bmacleod
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How Low Will Oil Go?

Wed Dec 24, 2008 2:35 pm

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?
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Alessandro
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RE: How Low Will Oil Go?

Wed Dec 24, 2008 7:02 pm

Yes, very interesting, I think 20 US$/barrel then lot of oil weels need to be capped due to cost of tapping.
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wn700driver
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RE: How Low Will Oil Go?

Wed Dec 24, 2008 7:18 pm

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?
Base not your happiness on the deeds of others, for what is given can be taken away. No Hope = No Fear
 
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Revelation
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RE: How Low Will Oil Go?

Wed Dec 24, 2008 7:27 pm



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...
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MarSciGuy
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RE: How Low Will Oil Go?

Wed Dec 24, 2008 7:47 pm

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...
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Tugger
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RE: How Low Will Oil Go?

Wed Dec 24, 2008 9:28 pm



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
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Alessandro
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RE: How Low Will Oil Go?

Thu Dec 25, 2008 1:17 am



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!
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Elite
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RE: How Low Will Oil Go?

Thu Dec 25, 2008 2:56 am

I'm going to go out on a limb here and say how about $15...
 
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RE: How Low Will Oil Go?

Thu Dec 25, 2008 3:38 am



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

Sorry, my bad, I clicked on the wrong 'quote text' box...
Inspiration, move me brightly! Light the song with sense and color.
Hold away despair, more than this I will not ask.
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texan
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RE: How Low Will Oil Go?

Thu Dec 25, 2008 4:12 am

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
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planemaker
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 3:28 am



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.
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texan
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 3:45 am



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
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planemaker
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 5:25 am



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
 
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Tugger
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 5:36 am



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
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planemaker
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 8:12 am



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
 
flexo
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 12:03 pm

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,-
 
baroque
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 12:52 pm



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 
 
planemaker
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 5:55 pm



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
 
wn700driver
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RE: How Low Will Oil Go?

Sat Dec 27, 2008 8:06 pm

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...
Base not your happiness on the deeds of others, for what is given can be taken away. No Hope = No Fear
 
flexo
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RE: How Low Will Oil Go?

Sun Dec 28, 2008 12:22 am



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.
 
planemaker
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RE: How Low Will Oil Go?

Sun Dec 28, 2008 7:41 pm



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
 
PPVRA
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RE: How Low Will Oil Go?

Sun Dec 28, 2008 9:41 pm

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
 
planemaker
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RE: How Low Will Oil Go?

Mon Dec 29, 2008 4:10 am



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
 
baroque
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RE: How Low Will Oil Go?

Mon Dec 29, 2008 7:09 am



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!!!
 
planemaker
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RE: How Low Will Oil Go?

Mon Dec 29, 2008 9:59 am



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
 
baroque
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RE: How Low Will Oil Go?

Mon Dec 29, 2008 10:09 am



Quoting Planemaker (Reply 24):
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.

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 world) for, well since Adam WAAB. Only in the US are these new. And even there, some are not even in force and most even when in force will not produce any measurable effects for some years. Only the lower mileages of SUVs will be a quick effect, and since oil got down to the 30, care to bet that the mileages have shot back up again?? The only thing that will keep them a bit down is the splendid winter in NA that you presumably know little about from Tuvalu!!

All very nice, but no real effect and where are alternative fuels at present I have to ask?

The main ones running are coal bed methane and tight gas shales, which are both in reality as "old as the hills".
 
planemaker
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RE: How Low Will Oil Go?

Mon Dec 29, 2008 11:02 am



Quoting Baroque (Reply 25):
Only in the US are these new.

Ah... no. There hasn't been plug-in hybrids in Europe nor electric cars.

Quoting Baroque (Reply 25):
And even there, some are not even in force and most even when in force will not produce any measurable effects for some years.

Not so for many reasons... starting with the simple fact that the new vehicles (and aircraft) entering the global fleet are more efficient than the ones they are replacing.... both private and commercial. In fact, Walmart's current fleet, one of the largest in the world, is 30% more efficient than their 2005 fleet... and they expect to be 100% more efficient by 2015.

Quoting Baroque (Reply 25):
The only thing that will keep them a bit down is the splendid winter in NA that you presumably know little about from Tuvalu!!

Ah... no. The recession will continue through 2009 will keep the miles down.

Furthermore, the new administration will implement policy to address climate change which will include a carbon tax, feebates, energy efficiency, conservation, etc. that will have immediate and growing effect.

So... on the one hand demand is reducing going forward while supply cannot be reduced due to the fact that the petro countries are dependent, year over year, upon increases in oil revenues.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
flexo
Posts: 344
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RE: How Low Will Oil Go?

Mon Dec 29, 2008 9:41 pm



Quoting Planemaker (Reply 26):

Furthermore, the new administration will implement policy to address climate change which will include a carbon tax, feebates, energy efficiency, conservation, etc. that will have immediate and growing effect.

Maybe,but

Quoting Planemaker (Reply 26):
... no. The recession will continue through 2009

None of your suggestions are affordable any more. Obama would be a fool to introduce any tax or fee that would harm the economy.
 
planemaker
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RE: How Low Will Oil Go?

Mon Dec 29, 2008 11:49 pm



Quoting Flexo (Reply 27):
None of your suggestions are affordable any more. Obama would be a fool to introduce any tax or fee that would harm the economy.

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 now we are paying over 75% less... so there is PLENTY of room to introduce a gas tax along the lines outlined in the WSJ.

Feebates are revenue neutral and effective and don't harm the economy.

And if you look at who he appointed as Energy Sec, you will see that Climate Change is a priority... and there will be a carbon tax or cap and trade.

And Obama has already said that part of the infrastructure stimulus package will include enregy conservation policy.

Last, but certainly not least, the auto bail out WILL include conditions requiring higher MPG vehicles.

P.S. Please look at oil prices today... barely broke $40/bbl! In the summer if this Gaza attack had occured oil would have spiked $20/bbl - now just a whimper. OPEC has lost all pricing power.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
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nitepilot79
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RE: How Low Will Oil Go?

Tue Dec 30, 2008 1:19 am

as far as sachs-goldman can dig  gnasher 
 
PPVRA
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RE: How Low Will Oil Go?

Tue Dec 30, 2008 7:45 pm



Quoting Planemaker (Reply 28):

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 now we are paying over 75% less... so there is PLENTY of room to introduce a gas tax along the lines outlined in the WSJ.

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 are trying to pay down their debts, and such a tax would get in the way. People are not going to buy electric cars when they can't afford it.

As for feebates, it depends on the type. Being revenue neutral doesn't mean it can't cause substantial distortions on the economy and how it allocates resources.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
planemaker
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RE: How Low Will Oil Go?

Tue Dec 30, 2008 8:59 pm



Quoting PPVRA (Reply 30):
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.

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 tax.

And it is much better that we increase the price of gas via a tax and keep the money in the US rather than allow OPEC to increase the price of oil and fund anti-US regimes in Iran and Venezuela (and non-OPEC Russia)!!

As I pointed out earlier, this year was the greatest transfer of wealth in history to petro countries.

We are suppose to be the most productive country in the world and yet we piss away billions a year burning gasoline... that has several negative effects to our economy and security. It makes absolutely no sense!

Quoting PPVRA (Reply 30):
People are trying to pay down their debts, and such a tax would get in the way.

It wouldn't becaase the next administration's plan would be to offset a gas tax with an income tax cut, as the WSJ editorialized.

Quoting PPVRA (Reply 30):
As for feebates, it depends on the type. Being revenue neutral doesn't mean it can't cause substantial distortions on the economy and how it allocates resources.

It isn't complicated and doesn't "distort" the economy. You pay less tax for fuel efficient autos and pay more on less fuel efficient autos.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
flexo
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RE: How Low Will Oil Go?

Tue Dec 30, 2008 9:35 pm



Quoting Planemaker (Reply 31):

It isn't complicated and doesn't "distort" the economy. You pay less tax for fuel efficient autos and pay more on less fuel efficient autos.

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 for Japan and Europe.

Quoting Planemaker (Reply 31):
It wouldn't becaase the next administration's plan would be to offset a gas tax with an income tax cut, as the WSJ editorialized.

That is actually a good plan, but I fear that Obama will use that switch to sneak in a tax raise.

Quoting Planemaker (Reply 31):

We are suppose to be the most productive country in the world and yet we piss away billions a year burning gasoline... that has several negative effects to our economy and security. It makes absolutely no sense!

 checkmark   checkmark   checkmark 
(I suppose you are talking about the US and not Tuvalu when you say 'we')
 
PPVRA
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RE: How Low Will Oil Go?

Tue Dec 30, 2008 10:45 pm



Quoting Planemaker (Reply 31):
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 tax.

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 internalize the true costs of road transportation, and actually give people a reason to not live as far from work and consider alternative transportation. In the end, replacing a 2ton vehicle for a 1.5ton vehicle but still drive the same mileage every year by yourself will have little to no beneficial effects, and certainly miss out on the potential savings out there. Not to mention electric cars work better if we are dealing with shorter distances and lower speeds, which will make them more attractive, from a financial angle and from a performance angle, the latter of which is the main criticism against them so far.

Quoting Planemaker (Reply 31):

It isn't complicated and doesn't "distort" the economy. You pay less tax for fuel efficient autos and pay more on less fuel efficient autos.

Which is distorting prices, the mechanism an economy uses to allocate resources, to influence people to make different choices than they otherwise would. Distortion is the whole logic behind these policies.

Regardless, many businesses actually need more powerful cars, and the ones who will hurt the most are the smaller businesses, the backbone of any economy.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
planemaker
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RE: How Low Will Oil Go?

Tue Dec 30, 2008 11:22 pm



Quoting Flexo (Reply 32):
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 for Japan and Europe.

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 in Alabama. However, we are not talking about a sea change to Big 3 fuel efficiency overnight but over several years. Part of the auto bailout will include provisions for American auto makers to greatly increase their CAFE numbers.

Quoting Flexo (Reply 32):
That is actually a good plan, but I fear that Obama will use that switch to sneak in a tax raise.

His Energy Sec has stated that he would like to see gasoline prices rise to European levels over 15 years.

I can't remember where in North America they implemented the first Carbon Tax, but earlier this year I remember reading that over a several years the tax would go up to around only 25 cents a gallon but... tax payers would receive it all back. Still... the opposing party screamed bloody murder. Crazy!

Quoting Flexo (Reply 32):
(I suppose you are talking about the US and not Tuvalu when you say 'we')

You are correct.  Smile

Putting the lack of productivity into focus, especailly the morning and evening commute, a driver represents on average only 6% of the mass that the engine has to move... what a waste!

Here is a book cover that I have paraphrased to "When you drive an SUV you ride with bin Laden"...



Quoting PPVRA (Reply 33):
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.

Too costly, too time consuming and not under federal jurisdiction... though I believe in tolls.

Quoting PPVRA (Reply 33):
In the end, replacing a 2ton vehicle for a 1.5ton vehicle but still drive the same mileage every year by yourself will have little to no beneficial effects

Not so at all! Multiply that by millions of vehicles and you have a HUGE reduction on oil imports!!

Quoting PPVRA (Reply 33):
Not to mention electric cars work better

I've already said that.

Quoting PPVRA (Reply 33):
Which is distorting prices, the mechanism an economy uses to allocate resources, to influence people to make different choices than they otherwise would.

If you want to call a price signal to increase productivity "distorting"... then fine.

Quoting PPVRA (Reply 33):
Regardless, many businesses actually need more powerful cars, and the ones who will hurt the most are the smaller businesses, the backbone of any economy.

Sorry... but not even close. Just take a look around on any morning and evening commute... we don't need SUVs or V8s. And a large part of the problem is that SUVs fall outside of the CAFE standards.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
PPVRA
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RE: How Low Will Oil Go?

Tue Dec 30, 2008 11:59 pm

Quoting Planemaker (Reply 34):
"When you drive an SUV you ride with bin Laden"



Quoting Planemaker (Reply 34):
Too costly, too time consuming and not under federal jurisdiction... though I believe in tolls.

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 of money anyways, might as well do it on something that is good. And better than paying people to dig ditches and cover them up again for no reason, like FDR did.

Quoting Planemaker (Reply 34):

Quoting PPVRA (Reply 33):
Not to mention electric cars work better

I've already said that.

You have to take it into the shorter distances context, which would be promoted with a toll system. Simply getting rid of SUVs won't bring down U.S. consumption to par with European levels, and current electric car technology could certainly use a hand from economics (and I don't even mean ugly subsidies or fiscal incentives).

Quoting Planemaker (Reply 34):
Sorry... but not even close. Just take a look around on any morning and evening commute... we don't need SUVs or V8s. And a large part of the problem is that SUVs fall outside of the CAFE standards.

There are fewer SUVs already, even fewer of the huge ones made by Ford and GM. As you said earlier, SUV plants are shutting down, too.

[Edited 2008-12-30 16:02:15]
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
WunalaYann
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RE: How Low Will Oil Go?

Wed Dec 31, 2008 12:08 am



Quoting Baroque (Reply 23):
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?

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 their energy sources. Veeeery responsible and considerate of sovereignty, the environment and future generations.

This Saudi swagger will last only as long as we give them a chance to.

Quoting PPVRA (Reply 33):
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 internalize the true costs of road transportation, and actually give people a reason to not live as far from work and consider alternative transportation

 thumbsup  Now THAT is some serious economist talk. You rule.  Smile

Quoting Planemaker (Reply 34):
Too costly, too time consuming and not under federal jurisdiction... though I believe in tolls.

Not that costly or time consuming. GSM technology and infrastructure is already firmly in place. All we need is a tag in each vehicle and to charge according to kilometres, emissions, fuel consumption, axle load, existence of public transport alternatives for a given route or whatever combination of these we wish.

In a $850b bucket, it would not amount to much.  Smile

Quoting PPVRA (Reply 35):
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 of money anyways, might as well do it on something that is good.

Oh dear. Keep the gems coming!!!!  bigthumbsup 

Quoting PPVRA (Reply 35):
current electric car technology could certainly use a hand from economics

And R&D, which can use public and private funding.

Quoting Planemaker (Reply 34):
we don't need SUVs or V8s. And a large part of the problem is that SUVs fall outside of the CAFE standards.

While I agree with your general technical assessment, I still think we should be free to build, and therefore purchase vehicles that comply with regulations. We just need to internalise all their operating costs.
 
planemaker
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RE: How Low Will Oil Go?

Wed Dec 31, 2008 4:11 am



Quoting PPVRA (Reply 35):
Tolls would also promote ride-sharing, buses, and even subways. I don't think its too costly, plenty of countries do it.

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 not only for tolls but for congestion pricing as in London, as well.

However, a fuel tax is much faster in curbing fuel use than tolls!

Quoting PPVRA (Reply 35):
Simply getting rid of SUVs won't bring down U.S. consumption to par with European levels

I didn't say that getting rid SUVs would bring down US consumption to European levels!!

Quoting PPVRA (Reply 35):
There are fewer SUVs already, even fewer of the huge ones made by Ford and GM. As you said earlier, SUV plants are shutting down, too.

What is your point?

Quoting WunalaYann (Reply 36):
Not that costly or time consuming.

It is far more costly than fuel taxes and feebates and much more time consuming.

Quoting WunalaYann (Reply 36):
While I agree with your general technical assessment, I still think we should be free to build, and therefore purchase vehicles that comply with regulations.

And the regulations (laws) have been a big part of the problem... they have been tailored by the auto industry and the oil industry lobbies.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
WunalaYann
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RE: How Low Will Oil Go?

Wed Dec 31, 2008 4:23 am



Quoting Planemaker (Reply 37):
However, a fuel tax is much faster in curbing fuel use than tolls!



Quoting Planemaker (Reply 37):
It is far more costly than fuel taxes and feebates and much more time consuming.

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 aiming for long term planning here, not just a way to make the 2010 budget look less atrocious. As you said, congestion pricing has to be part of any long term planning, but it goes beyond congestion. It is "pricing", altogether, that needs to be implemented, not just the congestion part.
 
baroque
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RE: How Low Will Oil Go?

Wed Dec 31, 2008 5:03 am

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 were more dependent on the timing of high tides. But over here in Aus, Tuvalu has its own role in the various mythologies, because its submersion is attributed to carbon dioxide emissions. Which glosses past the fact that atolls such at Tuvalu are always sinking due to crustal cooling and that normal reef processes are usually able to keep pace, so the cause of flooding on the coral atolls is most likely mismanagement of the reefs and coastlines much more than any global rise in sea levels. Funny thing is that this mechanism of atoll growth was worked out by Darwin - so quite a while ago!

But I digress!!

There seems to be more agreement than disagreement. I suppose that those outside the US, while acutely aware of the need for higher charges on fuel use (be it taxes, or tolls or congestion taxes) will truly be astonished if Obama is able to do much about it.

Certainly NOW is the time to do it, and if a policy was implemented rapidly, the US probably could cut a couple of million barrels a day off consumption and that WOULD have an affect on oil prices.

But really, to say that OPEC is a toothless tiger while maintaining that a POTUS could introduce even half European level fuel taxes has this observer "surprised".

Getting Indonesian bensin/petrol/gas prices up to nearly Rp6000 a litre (approx 60 US cents) while oil was about USD130 caused riots in the streets. (I would say the population carried on like a pork chop but that would be impolite!) Interestingly kerosene for cooking was even cheaper and even allowing for Government subsidies of course the market responded as you might expect and kerosene became very difficult to buy.

I would love to see it happen - good of us all and all that - but I will not hold my breath.

Just 8 hours to go, so a happy and prosperous 2009 to you all, and may your (and mine) pension funds recover at least a bit of what they lost in 2008!!!
 
planemaker
Posts: 5411
Joined: Mon Aug 25, 2003 12:53 pm

RE: How Low Will Oil Go?

Wed Dec 31, 2008 5:45 am



Quoting WunalaYann (Reply 36):
Now THAT is some serious economist talk.

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 oil supply - that alone would add $4/gallon to the price of gas... or the subsidies that big oil gets, etc, etc.

Quoting WunalaYann (Reply 38):
Define "far more".

Billions more.

Quoting WunalaYann (Reply 38):
But I agree with you - it is quicker to tax fuel. Only we are aiming for long term planning here, not just a way to make the 2010 budget look less atrocious. As you said, congestion pricing has to be part of any long term planning, but it goes beyond congestion. It is "pricing", altogether, that needs to be implemented, not just the congestion part.

I could give you several pages of long term planning!! Fuel taxes are a bullet but not a silver bullet... just look at Europe.  Smile

Quoting Baroque (Reply 39):
But really, to say that OPEC is a toothless tiger while maintaining that a POTUS could introduce even half European level fuel taxes has this observer "surprised".

Ah, no one said that Obama would introduce "even half European level fuel taxes"... so no need to be "surprised"!

However, OPEC is indeed a toothless tiger... Gaza being bombed and oil slides below $40/bbl... that is toothless. The consensus on CNBC today is that oil is going below $30/bbl next year.

Regarding my earlier points re. Iran, Venezuela and Russia... you should read this WSJ article...

The Wizards of Oil
As prices fall, so do the ambitions of Vladimir, Hugo and Mahmoud.

http://online.wsj.com/article/SB123059924483041283.html

A Happy and Prosperous 2009!
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
baroque
Posts: 12302
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RE: How Low Will Oil Go?

Wed Dec 31, 2008 6:30 am



Quoting Planemaker (Reply 40):
The Wizards of Oil
As prices fall, so do the ambitions of Vladimir, Hugo and Mahmoud.

http://online.wsj.com/article/SB123059924483041283.html

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 of at least two of those three governments, I bet you would like the replacement even less and it would not be democratic.

But Saudi production is probably still close to the stops. Decline is decline and while you can slow it, mostly it cannot be reversed and certainly not for long.

Quoting Planemaker (Reply 40):
A Happy and Prosperous 2009!

Oh, you mean oil back up to USD100 - thanks!!
 
planemaker
Posts: 5411
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RE: How Low Will Oil Go?

Wed Dec 31, 2008 7:21 am

Quoting Baroque (Reply 41):
Well it is more a classic US econo-political rant than a serious discussion of almost anything.

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 bit more to your standards  Smile ...

http://www.economist.com/world/europ...displaystory.cfm?story_id=12797734

Quoting Baroque (Reply 41):
For starters if low oil prices were to cause the fall of at least two of those three governments, I bet you would like the replacement even less and it would not be democratic.

First law of petropolitics states that the degree of democracy is inversely related to the price of oil... courtesy of Tom Friedman... http://www.foreignpolicy.com/story/cms.php?story_id=3426&page=1

Quoting Baroque (Reply 41):
Oh, you mean oil back up to USD100 - thanks!!

Oh, sorry that you need $100 oil to be happy in 2009!  

Unfortunately, oil won't be hitting $100 for a very, very long time.

[Edited 2008-12-30 23:49:45]
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
flexo
Posts: 344
Joined: Thu Mar 29, 2007 6:55 pm

RE: How Low Will Oil Go?

Wed Dec 31, 2008 10:10 am



Quoting Planemaker (Reply 40):
The consensus on CNBC today is that oil is going below $30/bbl next year.

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.
 Wink
Im surprised they are even making predictions like that any more!
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: How Low Will Oil Go?

Wed Dec 31, 2008 10:23 am



Quoting Planemaker (Reply 42):
Quoting Baroque (Reply 41):
Well it is more a classic US econo-political rant than a serious discussion of almost anything.

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 bit more to your standards

No, I quite like WSJ, just not their rants!  Big grin Well yes, those are the facts about their dependence on oil, it is the inferences drawn from the fairly obvious that I am not so sure about and that is where it goes off into a bit of a rant.

The Tom Friedman article (and I like Tom's work) is all very interesting BUT, I have been scratching my head and am yet to find a surge to democracy timed to coincide with a low in oil prices.

I tried Indonesia, and the change from Suharto was close to the low of 1998, but the really important elections were after the recovery in 1999. And anyone in Indonesia in 1998 would be hard pressed to link the resignation of Suharto to oil prices especially as the worst riots were in 1997 before the fall in oil prices. So I think I could draw a neat little chart for Indonesia to prove the exact opposite of the Friedman thesis. But then again if you were to ask the ghost of Suharto, he would say that Indonesia always had had elections. And he would not go one to say that it was also carefully explained to you for whom you should vote.

Quoting Planemaker (Reply 42):
Unfortunately, oil won't be hitting $100 for a very, very long time.

You might be right, but mostly if Obama does not manage to rescue the US economy I fear. There is this problem of economic recovery OR a sensible fuel policy, asking for both might be a bit like expecting to win the lottery twice (sorry I forgot, I usually win some European lottery or other twice a day according to my spam Email, I mean a real lottery with real money!). Oh well, anyone care to nominate what will win the annual AAPG contest to guess the price of oil on the 31st Dec for 2009. I don't have a clue myself except I doubt it will be between 30 and 40USD.
 
planemaker
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RE: How Low Will Oil Go?

Wed Dec 31, 2008 7:57 pm



Quoting Flexo (Reply 43):
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.

No, that wasn't consensus... the $200 figure was put out by Goldman Sachs (who were heavy into oil speculation).

Quoting Flexo (Reply 43):
Im surprised they are even making predictions like that any more!

Well, that is their analysts job after all. Based on the state of the economy, the credit crunch, and OPEC's pricing weakeness (the slide in oil even though the Gaza bombardment went into its 3rd day) made it fairly easy for them to come up with oil reaching $30/bbl.

Quoting Baroque (Reply 44):
No, I quite like WSJ, just not their rants!

Just for rant-less "facts", here are the Economist's take on the other 2 countries I highlighted...

Venezuela - Socialism with cheap oil

http://www.economist.com/research/ar...subjectid=381586&story_id=12853975

Iran - The party's over

http://www.economist.com/research/ar...subjectid=381586&story_id=12650281

Quoting Baroque (Reply 44):
The Tom Friedman article (and I like Tom's work) is all very interesting BUT, I have been scratching my head and am yet to find a surge to democracy timed to coincide with a low in oil prices.

I'm afraid that you didn't read the article very closely (here are just the graphs)...

http://www.foreignpolicy.com/images/petropolitics_1.jpg
http://www.foreignpolicy.com/images/Venezuela_060501.jpg
http://www.foreignpolicy.com/images/Russia_060501.jpg
http://www.foreignpolicy.com/images/IranChart_060501.jpg
http://www.foreignpolicy.com/images/nigeria_20060501.jpg

Quoting Baroque (Reply 44):
I tried Indonesia, and the change from Suharto was close to the low of 1998, but the really important elections were after the recovery in 1999.

Ah... you are again showing that you didn't read Friendman's article very closely... Indonesia does not fall into the category of a petrostate. Compared to the above countries where oil acounts for up to 90% of export earmings, for example, in Indonesia oil exports are below 20% of total exports. Likewise for the state budget.

Quoting Baroque (Reply 44):
You might be right, but mostly if Obama does not manage to rescue the US economy I fear.

We know that the economy is not going to be "rescued" in 2009... the best is that the slide bottoms out in the second half.

Quoting Baroque (Reply 44):
There is this problem of economic recovery OR a sensible fuel policy, asking for both might be a bit like expecting to win the lottery twice

You can have both.  Smile

Quoting Baroque (Reply 44):
I don't have a clue myself except I doubt it will be between 30 and 40USD.

I have a clue and I doubt that it will be above $50.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: How Low Will Oil Go?

Thu Jan 01, 2009 8:21 am



Quoting Planemaker (Reply 45):
Quoting Baroque (Reply 44):
I don't have a clue myself except I doubt it will be between 30 and 40USD.

I have a clue and I doubt that it will be above $50.

Looks like we have a deal at USD45 then.  chat 

So now all you others know this will not even be close.  pessimist   ouch 

Quoting Planemaker (Reply 45):
Quoting Baroque (Reply 44):
You might be right, but mostly if Obama does not manage to rescue the US economy I fear.

We know that the economy is not going to be "rescued" in 2009... the best is that the slide bottoms out in the second half.

I was not paying proper attention to the rather odd way the US defines a recession when I had an argument about a year ago that the US was heading for recession. Then we learned that the system puts nearly a 12 month lag into the announcement. The US went into recession just when I said it did and was chastised.

But that raises an interesting question. Presumably the same lag affects announcement of a recovery. That is a bit of a bitch!!

I think oil prices will surge on announcement of a recovery, but by the looks of it, that will be 12 months after it happens.  Confused
 
PPVRA
Posts: 7878
Joined: Fri Nov 12, 2004 7:48 am

RE: How Low Will Oil Go?

Thu Jan 01, 2009 7:26 pm



Quoting Planemaker (Reply 45):
Quoting Flexo (Reply 43):
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.

No, that wasn't consensus... the $200 figure was put out by Goldman Sachs (who were heavy into oil speculation).

Some speculators were actually buying oil contracts at $200:

Quote:
Oil $200 Options Rise 10-Fold in Bet on Higher Crude (Update5)

Jan. 7 (Bloomberg) -- The fastest-growing bet in the oil market these days is that the price of crude will double to $200 a barrel by the end of the year.

Options to buy oil for $200 on the New York Mercantile Exchange rose 10-fold in the past two months to 5,533 contracts, a record increase for any similar period. The contracts, the cheapest way to speculate in energy markets, appreciated 36 percent since early December as crude futures reached a record $100.09 on Jan. 3.

http://www.bloomberg.com/apps/news?p...601087&sid=ayQXcHVStlP8&refer=home
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: How Low Will Oil Go?

Fri Jan 02, 2009 6:08 am



Quoting PPVRA (Reply 47):
Some speculators were actually buying oil contracts at $200:

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 been the case, but I have not found any who have stated this. Most only ever give averages of hedging sales, which would not allow the little gem of what the highest prices paid actually were to be sorted out from the means.
 
planemaker
Posts: 5411
Joined: Mon Aug 25, 2003 12:53 pm

RE: How Low Will Oil Go?

Fri Jan 02, 2009 7:17 am



Quoting Baroque (Reply 46):
Looks like we have a deal at USD45 then.

So now all you others know this will not even be close.

It could very well be that way... one way or the other!  Big grin

On the one hand, we could have a major Middle East incident (not puny like Gaza)... and Nigeria might devolve into anarchy... and Russia might have problems pumping oil... and Mexico & the Gulf will have a lot of hurricanes, etc, etc.

On the other, if the above doesn't happen and the economy does not bottom out...

Quoting Baroque (Reply 46):
I think oil prices will surge on announcement of a recovery, but by the looks of it, that will be 12 months after it happens.

Ooooh, then that would be June 2010... at the earliest.

Quoting PPVRA (Reply 47):
Some speculators were actually buying oil contracts at $200:

Just so that people who are not familiar with oil contracts understand, speculators were NOT paying $200/bbl... they were paying for the option to buy oil at $200/bbl at some contracted point in the future. The option is a premium that is small compared to the price of the commodity and allows "gamblers" a cheap way to play the oil market. Before the credit crunch, hedge funds were up to 30-1 (and even more) leveraged on options... so with a relative small amount of cash they were able to manipulate the market by using sophisticated call (buy) and put (sell) option strategies.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein

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