Cheap oil - good or bad

[trottigy]

We all know there is no simple answer to this. Many are losing jobs in the oil industry, but at the same time many of us finally have a little extra money - thanks to cheaper gas pries  

 

Interesting take on this:

 

 

Plunging crude oil prices are diverting hundreds of billions of dollars away from the treasure chests of oil-exporting nations, putting some of the United States' adversaries under greater stress.

 

After two years of falling prices, the effects have reverberated across the globe, fueling economic discontent in Venezuela, changing Russia's economic and political calculations and dampening Iranian leaders' hopes of a financial windfall when sanctions linked to its nuclear program will be lifted next year.

 

At a time of tension for U.S. international relations, cheap oil has dovetailed with some of the Obama administration's foreign policy goals - pressuring Russian President Vladimir Putin, undermining the popularity of Venezuelan President Nicolás Maduro and tempering the prospects for Iranian oil revenue. At the same time, it is pouring cash into the hands of consumers, boosting tepid economic recoveries in Europe, Japan and the United States.

 

"Cheap oil hurts revenues for some of our foes and helps out some of our friends . The Europeans, South Koreans and Japanese - they're all winners," said Robert McNally, director for energy in President George W. Bush's National Security Council and now head of the Rapidan Group, a consulting firm. "It's not good for Russia that's for sure, and it's not good for Iran."

http://www.nola.com/business/index.ssf/2015/12/plunging_oil_prices_shake_up_g.html

 

Money is moving out of the oil countries pockets and into others.

Edited December 24, 2015 by trottigy

[Tortuga]

The easy speculation is that it wont last for long. I haven't kept up with the data but I hear that OPEC is flooding the market, typically that should close up some of the smaller suppliers, once OPEC has more control of the market it will reduce output until it recovers it's losses. In the mean time, it's interesting to review history and see how many wars have started over oil. It's easy to see Russia looking to get more oil one way or another.

[Stormswift]

The thing is - and I find this really weird, is we buy in oil from overseas and are subject to the rise and falls of the oil price like you yet ... we are ... New Zealand ... more specifically Taranaki - is sitting on a huge and I mean much bigger than our country oil field - that has been tapped into off the coast of New Plymouth but certainly not utilised ... and I'm glad it hasn't from the ecology side of things ... but political parties aren't interested in that, so I have to wonder why they aren't doing the usual exploiting of local amenities.

[Nobody]

The problem is how the effect on the overall economy may be negative. If you look at the big oil companies they are reducing capital spending. This now affects there contractors and other industries associated with them. It might compare to when the auto makers had their issues. It wasn't just the Big 3 that had problems it was ll their suppliers and then on down the line. Another issue is that although true we are doing better at the pumps, other industries who are affected are not passing any of their savings back to us.

[Nobody]

The thing is - and I find this really weird, is we buy in oil from overseas and are subject to the rise and falls of the oil price like you yet ... we are ... New Zealand ... more specifically Taranaki - is sitting on a huge and I mean much bigger than our country oil field - that has been tapped into off the coast of New Plymouth but certainly not utilised ... and I'm glad it hasn't from the ecology side of things ... but political parties aren't interested in that, so I have to wonder why they aren't doing the usual exploiting of local amenities.

 

Not knowing all the variables, I would say they are smartly waiting on timing. Why develop it if they can't make a profit? The US is shutting down wells like crazy because they can't make a profit at these prices. The part I don't understand is why OPEC is flooding the market. Even if they temporarily drive some out of the market, it will be easy enough to restart when the price goes up. 

 

Now after Russia drops a Nuke on the Middle East and disrupts that oil supply, then it will be time!

 

Interestingly, the US has now agreed to allow the oil pumped here to be sold on the world market. Could get interesting if they decide to push prices down lower themselves.

Edited December 24, 2015 by Your Brother

[Stormswift]

You could be right actually, already bigwigs like James Cameron and other stars are buying up in New Zealand because they see it as a safe country and nations are already turning their attention to our fresh water sources ... it could well be strategy on the part of our government, once they have succeeded in throwing out kim.dot.com they might turn their attention towards other things.

[Tortuga]

 Even if they temporarily drive some out of the market, it will be easy enough to restart when the price goes up. 

 

I wonder what the timeline is for that. I've assumed it would take several years to get back up to full production.

[Nobody]

Not really. Everything as far as in Texas fields, is pretty much just capped off, turn out the lights, and let it sit is the way I hear it described. It would take time only for more exploration and drilling. As it is all the "hard work" is done.

[Nobody]

As far as refineries, the oil industry has just spent hundreds of millions to debottleneck and basically just running at reduced rates. Facilities using natural gas are running flat out, printing money if you will. But even they have reduced / stopped capital spending for expansion. Keep an eye out as you see lots of consolidation of oil and oil production companies companies.

[Nobody]

http://fuelfix.com/blog/2015/12/24/dallas-fed-says-u-s-oil-bankruptcies-at-great-recession-era-levels/

[Dustparticle]

I can care less about the oil business. They are bunch of greedy pigs.

[Tortuga]

They are bunch of greedy pigs.

..that employ a lot of our brothers and sisters...

[leoperales]

I can care less about the oil business.

So you care a little?

[Miss Mouse]

Sure has cramped our style with Canadian dollar now worth $ .71 to one American $ . No one is going South this winter, few are going across the line to shop where we used to get better deals on most goods. Our gas prices are still high and the cost of goods coming north are costing us more especially in the grocery stores. For instance a bag of organic Romain lettuce used to cost about $2.99! Now on a good day we may be able to find same product for about $6.00/$7.00 some things have jumped to the point it's no longer affordable. We just do without!

Gas is $1.20 liter that's about $5.40 a gallon. The bright side were not as bad as Europe for gas prices .

We have friends who have been out of work for a whole year due to the dropping gas prices with no end in sight .

If the price stays low long enough we suspect some oil companies will no longer be able to operate.

Watching hinges on the world scene unravel gives us incentive to follow the instructions to keep our eye simple and keep busy in the more important things...why invest in the Titanic aye.

[Greg Dent]

Sorry Wendy but where are you that you are paying over a dollar a liter? In Ontario its averaging between 90 cents to 95 cents? 

 

the lower prices has really hit our economy hard. Our dollar is hit hard trading around $1.40 to one US dollar. It it hurts our exports badly. Our produce is super expensive. One head of broccoli is over $6 same with cauliflower.  We have never seen pricing like that ever. 

[trottigy]

On the flip side - we usually don't visit Canada due to the exchange rate, but this year we went to Victoria. It was beautiful and way less expensive than we thought.

I hope you get more tourist and ones who'll keep coming even after the rate swings back.

[Miss Mouse]

Sorry Wendy but where are you that you are paying over a dollar a liter? In Ontario its averaging between 90 cents to 95 cents? 

 

the lower prices has really hit our economy hard. Our dollar is hit hard trading around $1.40 to one US dollar. It it hurts our exports badly. Our produce is super expensive. One head of broccoli is over $6 same with cauliflower.  We have never seen pricing like that ever.

Vancouver we have added taxes thanks to translink but that's what we pay at the pump .... I guess we can't expect much else from a City that's housing prices are untouchable, where modest homes are going for a million dollars & rent a small 700ft apt is anywhere from $1200-2500 a month. So much off shore money here the only ones that can afford housing is those that come with bags of money.

[Miss Mouse]

On the flip side - we usually don't visit Canada due to the exchange rate, but this year we went to Victoria. It was beautiful and way less expensive than we thought.

I hope you get more tourist and ones who'll keep coming even after the rate swings back.

And you didn't come in and see us Jerry ..... Next time for sure we will put a steak on the BBQ .

Yes movie making has returned it's a huge industry here and tourists come so that's a positive aye!

[Tortuga]

The easy speculation is that it wont last for long. I haven't kept up with the data but I hear that OPEC is flooding the market, typically that should close up some of the smaller suppliers, once OPEC has more control of the market it will reduce output until it recovers it's losses. In the mean time, it's interesting to review history and see how many wars have started over oil.

 

http://www.msn.com/en-us/money/markets/shale%e2%80%99s-running-out-of-survival-tricks-as-opec-ramps-up-pressure/ar-BBnYkEI?ocid=spartandhp

[Tortuga]

http://www.msn.com/en-us/money/markets/oil-states-battered-as-tax-gushing-wells-shut-down/ar-BBo0XYn?ocid=spartandhp

 

oil-states-battered-as-tax-gushing-wells-shut-down

[stargazer]

If OPEC is trying to choke it's 'smaller' rivals by pumping out more, then they'd be digging their own graves. Apart from OPEC the other major producers are Russia, Iran, Iraq, Libya, GB, Nigeria, Venezuela etc. I don't think OPEC is trying to shut these giants out coz they got substantial reserves. Oil prices are going down because the outlook is gloomy plus a couple of other factors like uncertainty in the US economy, fears of recession in EU, China, Japan and so on.

[Pavlos]

Even though the oil prices are going down the gas remains expensive in my country. According to an article we are among the 5 most expensive countries in Europe, even though we suffer by the economic crisis. In my region (Crete) it costs 1.57€/lt =(6.5$/US gallon)

[trottigy]

If OPEC is trying to choke it's 'smaller' rivals by pumping out more, then they'd be digging their own graves. Apart from OPEC the other major producers are Russia, Iran, Iraq, Libya, GB, Nigeria, Venezuela etc. I don't think OPEC is trying to shut these giants out coz they got substantial reserves. Oil prices are going down because the outlook is gloomy plus a couple of other factors like uncertainty in the US economy, fears of recession in EU, China, Japan and so on.

You missed a country - US - especially the shale oil business. It is very costly. This is what they are hoping to stop. It costs a lot to start back up again too. But, that is very short sited - if it is the case.

I agree - they seem more focused on making what they can while they can.

Note: while oil and gas prices are somewhat connected - remember their is a refining process to be done and if that is not done in country prices can be very high. Also gas is a very heavily taxed commodity in many countries. This is often the largest percentage of the price paid at the pump.

Edited December 30, 2015 by trottigy

[stargazer]

Yea I didn't mention US shale because they mostly use it domestically. They export no or very little unlike other oil producing countries, given the fact that the US is still the largest consumer.

[Tortuga]

If OPEC is trying to choke it's 'smaller' rivals by pumping out more, then they'd be digging their own graves. Apart from OPEC the other major producers are Russia, Iran, Iraq, Libya, GB, Nigeria, Venezuela etc. I don't think OPEC is trying to shut these giants out coz they got substantial reserves. Oil prices are going down because the outlook is gloomy plus a couple of other factors like uncertainty in the US economy, fears of recession in EU, China, Japan and so on.

 

The reports that I have read seem to disagree with you. There are a lot of smart people in OPEC that have been playing this game for years and they apparently see some benefit to choking out their rivals. Most countries have substantial oil reserves they can't sell because OPEC continues to flood the market and is driving the price down, the economic fears in other countries are slowing their industrial growth and are adding to the glut. It will be interesting to see what OPEC's end game really is, maybe they plan to control more than just the oil market...