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AeroWesty
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Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 5:39 pm

Crude oil prices this week have dropped below the Saudi 'cost of production' (including social programs).

Can Saudis beat North Dakota in an oil price war?

The coming revolution in energy isn't just limited to oil, as I posted about last year, methane hydrate could become a reasonable alternative to natural gas. Along with shale oil technology improving, resulting in even lower production costs, the same thing is happening in the renewables industry, where the cost of production continues to drop.

Threats such as ISIS could become a mere footnote in history, if a drop in energy prices causes the economies of countries with significant sovereign financial obligations to falter, as they struggle to meet their cost of doing business.

Is OPEC ready to go toe-to-toe in an all-out price war with the rest of the world over energy prices?
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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 6:32 pm

Quoting AeroWesty (Thread starter):
Is OPEC ready to go toe-to-toe in an all-out price war with the rest of the world over energy prices?

It's an interesting question. The good news for OPEC, is that they can pretty much turn the dial to 11 and watch the oil flow in order to pay for their Social programs. The bad news for the rest of us, is that fracking would suffer if OPEC turned open the fields.........in the short term.

I currently think OPEC is actually trying to get Oil down to 70-80 to make max pain for fracking, and to slow down the Electric/renewables push that has gathered quite a bit of steam. One thing about this though is that quite a bit of the cost of Fracking is tied to the cost of gas and oil derivatives, so lower oil lowers their costs too.

The upside of this is that lower oil means that more money will be freed up for the rest of the economy for now.
Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did..So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.--Mark Twain
 
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 6:41 pm

Quoting AeroWesty (Thread starter):
the same thing is happening in the renewables industry

When economies depend less on fossil fuels (oil in particular), they will be insulated from shocks like ISIS, Al Qaeda, and other groups. Natural disasters would be the only disruption IF it gets to that.

Quoting Casinterest (Reply 1):
I currently think OPEC is actually trying to get Oil down to 70-80 to make max pain for fracking
Quoting Casinterest (Reply 1):
The good news for OPEC, is that they can pretty much turn the dial to 11 and watch the oil flow in order to pay for their Social programs.

Why would OPEC increase production to harm other oil producers? They'd pretty much want to reduce output for the same amount that fracking is producing. Keeps the cost stable per supply vs demand. If for social programs, OPEC would benefit from higher prices. If for the barrel of oil you're guaranteed to get $10 more if you ask for it, you will, so if the main goal is to fund social programs back home, you can bet OPEC members will reduce output. Economies survived paying $100/barrel; OPEC can aim to keep that target price: any lower, it harms OPEC. Any higher, your customers may not keep up.
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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 7:06 pm

Quoting einsteinboricua (Reply 2):
Why would OPEC increase production to harm other oil producers? They'd pretty much want to reduce output for the same amount that fracking is producing. Keeps the cost stable per supply vs demand. If for social programs, OPEC would benefit from higher prices. If for the barrel of oil you're guaranteed to get $10 more if you ask for it, you will, so if the main goal is to fund social programs back home, you can bet OPEC members will reduce output. Economies survived paying $100/barrel; OPEC can aim to keep that target price: any lower, it harms OPEC. Any higher, your customers may not keep up.

Sure, but if OPEC reduces production, and the frackers are able to keep increasing production, OPEC is making less on less production. OPEC, in the short run is better off over producing at lower prices.
Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did..So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.--Mark Twain
 
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 7:30 pm

Quoting AeroWesty (Thread starter):
Is OPEC ready to go toe-to-toe in an all-out price war with the rest of the world over energy prices?

They won't get into a price war. They will cut production. They know short term rest of the world cannot fill the gap, so prices will go back up quickly.

They cut oil price only when they think any renewable energy idea picking up steam. Low oil price obviously puts the idea on back burner.
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 7:38 pm

Quoting dtw2hyd (Reply 4):
They won't get into a price war. They will cut production. They know short term rest of the world cannot fill the gap, so prices will go back up quickly.

They cut oil price only when they think any renewable energy idea picking up steam. Low oil price obviously puts the idea on back burner.

Low oil prices put alternatives on the back burner for a time, but cutting production raises prices, which drives renewables and alternatives.

OPEC doesn't have the power it used to contrary to popular belief. Most developed nations aren't at the mercy of OPEC anymore. However, developing nations still rely heavily on oil and that is where OPEC still holds power.
 
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 7:39 pm

Quoting Casinterest (Reply 1):
The good news for OPEC, is that they can pretty much turn the dial to 11 and watch the oil flow in order to pay for their Social programs.

... while it keeps non-OPEC oil in the ground for the future. I've few problems with that scenario other than it delays technological advances to replace standard fossil fuels.
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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 7:48 pm

Quoting AeroWesty (Reply 6):
while it keeps non-OPEC oil in the ground for the future. I've few problems with that scenario other than it delays technological advances to replace standard fossil fuels.

True, but OPEC is in a bit of a panic now. I can't remember if it was in your article or elsewhere that I read that in 2005 the US imported 60% of our oil. Now the US is down to 5-10 % imports. This in and of itself is detrimental to OPEC. Their only saving grace has been China.
Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did..So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.--Mark Twain
 
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 8:14 pm

Quoting Casinterest (Reply 7):
True, but OPEC is in a bit of a panic now.

Oil prices for WTI were $70 in 2012, OPEC was not in a panic 2 years ago.
Oil prices for WTI were $40 in 2009, OPEC was not in a panic although they did cut some exports.

Oil Prices are $85 today, there is no panic only an article on the assumption that OPEC members could not cut back on its outlays.

You would have to explain how Saudi's expenses have increased from profitable at $70 two years ago to not profitable at $89 in that short period of time according to the article.

The US would be pretty good in the $85 to $90 range. Still profitable for exploration and production and still costly enough to make alternate sources viable.

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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 8:19 pm

Quoting Casinterest (Reply 1):
The upside of this is that lower oil means that more money will be freed up for the rest of the economy for now.

Indeed - this shouldn't be overlooked. It wasn't coincidence that the GFC started when oil was near historic highs - while the real estate bubble and the crazy financial instruments used by banks/Wall Street were certainly a cause, the fact that everything costs more when oil is high helped lead to a slowdown since consumers had less disposable income because more of their paycheck went into their gas tank while at the same time anything they wanted to buy cost more to offset the increase in production and transport to market costs caused by higher oil.
 
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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 8:31 pm

Quoting okie (Reply 8):
You would have to explain how Saudi's expenses have increased from profitable at $70 two years ago to not profitable at $89 in that short period of time according to the article.

Arab spring, and the associated outlays .

Quoting okie (Reply 8):
The US would be pretty good in the $85 to $90 range. Still profitable for exploration and production and still costly enough to make alternate sources viable.

Yep, which is why I think OPEC keeps producing down to about 70 or so.
Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did..So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.--Mark Twain
 
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 10:19 pm

Quoting AeroWesty (Thread starter):
Threats such as ISIS could become a mere footnote in history
Quoting einsteinboricua (Reply 2):
When economies depend less on fossil fuels (oil in particular), they will be insulated from shocks like ISIS, Al Qaeda, and other groups.

I'm a strong proponent of domestic energy production and export, but the quotations above are wishful thinking.

Low oil prices will not cause ISIS or Al Qaeda to go away. For proof, observe that Al Qaeda established itself in an era of low oil prices. Therefore, even if the civilized world has energy security, that does not ensure physical security. High profile terrorist attacks are historically disruptive and measurable events on a macroeconomic scale.
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RE: Crude Falls Below Saudi Break-even Price

Thu Oct 09, 2014 11:03 pm

Quoting Casinterest (Reply 1):
The bad news for the rest of us, is that fracking would suffer if OPEC turned open the fields.........in the short term.

I'm really not sure if fracking is that great a way to go. The science is not in, in terms of the impact it can have on the communities. Water and earthquakes are two issues that have to be cleared up big time.

Right now I believe that we are better off investing in wind and solar. There is a huge benefit to build up home solar units to lower demand in those peak period summer days. Power companies can lower investments needed to meet those peak periods if there is sufficient solar distributed throughout the market area. It can also, to some degree, help when weather knocks out electrical service to an area.

Apple is also demonstrating the potential of solar on their solar farms that power their billion dollar server farms. And we are seeing adds around here about a Florida power company that is combining solar and natural gas - using solar to minimize gas usage.

The more you look at it the more you want to have a base of power delivered by solar & wind as it allows petroleum resources to be delivered to more profitable areas, like pharmaceuticals.
 
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 12:02 am

Quoting DfwRevolution (Reply 11):
the quotations above are wishful thinking.

Maybe, maybe not.

There's no denying that the petro-states are mainly propped up by income from the sale of energy. If global energy prices wither to where society as they know it begins to collapse, or sovereign funds need to begin selling off foreign investments to support the status quo, the attention will begin to be drawn inward.

How fast that will/could happen is anyone's guess. Technology in the energy industries has advanced quickly, and countries such as the U.S. are within a decade(?) of becoming energy self-sufficient. Societies have changed rapidly before, and there's no saying that they may not again, given the right impetus.
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 12:50 am

Quoting Ken777 (Reply 12):
Right now I believe that we are better off investing in wind and solar.

Wind is still deceivingly expensive.

So what are the reasons for the price of oil coming down to this level? I imagine it has to do with the slowing down of the world´s major economies and China. If that is the reason, it´s one to be difficult for OPEC to get the prices back up.
 
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 3:07 am

Quoting AR385 (Reply 14):
Wind is still deceivingly expensive.

Between the increases in earthquakes and water pollution we may be looking at costs of fracking that is far higher than wind or solar. We need to wait until the science is clearly known, and what costs (if any) will need to be covered by the revenues generated from fracking.
 
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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 3:24 am

Quoting Ken777 (Reply 12):
Right now I believe that we are better off investing in wind and solar. There is a huge benefit to build up home solar units to lower demand in those peak period summer days. Power companies can lower investments needed to meet those peak periods if there is sufficient solar distributed throughout the market area. It can also, to some degree, help when weather knocks out electrical service to an area.

Of course this is where the future goes, which is also why I don't think OPEC can afford to reduce producing. Solar in the future will be built into metal roofs, and will greatly reduce the demand on oil. However that is still a bit off in the future. right now fracking is dangerous economically for OPEC. The environmental impact is no doubt a concern, but it has reduced OPEC's influence on Oil Prices.
Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did..So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.--Mark Twain
 
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 3:30 am

At what price does the extraction of oil from the Canadian Tar Sands become uneconomic? My understanding is that oil prices needed to be reasonably high to make doing so viable.

Quoting Ken777 (Reply 12):
I'm really not sure if fracking is that great a way to go

I agree, but IMO natural gas that has been extracted thanks to fracking is better than coal. If there were flames coming out of my kitchen tap, I'd probably be saying otherwise.

Quoting Casinterest (Reply 16):
Of course this is where the future goes, which is also why I don't think OPEC can afford to reduce producing. Solar in the future will be built into metal roofs, and will greatly reduce the demand on oil. However that is still a bit off in the future.

+1

[Edited 2014-10-09 20:32:45]
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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 3:50 am

Just as an aside . This weekly Net Oil Import chart highlights how much things have changed since 2005 . The US has gone from 12-13 million barrels a week of imports down to 5 - 6 million.

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WTTNTUS2&f=W


Canada gives us the largest share of our imports, and based on the 2014 numbers it is above the 33% of all imported oil they provided last year now.

http://www.eia.gov/petroleum/supply/weekly/pdf/table8.pdf
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rwessel
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 4:25 am

Quoting ZKOJQ (Reply 17):
I agree, but IMO natural gas that has been extracted thanks to fracking is better than coal. If there were flames coming out of my kitchen tap, I'd probably be saying otherwise.

The question, at least as regards greenhouse gasses, is not really settled. It crucially depends on the amount of methane leakage during the fracking and collection process. Methane is something like 20 times more potent a GHG as CO2 (on a mass basis, when considered over a century). If you halve the CO2 output at the point of use by using natural gas instead of coal (and it's somewhere in that ballpark), you erase your advantage once you get to about 6-7% leakage. Now the leakage rate for traditional natural gas wells is lower than that, but the numbers for fracked wells are just not solid yet (and range from 3-25%, depending on the source).
 
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einsteinboricua
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 11:54 am

Quoting DfwRevolution (Reply 11):
Low oil prices will not cause ISIS or Al Qaeda to go away. For proof, observe that Al Qaeda established itself in an era of low oil prices. Therefore, even if the civilized world has energy security, that does not ensure physical security. High profile terrorist attacks are historically disruptive and measurable events on a macroeconomic scale.

You're missing the point. Al Qaeda and ISIS will not go away, but because oil would no longer be the driving force of the economies, if oil spikes, only a few services will be affected. If a company gets its power source from the sun and has no need for oil, oil can shoot up to $300/barrel and the company is still able to operate normally.

Ergo, if terrorists decide to disrupt oil production in OPEC countries, the shock will be felt only by those who completely or mainly depend on oil and not those that have sought alternate sources.
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BestWestern
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 12:14 pm

The other country hurting in this is Russia.
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aircatalonia
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 12:29 pm

WTI has gone from about 100$ to about 85$ in the last 90 days.

In the same period of time an ounce of gold has gone from almost 1,400$ to about 1,200$.

I think that this has more to do with the USD than with the real value of oil, or the state of alternatives, which is pretty much the same as 3 months ago.
 
dtw2hyd
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 1:12 pm

Do we know what was the agreed rate between Russia and China on their 30 year deal? If the open market falls below China will throw a hissyfit.
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AeroWesty
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 4:24 pm

Quoting Casinterest (Reply 18):
This weekly Net Oil Import chart highlights how much things have changed since 2005

Interesting numbers in those links. Besides the changes in U.S. imports, I look at those figures and recall that during the first oil crisis in the 70s, known oil reserves were only 11 years worth at the then worldwide consumption rate. 40 years later and we're still pumping away.

Quoting aircatalonia (Reply 22):
I think that this has more to do with the USD than with the real value of oil, or the state of alternatives, which is pretty much the same as 3 months ago.

I've been watching that as well—there are some forecasts out there talking about a EUR:USD rate of 1.15 to 1.2 by January, down from 1.26 today.

The thing with commodities though, is that their prices will always have a natural floor—the cost of raw production. All of this new non-OPEC oil coming onto the market is slowly becoming cheaper to produce regardless of where the dollar goes on the world market.
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 4:44 pm

Quoting dtw2hyd (Reply 23):
Do we know what was the agreed rate between Russia and China on their 30 year deal? If the open market falls below China will throw a hissyfit.

the actual price is not known but the price was at a discount to the world oil price for at the time the oil is purchased. So China will never pay above the market price. Russia was in a weak bargaining position (Putin needed the deal to happen, Xi didn't) and China will never accept paying more than it has to (market price) or it simply would not have done the deal (or has an out to allow it to reneg on it). That is why the value of the deal was a range and nebulous.

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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 5:56 pm

Quoting Tugger (Reply 25):
oil

Sorry, Nat Gas, not oil.

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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 5:57 pm

The Saudis aren't hurting for anything. They've invested oil revenues wisely into other income streams for the govt. And, North Dakota oil isn't a big percentage of the world market, it's just distorting the US market. Saudi oil shipments have been shifting eastward ever since 2005 or so. They sell more oil to Asian customers who don't have any shale oil. I believe they will cut production moderately.

On the way down, it's a good time to buy up oil.
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 6:09 pm

Quoting BestWestern (Reply 21):
The other country hurting in this is Russia.

Yup. I have read that Rosneft needs to oil price to be at least at $110 to break even. Currently they are losing $ 30 - 40 with each barrel produced.
Rosneft has already asked Putin for a loan of $ 40 billion, IIRC, a few weeks ago and Putin wanted to use the Russian pension funds to provide the money. Add to this the Ruble being in freefall mode, with the Russian central bank trying to support it to prevent an inflation. They spend at least $ 350 million every day to defend the Ruble. Somebody is getting rich, but it isnot the Russian government, as foreign exchange traders have aimed at Russia for a big killing (like soros did with the British some years ago, or during the Asian crisis).

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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 6:29 pm

Quoting Pellegrine (Reply 27):
And, North Dakota oil isn't a big percentage of the world market, it's just distorting the US market.

No, it distorts the world market. What the US and Canada are now producing has shifted the sellers of oil elsewhere. if you look at the US history of oil imports, OPEC countries have lost a huge market destination and are competing in the remaining, but definitely growing markets elsewhere. . Shale oil discoveries and recovery is just getting heavily underway in many parts of China. This will further restrict OPEC markets.
Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did..So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.--Mark Twain
 
ElanusNotatus
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 6:35 pm

I don't pretend to understand the ins and outs.

Some things that I am aware of is that during a previous period of price escalation the OPEC countries, including Saudia Arabia, increased oil production in an endeavour to prevent a drop in demand that threatened the world economy. Saudi Arabia saw that it would not benefit from a depression in the major importers. Despite claims of support for terrorism, Saudi Arabia stepped up production to contain a common threat.

Secondly, a fall in production and the consequent drop in living standards in OPEC are likely to exascerbate socisl instability and potentially reduce control in affected countries. This might benefit organisations like al Qaeda or ISIS, not necesarily them but organisations who use similar arguments, undermining governments in the those countries. This is something that would adversely affect both the rulers of those countries and the West. Would the rulers of those countries stand idly by in the face of a threat to their own existence? That SA, the UAE and others have shown willingness to support the US in its efforts against ISIS suggests not, even if disagreement over the best approach remain.

Attempts to immure the West by reducing dependence on imports may seem attractive but will only have limited affect, if only because the degree of dependence varies and alternative sources will not see their role as being primarily philanthropic. Private gain may appear more attractive than public benefit.
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Pellegrine
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 6:43 pm

Quoting Casinterest (Reply 29):
No, it distorts the world market. What the US and Canada are now producing has shifted the sellers of oil elsewhere. if you look at the US history of oil imports, OPEC countries have lost a huge market destination and are competing in the remaining, but definitely growing markets elsewhere. . Shale oil discoveries and recovery is just getting heavily underway in many parts of China. This will further restrict OPEC markets.

Shale in China is overrated. OPEC imports to the US have been declining since before shale was even a topic in the US. OPEC has other customers. Tight oil (from shales) isn't as dependable a resource as conventional oil, it costs a lot more to produce, wells decline much quicker, etc. The market is stable. If Saudis want $100/bbl oil, they'll get it, they still have pricing power. They're just sitting back and watching for now. US doesn't export, and 1.1 Mbbl/day from North Dakota ain't changing that anytime soon.
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AeroWesty
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 7:33 pm

Quoting Pellegrine (Reply 31):
If Saudis want $100/bbl oil, they'll get it, they still have pricing power.

I'd bet real money that that exact thought went through the minds of the Chinese when they penned their agreement with the Russians.

Just like the world has been trying to break free from the dominance of the dollar, the world has also been looking for ways around OPEC's pricing power. One day, eventually, those sellers will get to a point where they'll have to start looking at what they can get for a price, and accept anything reasonable, simply because their economies are based on petro-dollar incomes which need to be fed.

Quoting Pellegrine (Reply 27):
The Saudis aren't hurting for anything. They've invested oil revenues wisely into other income streams for the govt.

No doubt. There comes a time when, if you have to get into a price war, those assets may need to be sold off or mortgaged to meet the monthly obligations if oil prices get too low. If you remember, the Japanese got severely burned in many cases when they began to sell off trophy properties purchased in the 80s, which only made things worse for the Japanese economy.

Am I predicting massive doom and gloom across OPEC? Certainly not, that would be silly. What I am watching is how all of these factors we've talked about above are working together, which are the most important indicators, and where it'll all take us.
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planemaker
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 8:02 pm

Quoting Ken777 (Reply 12):
The more you look at it the more you want to have a base of power delivered by solar & wind as it allows petroleum resources to be delivered to more profitable areas, like pharmaceuticals.

RIght now there are only a few new nuclear power plants being built domestically but in China they are going gangbusters!! And like all else, China has developed their own industry and are starting to sell their power plants overseas. And this is only with the Gen 3+ reactors. The Gen 4 will be modular, scaleable and cheaper. Nuclear will become the base load generator for the largest (eventually) economy in the world.

An important point that everyone overlooks is that we have reached peak oil demand. And the energy productivity path that allowed us to reach this point is not only baked in but will accelerate. One example appropriate for this site is just look at aviation with the 787, A350, neo, MAX, etc.

Quoting Casinterest (Reply 18):
Canada gives us the largest share of our imports, and based on the 2014 numbers it is above the 33% of all imported oil they provided last year now.

And it would be a heck of a lot more if Keystone XL were approved. The discount for tar sands oil has reached $30/bbl.
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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 8:46 pm

Quoting Pellegrine (Reply 31):

Shale in China is overrated. OPEC imports to the US have been declining since before shale was even a topic in the US. OPEC has other customers. Tight oil (from shales) isn't as dependable a resource as conventional oil, it costs a lot more to produce, wells decline much quicker, etc. The market is stable. If Saudis want $100/bbl oil, they'll get it, they still have pricing power. They're just sitting back and watching for now. US doesn't export, and 1.1 Mbbl/day from North Dakota ain't changing that anytime soon.

The Saudi's do not have pricing power at 100. Oil over 100 has allowed Shale and other alternatives to be developed and explored, and it is this production that is threatening OPEC. my mande argument above is that OPEC wants to produce more to push the prices down to help choke off the Shale development. The four largest producers of Oil are Russia, Saudi Arabia, the US and China. Russia and Saudi Arabia are not in the four largest consumers group, so what happens in the US matters a great deal to Saudi Arabia and Russia. Especially since the US now has the lead in Oil product production from 2013.

Quoting planemaker (Reply 33):

And it would be a heck of a lot more if Keystone XL were approved. The discount for tar sands oil has reached $30/bbl.

No, Keystone is about pushing exports out of the US. There are already routes between Canada and the US. The big kicking point of keystone XL is the connecting piece across Nebraska, where more than anything it is local state legal challenges causing issues.
Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did..So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.--Mark Twain
 
AeroWesty
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 8:53 pm

Quoting planemaker (Reply 33):
And it would be a heck of a lot more if Keystone XL were approved. The discount for tar sands oil has reached $30/bbl.

I'm going to have to re-read this article in the New Yorker from 2013—I had the impression that Obama was for Keystone, but it was tied up in too many political issues (what isn't?):

The President and the Pipeline

What is the discount for tar sands in relation to? WTI?
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Aesma
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 8:55 pm

Quoting AeroWesty (Reply 13):
How fast that will/could happen is anyone's guess. Technology in the energy industries has advanced quickly, and countries such as the U.S. are within a decade(?) of becoming energy self-sufficient. Societies have changed rapidly before, and there's no saying that they may not again, given the right impetus.

And how fast oil prices, high or low, will be forgotten when we'll be mourning our disappeared beaches, our flooded coasts and low lands, when Bordeaux wine will have to be made in the UK, when iconic species will have disappeared on top of the millions we hadn't heard of...
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
planemaker
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RE: Crude Falls Below Saudi Break-even Price

Fri Oct 10, 2014 9:42 pm

Quoting Casinterest (Reply 34):
No, Keystone is about pushing exports out of the US. There are already routes between Canada and the US.

The existing "routes" cannot handle tar sand output.

Quoting AeroWesty (Reply 35):
What is the discount for tar sands in relation to? WTI?

It was $40 in relation to WTI.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
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casinterest
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RE: Crude Falls Below Saudi Break-even Price

Sat Oct 11, 2014 2:51 am

Quoting planemaker (Reply 37):
The existing "routes" cannot handle tar sand output.

Sure they can. Just at a discount. However eventually Keystone or the great Eastern route to Nova Scotia will be built .
Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did..So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.--Mark Twain
 
planemaker
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RE: Crude Falls Below Saudi Break-even Price

Sat Oct 11, 2014 4:42 am

Quoting Casinterest (Reply 38):
Sure they can.

No they can't...

Canadian oil sands project shelved over lack of pipelines

Lack of pipelines costs Canadians

Canada to lose $15-billion a year on Keystone, lack of oil pipeline capacity

Oil pipeline infrastructure bottlenecks costing Canadian economy billions of dollars

Statoil Stalls Canadian Tar Sands Project Amid Delays On Keystone XL Pipeline

N.W.T. premier in U.S. promoting ‘Arctic Gateway’ pipeline

Quoting Casinterest (Reply 38):
However eventually Keystone or the great Eastern route to Nova Scotia will be built .

The fact that Canada is desperately trying to get approval for pipelines going west, south, east and, now, even looking at going north shows how constrained production is because of a lack of pipeline capacity. And there is no guarantee that any will be built.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
AeroWesty
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RE: Crude Falls Below Saudi Break-even Price

Sat Oct 11, 2014 4:48 pm

In the car last night, I caught a program on the BBC World Service called "The End of the Oil Age?", which explains how the shale oil industry has cut the relationship between oil prices and turmoil in the mideast. They also reported that the Saudis have sharply cut its price for Asian customers, and are in a price war to maintain production, including discounting to the U.S. to maintain market share.

Lots of interesting stuff:

http://www.bbc.co.uk/programmes/p027xnpc
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planemaker
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RE: Crude Falls Below Saudi Break-even Price

Sat Oct 11, 2014 6:41 pm

Quoting AeroWesty (Reply 40):
Lots of interesting stuff:

People really should listen to the program. Most haven't dialed into the fact that there is a structural change in demand.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
AeroWesty
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RE: Crude Falls Below Saudi Break-even Price

Sat Oct 11, 2014 6:52 pm

Glad you liked it.

Quoting planemaker (Reply 41):
Most haven't dialed into the fact that there is a structural change in demand.

I was totally unaware of the plants coming online in the next few years which will allow petrochemicals to be made from N. American-sourced natural gas instead of oil, that the program spoke about. We're at the dawn of a huge revolution in how fossil fuels are used.
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Okie
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RE: Crude Falls Below Saudi Break-even Price

Sat Oct 11, 2014 10:46 pm

Quoting Pellegrine (Reply 31):
Shale in China is overrated

They have the technology, equipment and shale. They do not have the infrastructure yet. China was a century behind they will be caught up in two decades.

Quoting planemaker (Reply 39):
Reply 39

The Chinese are heavy investors in the Tar Sands, Chinese are heavy investors in US Treasuries, the Keystone pipeline will come because of that pressure.
China needs the heavy end hydrocarbons for roads and roofs on a massive expanding infrastructure and economy, the US needs someone to keep buying debt.

Quoting AeroWesty (Reply 42):
I was totally unaware of the plants coming online in the next few years which will allow petrochemicals to be made from N. American-sourced natural gas instead of oil, that the program spoke about. We're at the dawn of a huge revolution in how fossil fuels are used.

Amazing what the free market does when left to its own resources.

The Saudi's/OPEC will handle the low prices just fine.

The other hand the low oil prices may be the death nail Venezuela and Maduro as oil exports is the only source of USD. They are in massive debt, 60% inflation, declining oil production from government control and have no other source other than oil converted to USD to buy food. This is going to get tough for Venezuela before any other country.

Okie
 
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RE: Crude Falls Below Saudi Break-even Price

Sun Oct 12, 2014 12:26 am

Quoting okie (Reply 43):
the Keystone pipeline will come because of that pressure.

China owning a bit of the tar sands will certainly not force the Keystone XL to be built.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
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RE: Crude Falls Below Saudi Break-even Price

Sun Oct 12, 2014 1:50 am

Quoting planemaker (Reply 39):
Statoil Stalls Canadian Tar Sands Project Amid Delays On Keystone XL Pipeline

I think Keystone is an excuse for Statoil to pull out. They and the govt (Statoils owner) have been getting a lot of stick from all quarters in Norway, the public don't like this investment at all.
 
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RE: Crude Falls Below Saudi Break-even Price

Sun Oct 12, 2014 11:21 pm

For a long time there has been an inverse relationship between the dollar and the price of oil. But this may change when America resumes the role of largest global oil producer.

The oil situation represents potentially a tectonic shift in global economics and power structures. Russia, China and the Middle East will be the relative losers while Europe will be only marginally effected. America stands to solve every financial problem it faces and re-assume the kind of economic dominance it had in the post-WW2 era. It really is monumental. The world's sole superpower has a weakness right now in that it still needs foreign oil and must face a glut of cheap labour in Asia - but making America an energy superpower again will quickly quell any talk of a superpower rival or global alternative to the dollar as the currency of international trade. The trade deficit with China quickly disappears....

I never understand why Obama doesn't make his whole second term based on energy, the way the first term was based on healthcare. The energy in America ensures their place in the world for another fifty years.




Pu
 
planemaker
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RE: Crude Falls Below Saudi Break-even Price

Mon Oct 13, 2014 12:52 am

Quoting pu (Reply 46):
The world's sole superpower has a weakness right now in that it still needs foreign oil and must face a glut of cheap labour in Asia - but making America an energy superpower again will quickly quell any talk of a superpower rival or global alternative to the dollar as the currency of international trade. The trade deficit with China quickly disappears....

There is more than just one weakness. And On a PPP basis China is said to have passed the US. And within in two years on a GDP basis. And the US doesn't export crude so the trade deficit with China won't disappear.
Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
 
Osubuckeyes
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RE: Crude Falls Below Saudi Break-even Price

Mon Oct 13, 2014 4:48 pm

Quoting planemaker (Reply 47):
And the US doesn't export crude so the trade deficit with China won't disappear.

There is a fair possibility that will change with mounting pressure.

http://www.bostonglobe.com/business/.../F1kKlSk7jBMtLWuolivpDL/story.html

http://www.forbes.com/sites/timworst...s-us-to-lift-crude-oil-export-ban/

http://www.cfr.org/oil/case-allowing-us-crude-oil-exports/p31005
 
AeroWesty
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RE: Crude Falls Below Saudi Break-even Price

Mon Oct 13, 2014 5:38 pm

Quoting osubuckeyes (Reply 48):
Quoting planemaker (Reply 47):
And the US doesn't export crude so the trade deficit with China won't disappear.

There is a fair possibility that will change with mounting pressure.

I'm at a point where I'd like to see the U.S. be able to export as much of the world's market for value-added petrochemical products as possible. I understand the whole Keystone argument—oil sands are basically tar, and more polluting when burned than coal—but Canada isn't going to sit still while that oil can be shipped by rail for a $10-15 premium, or stuck into a pipeline for a Canadian port of export.

There's a lot of cash and high-value technology which can be developed and retained by becoming the middle-man in the process. So what if a limited amount of crude from N. Dakota gets mixed in there? In the back of my mind I'd still rather us hold onto as much of our own native supply in the ground while the rest of the world exhausts their supplies first (increasing its value by doing nothing), but if you're gonna be a player, ya gotta play.

Quoting pu (Reply 46):
I never understand why Obama doesn't make his whole second term based on energy, the way the first term was based on healthcare.

Read Obama's second inaugural address, then the New Yorker link I posted above. He does feel it's part of his legacy to address, but as usual, how to go about it is mired in politics. I'd like to see Obama do more by executive order. From the New Yorker link:

Quote:
Accounts of Obama’s private views about his second-term climate agenda suggest that he sees the E.P.A. rules as his real legacy on the issue, and that he’s skeptical of the environmentalists’ claims about Keystone.
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