Low oil prices
 

Now around $80/bbl and falling. This will have significant effects on the world economy. Russia will be stressed, money to the oil countries of the middle east dry up to barely cover bribes, and there may be a temporary freeing of money to boost the Christmas season spending. All of the above work to the advantage of the U.S.

Your comments?

Comment
 

Every time something happens that takes our minds off the state of things, I wonder what's really going on. Is it because it's an election year; or what?

Good comment. I'm wondering myself if it is a prop for the economy in some ways.

If the price per barrel goes too low, fracking will become too expensive to be worthwhile. There is a debate on what exactly that price is, but the numbers I've been hearing range from $50 to $80 a barrel. There are a lot of jobs in and connected to that industry.

If it is some conspiracy to prop up the economy what's the down side. High energy prices are like a hidden tax on almost everyone. Besides causing higher prices for every consumer good that needs transportation everyone that doesn't walk to work will have more money in their pocket at the end of each week. Home heating oil prices have dropped which will also have a significant impact on household budgets, especially in the northeast. For a large segment of the population that's money that won't go into a savings account but will go directly back into the economy at stores and restaurants. I can say from having run a small town retail store from 2002-11 that gas prices have a huge affect on people's spending patterns. It's an effect that will ripple through the economy more quickly and with more impact that any govt program.

On a world level it will mean more economic stress on Russia which will cause the true power brokers in charge to put pressure on Putin to dial back, at least temporarily. It's likely Iran will also feel the pinch and be more amenable to modifying their behavior. It may even cost groups like ISIS some of the money they're making from oil sales. All positives.

It may impact further expansion in frakking here in the US and cause the shutdown of some marginal operations and wells. But this always happens during the booms and busts of oil prices. I've read that most of the oil patch can still make money in the $80-$85/bbl range that oil is currently at so I don't expect much immediate impact. It may limit further expansion for a while but the costs of frakking and directional drilling have already been dropping and were expected to continue to do so anyway.

Anecdotally, the drop in gas prices is saving me $7/ week from early this year and my wife about $25/wk. It'll have a big impact on our household budget.

http://mobile.bloomberg.com/news/201...tml?cmpid=yhoo

Maybe it is just another left wing, liberal plot to stick not to the rich.

Oil prices are set on the world market, not the U.S. market.

It's not always just about us.

It just may one reason it is coming down is the Shale oil in the Dakotas is putting more oil in the market place. So I hope prices don't go down too much further to stop exploration and opening more wells up. The advancement of fracing and horizontal drilling has also helped to put more oil on the market place. We THE USA are just about to become THE oil producing country ALL thanks to fracing and other cool technologies that have come on board in the last few years.
So oil prices better not drop any more as wells are being shut down. Not Good.
http://oilprice.com/Energy/Oil-Price...perations.html

Don't be fooled into thinking the price of oil is for, by, or of US politics. Our system has been cast for decades. It is more about creating the right kind of instability in the Middle East.

On a related note, what's the deal with ISIS selling oil? Who would buy it? I'm not. The ol' BS meter is pegged.

From what I've read they're trucking it across the border to Turkey, at cut rate prices. And yes, we're all buying it once it hits the international market.

This may be to hurt the Russians or reduce US shale development. It seems like mostly Saudi jaw boning driving the price down with no actual action on their part. They need about $90 a barrel to cover their cost of government so I don't expect this to last long.

That's not going to happen. It's the production from fracking that's driving the price down. Fracking production is in the driver's seat right now.

I expect oil prices to stay low for the foreseeable future (the next few years).

The price of gas should hit rock bottom just about Christmas and stay low after that.
That's my ETA on finishing my wood powered truck.

Thank you! And, I believe you. My whole life, diesel was always cheaper than gas. It did it's flip flop within weeks of us buying a diesel pickup...

Yep, I remember distinctly the day gas went over $2/gal. It's the day I bought my Suburban.

Here's a good article on why oil prices fell, and future pricing forecasts. It inferred that OPEC was protecting its market share, and testing at what price, more costly US production was profitable at.
http://www.bloomberg.com/news/2014-1...r-so-fast.html

................For the present the drilling will continue , daily rental for drilling rigs will or should decrease because some producers will cut their rigs loose when the well is completed . The drilling in south tx in the Haynesville shale may see a small decrease in the rig count .
................Most savy lessee(s) include a clause in their lease that requires the producer to start drilling before the end of the lease term or they lose their lease . So , the producer drills atleast one well so the lease is 'held' by production . As far as the effects on fracking , producers keep drilling wells , they drill , set pipe , cement , perforate , and log the well , then they Wait to frac until the price comes back up .
................Those companies with sufficient capital resources and lots of undrilled leases will actually INcrease their drilling activity because their costs of drilling decrease when the market price per barrel drops as it has recently .

BUMMERS your predictions have been so off..spring came and went and still no joy in medical insurance or health care. And Q4 no more. So, gas prices will most likely rebound with avenging.

The other aspect is the continued shale plays for natural gas. This has changed somewhat with drillers concentrating on areas that produce along with natural gas others like propane. A stripper plant nearby that was recently completed is shipping a large number of truck loads of propane daily.

With the oncoming shutdown of coal fired plants the replacements, which can be up and running in two years, will be fueled by natural gas.

In the near future exports of CNG will climb as export facilities are completed. That means driiling of new natural gas wells will continue. A byproduct is oil. That means more, albeit small, sources will be produced with the side effect of dumping more oil on the market. The oil has to removed meaning it will go to market no matter what the price in order to continue producing natural gas.

My guess is that natural gas prices will increase in the future but oil prices will slowly drop or stagnate at lower levels. This country is on a path to be a major exporter of energy in one form or another.

The bright spot is lower cash flow into the Middle East and the potential to reduce state or private funding of terrorism. We can expect that regime change may also occur. While I doubt that will happen in Russia, Putin understands he is on an "energy" leash. His dreams of empire look short-lived.

LOL :)

DW just purchased her dream sports car that averages 14MPG. :facepalm:

I figured gas would start heading to $5 gal!

It will just give it time :sing: Thing with some of us and our cars is we have them because that is what we want and at this time in life we don't care what gas cost . I got the wants for a Mustang Cobra ,that would give us three Mustangs :sing: Even at 63 years old I like a little zip under the hood :D

.............I purchased a brand new 2012 Mustang GT , solid black , 412 Hp with 6 speed manual ! Was faster than a car load of illegals in a 57 Chevy with a rocket in the trunk . I loved that car but my Arse was simply too close to the pavement , I was constantly dodging big rig recaps as they would have really torn up the under carriage had I ran over one . Traded it for 2011 F150 new supercrew with 5.0 . I love my pickup , more than I loved that mustang . , fordy

Oil
 

News tonight, NC is raising tax on fuel; effective 1/15. They say; because fuel prices are so low. How can they know that far ahead what gas prices will be? To get a tax increase.

Relax, folks. Saudis and most of the middle east have very low extraction costs. They are flooding the market in order to put the squeeze on the US producers who have costs in the $50 per bbl range. As soon as they've driven some of those fellows out of the business they will jack up the prices again.

Oil sands extraction costs are said to be around $75 per bbl. One new company says it can produce, with new technology, for around $38 per barrel. That is still higher than the Arabs' cost.

Danged A-rabs.

The gas is taxed by the gallon not the price per gallon . Its got to be more effeceint (sp) cars.

Under $50 a barrel. I expect much of the oilfield to start laying off soon. but that's the boom and bust of the oilfield.

East of the RockiesPriceChangeGvty
Adj*Altamont Yellow Wax38.91(1.90)Rocky Mountain Condensate43.91(1.90)Southwest Wyoming Sweet48.66(1.90)Uinta Basin Black Wax37.91(1.90)Western Colorado44.91(1.90)Note: Prices in $/bbl


http://crudemarketing.chevron.com/po...cing_daily.asp

Crud!!!!

Wolf, at those prices much of the oil patch is under water. So is the stock market; my few nickles are now pennies.

Actually, here in NC we have one of the highest gas taxes in the nation and they recompute it every six months based on the average price during a six month period. The tax goes up one cent to $.375 cents per gallon based off the sales price from April 2014 through Sept. 2014. Which of course was the highest priced period. Yet we are putting in toll roads because we can't raise enough money to build and repair roads. Idiotic!!!!!

http://www.wral.com/nc-gas-tax-will-...-day/14281211/

The stock market is doing fine today. It's up $175 on the day, and is only a few hundred below the historical high.

Ah yes but don't get too excited just yet. Russia just bumped their interest rates from 10 to 17% trying to stave off the financial depression that appears to be on the way. Trading has now been halted on the ruble...this may be the black swan event that many in the world have been looking for.

And here at home, drilling rigs are shutting down in North Dakota.
Not a problem you say? Well...there was a lot of money borrowed by bonds (mostly junk bonds) by drilling companies. If they can't make their payments, then there could be more problems here in the US.

http://www.bloomberg.com/news/2014-1...of-losses.html

Outsmarted by the Arabs -- again...

Some of their production costs are low but that's not so true of more recent field developments, some of them have been rather disappointing actually. They also do not have anything like the extra capacity that they used to have so they can't just open the valves to flood the market. This whole thing is more about jawboning and market demand. The Saudis don't want to have to reduce production to compensate for increase US production in the face of declining demand, it's that simple. They are also crushing the Russians which they like. You also have to consider that because of the steep decline curve in shale production it won't take much of a pull back in shale drilling and fracking to drastically alter the supply situation.

Ask that governor of yours what the heck the problem is. I lived in NC from 89-91. They were busy trying to build enough 4 lanes so everyone would be within 10 miles of one. Maybe the upkeep on that requires alot of tax. Anyway between the cost of living and all the northern east coasters moving in a buying up everything, it wasn't for me.

That's about the time the NCDOT coffers were busting at the seams. We had plenty of money for building and maintaining roads. Then the legislature decided to raid the accounts just like the Feds did Social Security. But the state can't just print money to cover the IOU's.

The Saudis are fully convinced that demand for oil will be gone long before their oil runs out. Right or wrong, that's how they approach the problem. Believing that, they want to sell all the oil they can for whatever they can get for it.

To keep things in perspective, good quality oil (west Texas intermediate) sold for $18 during the late 1980s oil glut. Saudis didn't mind $18 oil at all, and sold us all we wanted for that price. Adjusting for inflation, $18 oil in 1988 would be equivalent to $36 oil today. With oil at $55 today the Saudis are still riding high, and oil could drop another $20 and they'll still sell us all we're willing to buy.

Part of what you are saying is correct. However, given the current volume they are selling they need nearly $90 a barrel to cover the cost of running their government and all their programs. They are taking money from their reserves to cover the shortfall and I don't know how long they can or will want to sustain that. The other issue is that their oil is going to run out, a lot of their new developments have not been nearly as prolific as anticipated and the quality has been much lower than expected. Some fields are starting to water out. They are doing a whole lot of things to maintain or increase production that they never thought they would have to do and it's not working in many cases. So I'm really not buying that they expand demand to run out before their reserves do.

The former Saudi oil minister once said:

"Thirty years from now there will be a huge amount of oil - and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil."
http://www.telegraph.co.uk/news/ukne...-oil-ends.html

Oh yeah, they really believe that.

Nevada; I have a large part of my savings in oil stocks--down 25%. I don't know that the Saudi was wrong---

Not more than a few days ago I read that some auto outfit was readying a test model of the fuel cell for its autos. Work on fuel cells has been going on for a long time--there may be a break through.

I'd like to know--My habit has been to buy high and sell low, and I'd like to change that.

One thing about it; win lose or draw, the chemical industry will need oil for feedstocks. Half our clothing is now synthetic materiels from oil, and there are many other uses. For one thing, we've a lot of country roads that could be paved with asphalt. Oil will sell, but perhaps at lower prices.
Ox

Ox, I see we have the same investment strategy - buy high and sell low.

From what I can find, it looks like about 80% of a barrel of oil is used for heating and fuel and only about 20% for fertilizer, petrochemicals, asphalt, etc.

One stock I just sold was a company that makes petrochemicals. It was supposed to go up as oil went down, but instead it dropped hand in hand with oil companies. This market is strange.

The Saudis say a lot of things. Doesn't mean they're true. Dissembling is a fine art with that bunch.

Remember when someone said that nuclear power was going to make electricity too cheap to meter? Same thing, it's agenda driven.