

Just the other day crude oil fell $3.5 to $33 even as OPEC announced a 2.2 million BPD cut.

Which make me wonder what will be if any the new bottom floor for crude oil?


The engine is the heart of an airplane, but the pilot is its soul.
69 replies: All unread, showing first 25:
 
User currently offlineAlessandro From , joined Dec 1969, posts, RR:
Reply 1, posted (5 years 8 months 1 week 6 days 7 hours ago) and read 3735 times:

Yes, very interesting, I think 20 US$/barrel then lot of oil weels need to be capped due to cost of tapping.

User currently offlineWN700Driver From , joined Dec 1969, posts, RR:
Reply 2, posted (5 years 8 months 1 week 6 days 7 hours ago) and read 3720 times:

I don't think we'll see $20. Maybe $30. The media is already trying to drum up prices again by suggesting their might be shortages in the future. What is it about these guys that they can't wait to see prices up again?

User currently onlineRevelation From United States of America, joined Feb 2005, 12468 posts, RR: 25
Reply 3, posted (5 years 8 months 1 week 6 days 6 hours ago) and read 3716 times:



Quoting Alessandro (Reply 1):
What is it about these guys that they can't wait to see prices up again?

High prices triggers people's fears, which grabs their attention which sells newspapers/advertisements.

Oil plateu'd at $25/bbl for quite a long time. I didn't think we'd ever see it again, but we might very well do.

Makes me want to buy a defunct filling station, fill the tanks, then draw my 20 gals a week till I run it dry...



Inspiration, move me brightly!
User currently offlineMarSciGuy From United States of America, joined Jun 2007, 549 posts, RR: 0
Reply 4, posted (5 years 8 months 1 week 6 days 6 hours ago) and read 3701 times:

I'm ALMOST considering trying to buy a futures contract at these prices....if only I had the cash on hand! a particularly expensive piece of as yet un-given jewelery emptied my bank account recently...


"There weren't a ton of gnats there where a ton of gnats and their families as well!"
User currently offlineTugger From United States of America, joined Apr 2006, 5525 posts, RR: 8
Reply 5, posted (5 years 8 months 1 week 6 days 4 hours ago) and read 3667 times:



Quoting Bmacleod (Thread starter):
even as OPEC announced a 2.2 million BPD cut.

Gotta love their threats to cut production!

The problem is the market knows they can't cut it very much. The only country that really can do it is Saudi Arabia, all the others are seeing their budgets being decimated so if they cut production they just sell less at a lower price. They need the money, now more than ever, so they all cheat.

The market also knows that they have plenty of spare capacity so their is no incentive to bid the price up to get "that last barrel".

Tugg



I don’t know that I am unafraid to be myself, but it is hard to be somebody else. -W. Shatner
User currently offlineAlessandro From , joined Dec 1969, posts, RR:
Reply 6, posted (5 years 8 months 1 week 6 days 1 hour ago) and read 3627 times:



Quoting Revelation (Reply 3):
Quoting Alessandro (Reply 1):
What is it about these guys that they can't wait to see prices up again?

High prices triggers people's fears, which grabs their attention which sells newspapers/advertisements.

Oil plateu'd at $25/bbl for quite a long time. I didn't think we'd ever see it again, but we might very well do.

Makes me want to buy a defunct filling station, fill the tanks, then draw my 20 gals a week till I run it dry...

I didn´t write that!


User currently offlineElite From Hong Kong, joined Jun 2006, 2796 posts, RR: 10
Reply 7, posted (5 years 8 months 1 week 5 days 23 hours ago) and read 3608 times:

I'm going to go out on a limb here and say how about $15...

User currently onlineRevelation From United States of America, joined Feb 2005, 12468 posts, RR: 25
Reply 8, posted (5 years 8 months 1 week 5 days 22 hours ago) and read 3593 times:



Quoting Alessandro (Reply 6):
I didn´t write that!

Sorry, my bad, I clicked on the wrong 'quote text' box...



Inspiration, move me brightly!
User currently offlineTexan From New Zealand, joined Dec 2003, 4277 posts, RR: 52
Reply 9, posted (5 years 8 months 1 week 5 days 22 hours ago) and read 3583 times:

Depends on the market forces. If people keep conserving, driving less, using less energy, then prices will continue to drop until the supply also drops dramatically. If people see the drop in oil prices as a green light to go out and buy more Chevy Escalades that get less than 10 mpg, increase energy usage, etc, then oil prices will rise rapidly again as production decreases.

Quoting Tugger (Reply 5):
The problem is the market knows they can't cut it very much. The only country that really can do it is Saudi Arabia, all the others are seeing their budgets being decimated so if they cut production they just sell less at a lower price. They need the money, now more than ever, so they all cheat.

I disagree. The lower prices hurt the countries more now than decreasing production will. By decreasing production they will be able, in most cases, to reduce staff and conserve the amount of oil available in ground. This will, in turn, allow the countries to continue to produce oil at lower levels while still selling at a premium. The only thing that undercuts this is a switch to alternative fuels, like Qatar is attempting.

But to say Saudi Arabia is the only OPEC country that can decrease its oil production is false. The U.A.E., Kuwait, Libya, Algeria, Venezuela, Angola, and Qatar can all decrease their production decently without taking a major hit. Venezuela's produces heavy crude anyway, which is more difficult and time consuming to change into gasoline, so their production should not dramatically affect domestic gas prices. I am not sure about the production capabilities of the other OPEC countries not mentioned (Ecuador, Indonesia, Iran, Iraq, Nigeria).

The biggest question to me, though, is whether all OPEC members will actually follow through with the plan. If you all remember what happened in the late 1990s (1997 maybe?), OPEC wanted to decrease production. Venezuela, however, increased production in order to increase its sales. This led to a retaliatory measure by Saudi Arabia which drove oil prices to their absurdly low levels (something like $12/bbl). BUT that's not all! It also led to a revolt in Venezuela that resulted in everybody's favorite dictator-who's-not-a-dictator coming into power.

Saudi Arabia's fields are not as plentiful as they once were, however. IF an OPEC member disobeyed and did not decrease production, could Saudi Arabia exert the same amount of pressure? Their fields have been pumping at over 90% capacity for years now; they cannot simply turn a knob and make more oil flow out of the ground. So anyway, it will be interesting.

Now, I don't expect an OPEC member to have a change of heart. I just wanted to wave the wand of speculation.

Also, in terms of oil imports, the U.S. imports more oil from both Canada and Mexico than any other country. Just in case anybody is wondering, here are the official government oil import numbers for the month of September (numbers are in thousands of barrels):

Total oil imported: 345,361 Percentage: 100%
Oil imported from Persian Gulf: 62,731 Percentage: 18.16%
Oil imported from OPEC: 153,849 Percentage: 44.55%
Oil imported from Canada and Mexico: 101,108 Percentage: 29.28%
Oil imported from everyone else: 90,404 Percentage: 26.18%
Source

Texan



"I have always imagined that Paradise will be a kind of library."
User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6152 posts, RR: 35
Reply 10, posted (5 years 8 months 1 week 3 days 22 hours ago) and read 3483 times:



Quoting Texan (Reply 9):
If people see the drop in oil prices as a green light to go out and buy more Chevy Escalades that get less than 10 mpg, increase energy usage, etc, then oil prices will rise rapidly again as production decreases.

The big 3 (at least 3 for now) just closed 3 SUV plants. For the next year or so, very few will be buying Escalades... or any SUVs. There has been a fundamental paradigm shift that play out over the next few years that will continue to defang OPEC.

Quoting Texan (Reply 9):
I disagree. The lower prices hurt the countries more now than decreasing production will. By decreasing production they will be able, in most cases, to reduce staff and conserve the amount of oil available in ground. This will, in turn, allow the countries to continue to produce oil at lower levels while still selling at a premium. The only thing that undercuts this is a switch to alternative fuels, like Qatar is attempting.

I disagree.  Smile

Iran, Russia and Venezuela all need +$80/bbl just to balance their budgets. "By decreasing" oil production they will not be able to jack up prices by 100% to balance their budgets.

Quoting Texan (Reply 9):
But to say Saudi Arabia is the only OPEC country that can decrease its oil production is false. The U.A.E., Kuwait, Libya, Algeria, Venezuela, Angola, and Qatar can all decrease their production decently without taking a major hit. Venezuela's produces heavy crude anyway, which is more difficult and time consuming to change into gasoline, so their production should not dramatically affect domestic gas prices. I am not sure about the production capabilities of the other OPEC countries not mentioned (Ecuador, Indonesia, Iran, Iraq, Nigeria).

Not so... Saudi Arabia is now running a deficit! And I have already pointed out Venezuela and Iran's situation.

Quoting Texan (Reply 9):
Saudi Arabia's fields are not as plentiful as they once were, however. IF an OPEC member disobeyed and did not decrease production, could Saudi Arabia exert the same amount of pressure? Their fields have been pumping at over 90% capacity for years now; they cannot simply turn a knob and make more oil flow out of the ground. So anyway, it will be interesting.

Saudi Arabia cannot exert the same amount of pressure.



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineTexan From New Zealand, joined Dec 2003, 4277 posts, RR: 52
Reply 11, posted (5 years 8 months 1 week 3 days 22 hours ago) and read 3475 times:



Quoting Planemaker (Reply 10):
Iran, Russia and Venezuela all need +$80/bbl just to balance their budgets. "By decreasing" oil production they will not be able to jack up prices by 100% to balance their budgets.

Iran and Venezuela are dramatically hurt by the domestic gasoline subsidies, true. I assume Saudi and some of the other oil producing countries (Egypt) are in the same situation. But by decreasing production, prices SHOULD increase. If this happens and oil returns to the $80 level OPEC seeks, then that goal will have been met. However, the current oil price downturn also will hopefully convince some of the OPEC countries of the necessity of economic diversification and increased foreign direct investment and control of facilities.

Moreover, by decreasing production, their hope is of course to limit supply. The question that remains is whether they will "be able to jack up prices by 100%" or not. I agree, they likely will not meet their goal, especially in the current economic climate, where few countries will balance their budgets. But not balancing a budget is not the end of the world (just ask the U.S.).

You are definitely correct about Venezuela, though. They were one of the exceptions. Their costs will remain relatively fixed regardless of the price of oil because of Chavez's policies. Not much supply and demand can do about poor governance in the short term...

Quoting Planemaker (Reply 10):

Saudi Arabia cannot exert the same amount of pressure.

I was trying to allude to that by saying they can no longer just turn a knob and have more oil magically appear. We still do not know what kind of pressure Saudi Arabia can exert, though. Even then, though, they may decide not to take the risk. Regardless, this is all speculation because we are not at that point  Smile

Quoting Planemaker (Reply 10):
The big 3 (at least 3 for now) just closed 3 SUV plants. For the next year or so, very few will be buying Escalades... or any SUVs. There has been a fundamental paradigm shift that play out over the next few years that will continue to defang OPEC.

I know, and thank goodness. Although I like the Escalade hybrid, which could get all the way up to 20 mpg! And all for a price tag of only $73,000+. Again, we shall have to see how the entire scenario plays out.

Texan



"I have always imagined that Paradise will be a kind of library."
User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6152 posts, RR: 35
Reply 12, posted (5 years 8 months 1 week 3 days 21 hours ago) and read 3460 times:



Quoting Texan (Reply 11):
But by decreasing production, prices SHOULD increase. If this happens and oil returns to the $80 level OPEC seeks, then that goal will have been met.

"Should" but obviously it isn't working since Mar 09 crude delivery is only $42... after the record production reduction (obviously the market has little faith in OPEC discipline, as well!)

People don't realize it but the world has changed... OPEC has lost its grip.

Quoting Texan (Reply 11):
But not balancing a budget is not the end of the world (just ask the U.S.).

It is for Venezuela, Iran and Russia because oil revenues represent an extremely high % of GDP... unlike the US where the deficit is a fraction of GDP.

Quoting Texan (Reply 11):
Again, we shall have to see how the entire scenario plays out.

There will be a few bumps on the road ahead with oil prices but OPEC will increasingly become irrelevant.



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineTugger From United States of America, joined Apr 2006, 5525 posts, RR: 8
Reply 13, posted (5 years 8 months 1 week 3 days 20 hours ago) and read 3459 times:



Quoting Texan (Reply 11):
Iran and Venezuela are dramatically hurt by the domestic gasoline subsidies, true. I assume Saudi and some of the other oil producing countries (Egypt) are in the same situation. But by decreasing production, prices SHOULD increase. If this happens and oil returns to the $80 level OPEC seeks, then that goal will have been met. However, the current oil price downturn also will hopefully convince some of the OPEC countries of the necessity of economic diversification and increased foreign direct investment and control of facilities.

Doesn't work like that. A few things:
1.) OPEC country's lie about what they produce (or more accurately over-produce) and the market trader's know this.
2.) the reserve capacity (OPEC has cut, in theory, production by almost 15%) exists and will be taken advantage of by any oil producing nation that can in order to make up their budget shortfalls. Of course two-thirds of the cuts have been done by Saudi Arabia who has the ability to produce more oil at lower cost than any other member. Additionally the market knows that there will be no shortage in the near future because there is enough "reserve" to meet increases in demand (that was the fear this summer as production was pretty maxing out and going down due to fields aging out).
3.) OPEC does not control the market as much as they used to, Russia keeps bloviating about joining the cuts but hasn't and won't because they need the money as much as anyone.
4.) well Four is a new aspect, there is a belief now that alternates may be available, more so than at the beginning of the summer due to the fact that everyone has been scratching for alternatives to $150 going on $200 a barrel oil. There is a real search on now, even if the lower prices are crimping any new developments, for sustainable energy alternatives. It could die out again as it has in the past if oil stays low, which is what Saudi Arabia is praying for and why they were always calling for oil to be around $70 to $80 per barrel (low enough to prevent price shock and encourage development of alternatives, high enough to make gobs of money).

Quoting Texan (Reply 11):
Moreover, by decreasing production, their hope is of course to limit supply. The question that remains is whether they will "be able to jack up prices by 100%" or not. I agree, they likely will not meet their goal, especially in the current economic climate, where few countries will balance their budgets. But not balancing a budget is not the end of the world (just ask the U.S.).

Other countries will never be extended the credit that the USA is being extended now. The world already thinks it is crazy how things are now but the ONLY country they all seem willing to invest in and think will recover strongly is the USA.

Tugg



I don’t know that I am unafraid to be myself, but it is hard to be somebody else. -W. Shatner
User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6152 posts, RR: 35
Reply 14, posted (5 years 8 months 1 week 3 days 18 hours ago) and read 3432 times:



Quoting Tugger (Reply 13):
4.) well Four is a new aspect, there is a belief now that alternates may be available, more so than at the beginning of the summer due to the fact that everyone has been scratching for alternatives to $150 going on $200 a barrel oil. There is a real search on now, even if the lower prices are crimping any new developments, for sustainable energy alternatives. It could die out again as it has in the past if oil stays low, which is what Saudi Arabia is praying for and why they were always calling for oil to be around $70 to $80 per barrel (low enough to prevent price shock and encourage development of alternatives, high enough to make gobs of money).

In addtion to your above point, as I mentioned earlier, there is a paradigm shift that won't see us succumbing to past practices of returning to "life as normal"... even with "low" oil prices. There are a few key points that highlight why this shift has staying power:

1. National security... aside from the fact that the military is the largest single user of oil in the world, over $100-billion in the defence budget is to maintain a military posture in the middle east just to safe guard the military's access to oil. Ironic... burning crude to ensure supply of crude!

2. Trade deficit... most people think that our largest trade deficit is with China (which is true country wise) but in dollar terms is it crude - our crude deficit dwarfs our China deficit. The oil deficit is the largest transfer of wealth in history.

3. Climate change... there is a consensus on climate change and there will be increased policy addressing this issue. A carbon tax or cap and trade is inevitable.

Quoting Tugger (Reply 13):
The world already thinks it is crazy how things are now but the ONLY country they all seem willing to invest in and think will recover strongly is the USA.

In fact, right now, with the almost zero yield on T-bills, people are effectively paying the the government to take their money!!



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineFlexo From St. Helena, joined Mar 2007, 406 posts, RR: 0
Reply 15, posted (5 years 8 months 1 week 3 days 14 hours ago) and read 3413 times:

Well, we currently see a very strong correction of exaggerated oil prices.
The almost vertical drop will definitely soon end though as otherwise we would hit zero in a couple of months.

Right now everyone seems to be waiting to see the bottom to go back in oil. IMHO we will see a very strong recovery of oil prices soon after year end. Then the banks have lots of surplus liquidity which they currently are stacking up to be safe for the turn.
In lack of other profitable investments (IMO shares won't recover before mid 2009) I can see commodities and especially oil going up soon and then quickly.

So, my guess is that oil won't go below US$ 30,-


User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 16, posted (5 years 8 months 1 week 3 days 13 hours ago) and read 3407 times:



Quoting Texan (Reply 9):
Also, in terms of oil imports, the U.S. imports more oil from both Canada and Mexico than any other country. Just in case anybody is wondering, here are the official government oil import numbers for the month of September (numbers are in thousands of barrels):

Thanks for some real numbers. But just as most OPEC countries are a little casual with the truth, I do wonder where the 10 million barrels imported by the US from the US Virgin Islands really came from. Perhaps it was recycled Extra virgin olive oil from Italy sold as biofuels.  duck 


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6152 posts, RR: 35
Reply 17, posted (5 years 8 months 1 week 3 days 8 hours ago) and read 3373 times:



Quoting Flexo (Reply 15):
IMHO we will see a very strong recovery of oil prices soon after year end.

No we will not see a "strong" recovery soon after year end... March delivery of crude is already trading in the low $40s.

Quoting Baroque (Reply 16):
Perhaps it was recycled Extra virgin olive oil from Italy sold as biofuels.

Similar to the recycled "molasses" from Brazil that we import from various caribbean countries.  Big grin



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineWN700Driver From , joined Dec 1969, posts, RR:
Reply 18, posted (5 years 8 months 1 week 3 days 6 hours ago) and read 3348 times:

I agree with Planemaker.


This is a lot bigger than just oil and banks. And Russia, although OPEC is just going to have to get used to Russia and Canada, IMHO. No, the problem is that the world economy is a place it really hasn't been before. While it is in NOW WAY as bad as it was during the real depression (gawd, how I wish people would stop making that careless comparison..) there are new factors now that were not present then.

Namely credit and that new role of the governments of the world as failure subsidisers. The problem with the latter is self explanitory, but the problem with credit is not so simple. Credit ultimately makes things harder, but softer and more comfortable too. There are good reasons why people often refer to credit as the Methadone of the financial world. As long as people and companies can put reality at bay, there will be no reason to increase the price of anything.

I say this for a few reasons. It has been said that Saudi and other OPECs are now runnig a deficit. This is true. But misleading. They are Operating at a deficit, but are nowhere near bottoming out cash wise. For this reaon, I believe they could sustain $15 bbl oil for the better part of six months if they wanted to. They won't. I still think $30 is as low as it will go. But I also think it will stay there for at least another six months, perhaps a little more. I think after that it will gradually move to a point where WTI Oil ends up at about $75. That's a good line for everyone, but it will be a while before we are there...

My advice. Buy your futures within the next few months...


User currently offlineFlexo From St. Helena, joined Mar 2007, 406 posts, RR: 0
Reply 19, posted (5 years 8 months 1 week 3 days 2 hours ago) and read 3328 times:



Quoting Planemaker (Reply 17):
No we will not see a "strong" recovery soon after year end... March delivery of crude is already trading in the low $40s.

Fair enough, I should have been more specific - I was thinking about oil futures.

All this is guesswork anyway obviously but it will be very interesting where the banks are going to place the hundreds of billions of excess liquidity thhey are hoarding after the year turn.


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6152 posts, RR: 35
Reply 20, posted (5 years 8 months 1 week 2 days 6 hours ago) and read 3269 times:



Quoting WN700Driver (Reply 18):
It has been said that Saudi and other OPECs are now runnig a deficit. This is true. But misleading. They are Operating at a deficit, but are nowhere near bottoming out cash wise. For this reaon, I believe they could sustain $15 bbl oil for the better part of six months if they wanted to.

Saudi and Kuwait could (very large reserves vs small populations) but not the other countries... more importantly "enemies" of the US... Iran and Venezuela (and non OPEC Russia).

Iran has +71-million pop with 20-30% UNEMPLOYMENT!!!! Oil accounts for 80% of export earnings (yet Iran imports around 40% of its gasoline) and energy subsidies amount to 18% of GDP. 50% of Venezuela's budget is dependent on oil exports (which are 90% of total export revenues) and inflation is running at 36%. Nigeria is in the same boat as is Indonesia (in fact, they barely even export oil now and will be leaving OPEC at the end of the year). Econmically, Russia is in the same sorry boat... but exacerbated by the Georgian war and the flight of foreign capital and the recession.

Quoting WN700Driver (Reply 18):
But I also think it will stay there for at least another six months, perhaps a little more. I think after that it will gradually move to a point where WTI Oil ends up at about $75. That's a good line for everyone, but it will be a while before we are there...

Avoiding some geo-political crisis, there is no reason why oil will reach $75/bbl given all the tech, economic and policy developments coming down the pike.

Quoting Flexo (Reply 19):
All this is guesswork anyway obviously but it will be very interesting where the banks are going to place the hundreds of billions of excess liquidity thhey are hoarding after the year turn.

It isn't guesswork... but based on econmic facts. The only guesswork is if whether there will be some sort of geo-political strife that will drive up oil prices (i.e. Saudi domestic terrorism against oil installations, Iran closing the Strait of Hormuz)... and possibly because of the low oil prices.

After the debacle of this past year, the banks are not going to gamble on oil.



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlinePPVRA From Brazil, joined Nov 2004, 8961 posts, RR: 40
Reply 21, posted (5 years 8 months 1 week 2 days 4 hours ago) and read 3252 times:

Quoting Planemaker (Reply 12):

Quoting Texan (Reply 11):
But by decreasing production, prices SHOULD increase. If this happens and oil returns to the $80 level OPEC seeks, then that goal will have been met.

"Should" but obviously it isn't working since Mar 09 crude delivery is only $42... after the record production reduction

Careful with that, contracts were being signed for the end of this year for $200bbl. We all know what happened then. March delivery contracts are future contracts, they mean little as to where spot prices will actually be in March.

Quoting Planemaker (Reply 12):
(obviously the market has little faith in OPEC discipline, as well!)

Heard of that, too.

Quoting Planemaker (Reply 20):

After the debacle of this past year, the banks are not going to gamble on oil.

Commodities are the very basis of any economy. They should be the first one to recover.

PS: not saying they will gamble on futures, though. There may not even be that much of an incentive to gamble on it unless we get another economic bubble. Or, high inflation could send people running towards commodities.

[Edited 2008-12-28 14:02:36]


"If goods do not cross borders, soldiers will" - Frederic Bastiat
User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6152 posts, RR: 35
Reply 22, posted (5 years 8 months 1 week 1 day 22 hours ago) and read 3202 times:



Quoting PPVRA (Reply 21):
Careful with that, contracts were being signed for the end of this year for $200bbl. We all know what happened then. March delivery contracts are future contracts, they mean little as to where spot prices will actually be in March.

$200/bbl crude... that was a WHOLE other ball game... different rules, playing field and players... and it ain't comin' back! If anything, spot prices could be lower considering the economic and political environment.

Quoting PPVRA (Reply 21):
Commodities are the very basis of any economy. They should be the first one to recover.

But, as noted above, not oil because the fundamentals have changed. This time, as I have pointed out throughout this thread, there has been a paradigm shift and we are not going back to "normal".



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 23, posted (5 years 8 months 1 week 1 day 19 hours ago) and read 3178 times:



Quoting PPVRA (Reply 21):
Careful with that, contracts were being signed for the end of this year for $200bbl. We all know what happened then. March delivery contracts are future contracts, they mean little as to where spot prices will actually be in March.

Correct. Futures bear some relation to forthcoming prices but not much. For a better idea of uture prices, I can supply a dartboard complete with a small supply of darts!  duck 

Quoting Planemaker (Reply 20):
Saudi and Kuwait could (very large reserves vs small populations) but not the other countries... more importantly "enemies" of the US... Iran and Venezuela (and non OPEC Russia).

Iran has +71-million pop with 20-30% UNEMPLOYMENT!!!! Oil accounts for 80% of export earnings (yet Iran imports around 40% of its gasoline) and energy subsidies amount to 18% of GDP. 50% of Venezuela's budget is dependent on oil exports (which are 90% of total export revenues) and inflation is running at 36%. Nigeria is in the same boat as is Indonesia (in fact, they barely even export oil now and will be leaving OPEC at the end of the year). Economically, Russia is in the same sorry boat... but exacerbated by the Georgian war and the flight of foreign capital and the recession.

Saudi, Kuwait, Iraq and Iran fields are more that 50% produced - exactly how much more is a bit of a mystery. (One of the more amazing things about the reserves of most of those countries is that they have remained constant for nearly 20 years while production has ranged between about 3.5 billion barrels a year and 1 billion barrels a year - yet another example of the Magic Pudding)

Indonesia now consumes more oil than it produces but Nigeria is still exporting about 2 million barrels a day, depending on which pipelines have been blown up this week.

Exactly which boat do you think Russia is in? "The getting less for its oil this year boat" - yes. Not sure which other boats it is in. Certainly no boats that do not encourage Russia to figure out ways of increasing the price for its oil. On the other hand, Saudi A has a long history of trying to discourage alternative fuels. That is probably why it flooded the market in the early 80s. It was concerned that high prices mid year were encouraging alternative fuels. The current low might be Saudi saying, if you want to do alternative fuels, it will cost you, are you willing to pay more than we can make you pay?

Quoting Planemaker (Reply 22):
But, as noted above, not oil because the fundamentals have changed. This time, as I have pointed out throughout this thread, there has been a paradigm shift and we are not going back to "normal".

Has there been a paradigm shift? Nice idea, but I rather doubt it. The costs of a PS are just too high if there is a cheaper alternative. Eventually you will be right, but not just yet!!!


User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6152 posts, RR: 35
Reply 24, posted (5 years 8 months 1 week 1 day 16 hours ago) and read 3158 times:



Quoting Baroque (Reply 23):
The current low might be Saudi saying, if you want to do alternative fuels, it will cost you, are you willing to pay more than we can make you pay?

No, the Saudis are not saying that.... and the paradigm change is not just about alt fuels.

First, in general, the world was in a far different geopolitical environment than today... back then OPEC, and Saudi in particular, had much more clout.

Second, and specifically about Saudi, the Saudi budget is so much larger than in the '80's... and they really do need the revenue (though less than any other OPEC country or Russia). Oil accounts for 75% of budget revenue and 90% of export revenue. With its demographics and high unemployment, the Saudi's cannot afford "to cut their nose to spite their face"... this time. That is why they recently went on record as saying that they want $75/bbl (which is still too low for Iran and Venezuela).

Quoting Baroque (Reply 23):
Has there been a paradigm shift? Nice idea, but I rather doubt it.

Just look around... It is not just about alt fuels.

First, the credit crunch has triggered consequences...

- People are returning or parking their SUVs, or are not using them as much.
- SUV sales have evaporated and 3 SUV plants were just shut down.

Second, more fuel efficient vehicles are entering the global fleet... and the electrification of tranport vehicles has started.

Third, public policy addressing fuel efficiencies are increasing.

Fourth, finally, government and the public are getting in synch regarding the national security aspects of petro-politics.

Fifth, climate change is accepted by the majority of people... and there will be a carbon tax.

Sixth, alt fuels...  Smile

So, countries that are dependent on oil revenues will require annual increases to match their growing populations... while on the other hand, total crude demand will decrease year over year due to technology and policy.



Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
25 Baroque : I can only assume that Tuvalu is more isolated than I had supposed. Most of the factors you list have been off and running in the RoW (rest of the wo
26 Planemaker : Ah... no. There hasn't been plug-in hybrids in Europe nor electric cars. Not so for many reasons... starting with the simple fact that the new vehicl
27 Flexo : Maybe,but None of your suggestions are affordable any more. Obama would be a fool to introduce any tax or fee that would harm the economy.
28 Planemaker : Not so at all... just consider that the recession started a year ago and yet we were paying up to $147/bbl ($700-billion on an annualized basis) and
29 Nitepilot79 : as far as sachs-goldman can dig
30 PPVRA : Driving energy prices back up during a bad economy will only delay recovery and add to the suffering of people who are in really bad shape. People ar
31 Planemaker : Ah???? We are paying 75% LESS for crude than the summer and down from $90 at the start of the year. As the WSJ says, there is lots of room for a gas
32 Flexo : With this there is the problem that most fuel efficient cars aren't produced by American manufacturers, so really that would be the most beneficial f
33 PPVRA : If you want to address many of the issues you pointed out above in this thread, then replace gas taxes with tolls on the highways. Road pricing will
34 Post contains images Planemaker : Actually, Honda and Toyota have quite a few plants in North America and build most of their fuel efficient cars here - including in a year the Prius
35 PPVRA : Tolls would also promote ride-sharing, buses, and even subways. I don't think its too costly, plenty of countries do it. Obama wants to spend a lot o
36 WunalaYann : I remember a few years ago a UN summit on energy conservation and Saudi Arabia actually denouncing the efforts made by Western countries to diversify
37 Planemaker : FYI, we already have tolls in many areas... and not just on turnpikes but bridges and tunnels as well. Again, as I have said several times now, I am
38 WunalaYann : Define "far more". We are talking about investing $850 BILLION into infrastructure. But I agree with you - it is quicker to tax fuel. Only we are aim
39 Baroque : Great discussion folk, and interesting to learn that the morning and evening commutes are so choked in Tuvalu, I would have thought the problems there
40 Post contains links Planemaker : If you want real economist talk... then the fuel price should include its real cost... such as that part of the defense budget devoted to ensuring oi
41 Baroque : Well it is more a classic US econo-political rant than a serious discussion of almost anything. For starters if low oil prices were to cause the fall
42 Post contains links and images Planemaker : Hardly a rant. It clearly lays out each countries economic situation... facts are facts. Since you don't like the WSJ... perhaps the Economist is a b
43 Flexo : I think just 6 months ago the consensus on CNBC was that oil will be at $200 by the end of the year... Close enough, just $ 160,- off. Im surprised t
44 Baroque : No, I quite like WSJ, just not their rants! Well yes, those are the facts about their dependence on oil, it is the inferences drawn from the fairly o
45 Post contains links Planemaker : No, that wasn't consensus... the $200 figure was put out by Goldman Sachs (who were heavy into oil speculation). Well, that is their analysts job aft
46 Baroque : Looks like we have a deal at USD45 then. So now all you others know this will not even be close. I was not paying proper attention to the rather odd
47 Post contains links PPVRA : Some speculators were actually buying oil contracts at $200: http://www.bloomberg.com/apps/news?p...601087&sid=ayQXcHVStlP8&refer=home
48 Baroque : You might know this PPVRA, were any of the more significant oil companies able to park some forward oil at prices above USD150? I suspect it may have
49 Planemaker : It could very well be that way... one way or the other! On the one hand, we could have a major Middle East incident (not puny like Gaza)... and Niger
50 Baroque : About the same time as some major landmark for the 787 - probably! Anyway, while Astuteman is sitting back finishing his popcorn, you will have plent
51 MD11Engineer : Actually I don't think so. Ok, the price spike in summer hurt me a bit, but just because diesel is cheap now (first time since years a liter of diese
52 Post contains links WunalaYann : It looks like some people in the US are starting to see the light. http://news.yahoo.com/s/ap/20090102/ap_on_go_ot/gas_tax http://news.yahoo.com/s/ap
53 PPVRA : Sorry, but I don't have that information. It would indeed be interesting to know, though. " target=_blank>http://news.yahoo.com/s/ap/20090102/...e_ta
54 Planemaker : Well, it will be easy enough to see the actual situation when the monthly stats get released... but I agree with you. Anecdotedly, a banker friend of
55 PPVRA : Taxing gas for this purpose would be an official recognition of dirty policies in the middle east and elsewhere and if nothing is done about to chang
56 Post contains links Baroque : Well I hope you are both right. One tends to feel a bit pessimistic in Aus at this time of year when the annual petrol wasting festival called the Su
57 MillwallSean : I am not a person with knowledge enough to predict oilprices. i assume few people can these days. But I do know my economical statistics and some numb
58 Rara : I assume nobody can. Many of the good arguments in this thread are based on factual developments. Nowadays, the price for oil is obviously not or onl
59 Baroque : All true, but Millwall makes some good points. Take the total disaster that will befall Russia and Iran. Well how about the US? It is paying about 1.
60 Post contains links Planemaker : The discussion has not been about just Iran (or Russia... or Venezuela) but how these countries are very dependent on oil revenues for their state bu
61 F9Animal : That just breaks my heart! How about all these planes flying on bio lately? I can't wait until OPEC becomes NOPEC.
62 Planemaker : Actually, it is big gain for consumers... with little pain for the oil majors. Exxon's 2007 total average cost of production was $6.77 per barrel. De
63 Baroque : No I will not cry you a river, but I think you will find the rate and tax payers of oil producing regions will do just that - as they suddenly discov
64 Planemaker : Perhaps now, fewer Silk Worms might make their way to the Rafah tunnels... Exxon's reduced tax "contribution" is relatively miniscule to the trillion
65 Baroque : Well it is going to be a mixed bag. The US is currently saving about 1.5 billion a day compared with oil at its peak. So most of that is available to
66 Planemaker : Yes, perhaps some portion, but not nearly as much as you might imagine out of a foreign total of $3042.7-billion (which is less than 40% of total Tre
67 Flexo : Interesting stat, what's your source for it? (I'm not doubting the numbers, just interested) Yeah, isn't that the craziest thing? Has there ever been
68 Baroque : A bit sobering that the sub-prime mortgages were crazy too and they did not last for ever did they? So it might be with the US Treasuries. The Chines
69 Post contains links Planemaker : Here you are ... http://www.treas.gov/ It is all relative... in a cash flight to safety, which other currency is "safer"? What lower oil price "downs
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