Oil Prices - Deja vu all over again

[Eric Stoner]

Oil prices are supposed to be stable or even go up. Instead they are declining as they did in the late 1990's and mid- 1980's.

Demand for oil is rising. Especially in India and despite China's slowdown. That should be creating upward pressure on oil prices.

Spending on new oil is down. Something like 42 % of oil rigs are currently inactive.

Stock prices for oil companies are low so investors should be rushing in to buy and bid up prices only they are not.

Oil supplies are UP! Despite lower prices OPEC has increased output . Plus there is an expectation that Iranian and Libyan oil will be coming online soon.

Most importantly of all the Dollar is strong. Oil is still denominated in King Dollar.

Right now I can't decide between buying some gold or going long on oil. What if the Iranian deal falls through ? Or Libya becomes more unstable ? Or Venezuela becomes even more of a basket case ?

[oldster]

If one went to the friendly neighborhood oil refinery and bought a barrel of oil, then there would be a 'price' for oil. Unfortunately with cartels in charge of large pieces, and then the 'futures' market creating unearned profits, there is no rational price for oil, and thus it is crazy to expect one. What we consider normal in the oil market is what Enron did in the electricity market and was obviously illegal

[rickdugan]

Idk Eric. I don't know too many professional investors who are bullish on oil right now. The boom in shale oil production here in the U.S. has been a real game changer. OPEC hasn't continued to pump out so much oil out of benevolent concern for our gas prices. OPEC knows that if it starts choking supply and the price of oil rises too much, then more U.S. shale oil producers will have a profit incentive to reactivate now dormant rigs and start filling in the supply gap. Many of the currently active shale oil rigs are profitable even at $50 per barrel and others, which were shut down as oil prices plummeted, could be reactivated at various price points above $50. It is all about protecting market share now and, from what I am reading, the pros don't see this standoff resolving anytime soon.

[GlitterButterfly]

Commodities, in general, are crashing just like right before 2008.


Gold prices are extremely manipulated. Albiet, the price is a steal right now. How long before they smash the price down and confiscate it like they did during FDR'S presidency?

FX is probably a better route to go for awhile imho. It's a crazy, tumultuous world out there, right now.

[Eric Stoner]

Idk Eric. I don't know too many professional investors who are bullish on oil right now. The boom in shale oil production here in the U.S. has been a real game changer. OPEC hasn't continued to pump out so much oil out of benevolent concern for our gas prices. OPEC knows that if it starts choking supply and the price of oil rises too much, then more U.S. shale oil producers will have a profit incentive to reactivate now dormant rigs and start filling in the supply gap. Many of the currently active shale oil rigs are profitable even at $50 per barrel and others, which were shut down as oil prices plummeted, could be reactivated at various price points above $50. It is all about protecting market share now and, from what I am reading, the pros don't see this standoff resolving anytime soon.

There is actually a lot more to it. Saudi Arabia is pumping oil as much as possible to protect its market share AND because it hurts Iran. If we get one good crisis in the Middle East then what happens ? Suppose the Senate shoots down the deal with Iran and Iran says : " Full speed ahead on building a bomb ." And then the Saudis say : "We want our own bomb too. "

The U.S. has dramatically increased production but while we were doing so the price was going up.

[rickdugan]

There is actually a lot more to it. Saudi Arabia is pumping oil as much as possible to protect its market share AND because it hurts Iran. If we get one good crisis in the Middle East then what happens ? Suppose the Senate shoots down the deal with Iran and Iran says : " Full speed ahead on building a bomb ." And then the Saudis say : "We want our own bomb too. "

The U.S. has dramatically increased production but while we were doing so the price was going up.

Idk Eric. Maybe Iran factors in, but oil prices started plummeting in 2014, during the same time that U.S. oil output shot up by a record amount. During the middle of last year, oil prices were at $110 per barrel. Then the dramatic drop began and continued through the end of the year as the market started to fully digest the additional 1.2 million barrels of oil per day produced by shale oil rigs. Oil production in the U.S. increased by over 16% in 2014 alone. Most market analysts that I have read believe that OPEC's unwillingness to reduce production volume is a means to keep prices low enough to stave off a loss of market share to U.S. oil producers. From my inexpert viewpoint, that makes a lot of sense. And while we've seen some price volatility this year, oil prices have stayed in the $60s and under throughout 2015.

Though it is nice to see countries like Iran, Russia and Venezuela suffer a bit in the process.

[SnuffleUffleGrass]

Venezuela has been suffering...It is not just oil issues, but I do know people who have fled there & refuse to go back. A real mess.

Wish I had some ideas about where this is all going. It's impacting me pretty negatively.... : (

[Eric Stoner]

Let's see what happens to oil prices now that Biden has killed the Keystone Pipeline. Aside from the ten thousand construction jobs now lost, about twenty thousand others are affected. The oil from Canadian tar sands in Alberta will still come into the U.S. Without the pipeline it will come in railroad tank cars using even more energy with various risks of derailments and spills.
At present the U.S. is a net EXPORTER of oil and gas. Let's see how long that lasts.

[SnuffleUffleGrass]

Let's see what happens to oil prices now that Biden has killed the Keystone Pipeline. Aside from the ten thousand construction jobs now lost, about twenty thousand others are affected. The oil from Canadian tar sands in Alberta will still come into the U.S. Without the pipeline it will come in railroad tank cars using even more energy with various risks of derailments and spills.
At present the U.S. is a net EXPORTER of oil and gas. Let's see how long that lasts.

The oil industry will be just fine. Trust me.

[Eric Stoner]

I don't care about oil industry fat cats. I care about consumers having to pay higher prices at the pump and for home heating oil. Plus those higher cost trickle down and affect prices for a lot of things e.g. higher fuel costs increase shipping and delivery costs.

[rickdugan]

Let's see what happens to oil prices now that Biden has killed the Keystone Pipeline. Aside from the ten thousand construction jobs now lost, about twenty thousand others are affected. The oil from Canadian tar sands in Alberta will still come into the U.S. Without the pipeline it will come in railroad tank cars using even more energy with various risks of derailments and spills.
At present the U.S. is a net EXPORTER of oil and gas. Let's see how long that lasts.

Idk. As long as the shale oil producers can still stay profitable at $50 per barrel, I struggle to see a return to $100 barrel prices and the resulting $4 per gallon gas prices. I also simply cannot imagine politicians having the political will to try to kill the U.S. oil industry. It's one thing to stop a project or well before it starts, but quite another to close it down once it's operating and people are employed to work it.

Also, there is underway a fairly significant green movement in the energy industry right now. Google ESG investing. It is becoming increasingly difficult to find institutional investors willing to invest in fossil fuel reliant companies, with a lot of the new investor money instead going into ESG energy initiatives. To appease this new generation of more socially conscious investors, even the nation's largest public utility companies are transitioning more of their grids to greener energy sources, like wind and solar. Then of course there is the ongoing push towards electric and hybrid vehicles, which I believe will be an area of focus for the new political regime.

All of this is to say that I don't see oil prices spiking any time soon, at least for any extended length of time. I could see a temporary jump due to a combination of increased global demand as economies improve and whatever games that OPEC might decide to play, but there is so much supply capacity online in the U.S. - and more readily available if oil starts creeping over $60 - that I just struggle to imagine that both wouldn't be absorbed relatively quickly.

Just my inexpert view on the matter fwiw. Now I hate to say "I told you so" from what I posted 5 years ago and it certainly doesn't mean that I'm right this time, but...

[Eric Stoner]

Well , we will see. Gas prices went to a low of $1.74 a gallon under Bush The Dim in 2009. Under Obama they went up to a high of nearly $3.35 in 2014.
They collapsed in 2015 and 2016 thanks to over-production fed in part by fracking. Oil went down to $43.34 a barrel in 2016.
Under Trump it went up as high as $65.20 in 2018 before starting to decline. The drop was compounded by a collapse in demand in 2020 thanks to Covid. Lately they have been creeping up.

[eagle2]

Let's see what happens to oil prices now that Biden has killed the Keystone Pipeline. Aside from the ten thousand construction jobs now lost, about twenty thousand others are affected. The oil from Canadian tar sands in Alberta will still come into the U.S. Without the pipeline it will come in railroad tank cars using even more energy with various risks of derailments and spills.
At present the U.S. is a net EXPORTER of oil and gas. Let's see how long that lasts.

Cancelling the Keystone Pipeline will have little to no impact on the price of gas. There are plenty of other pipelines available.

https://financialpost.com/commoditie...oil-to-the-u-s

Eventually gas-powered vehicles will be replaced by electric ones. Long term, the fossil fuel industry is going to die out. Eventually electric vehicles will cost less than gas-powered vehicles, and solar and wind power will cost less than energy from fossil fuels.

[slowpoke]

Less gasoline consumption means less tax revenue for maintenance and construction of highways.

[whirlerz]

Plenty of oil in TX, Im told

[slowpoke]

Interestingly we (where I live) will likely benefit by the cancellation of the keystone pipeline.

[eagle2]

Less gasoline consumption means less tax revenue for maintenance and construction of highways.

They'll have to find another way to fund it. Eventually roads and highways will be unnecessary, because we'll have flying cars, but that's not happening any time soon, at least on a large scale.

[Eric Stoner]

They'll have to find another way to fund it. Eventually roads and highways will be unnecessary, because we'll have flying cars, but that's not happening any time soon, at least on a large scale.

Rotflmao. I'd love to live next door to the Jetsons. Do you SERIOUSLY expect to see anything like your predictions in your lifetime ?

[slowpoke]

They'll have to find another way to fund it. Eventually roads and highways will be unnecessary, because we'll have flying cars, but that's not happening any time soon, at least on a large scale.

Will we have flying 18 wheelers?

[rickdugan]

Eventually gas-powered vehicles will be replaced by electric ones. Long term, the fossil fuel industry is going to die out. Eventually electric vehicles will cost less than gas-powered vehicles, and solar and wind power will cost less than energy from fossil fuels.

We won't see any of this in our lifetimes. In fact, our kids probably won't see it either. We are utterly lacking in both the infrastructure and technology to achieve this.

This statement very much includes powering our electric grid from solar and wind. The inherent problem with wind and solar is that they are not reliable and consistent and we are not remotely close to having the battery technology to store enough during good times to hold us over during the bad ones.

California can't even meet it's absurd mandate of 33% of its power coming from renewables without rolling blackouts that can last up to a day or more. In fact, PG&E is now being forced to buy more of its electricity on an emergency basis from out-of-state coal fired plants, LMAO, when it can get it at all. And Californians are paying a steep price for this mandate in terms of electric rates and planned blackouts. It's like living in Venezuela, lol.

It will be many decades before fossil fuels go away. Indeed natural gas is actually gaining an increasing share of the energy production market because it burns cleaner than coal and oil, but is much more consistent than wind or solar. Except of course in CA.

[miss.a.p1600]

Will we have flying 18 wheelers?

drone deliveries?

[miss.a.p1600]

They'll have to find another way to fund it. Eventually roads and highways will be unnecessary, because we'll have flying cars, but that's not happening any time soon, at least on a large scale.

Mfs can barely drive without wrecking on land.

probably only the best drivers would be authorized to operate flying cars

[Eric Stoner]

Mfs can barely drive without wrecking on land.

probably only the best drivers would be authorized to operate flying cars

That's RIGHT ! If you like car crashes now just wait until the vehicles are airborne.

[whirlerz]

Will we have flying 18 wheelers?

sounds fun!

[eagle2]

Rotflmao. I'd love to live next door to the Jetsons. Do you SERIOUSLY expect to see anything like your predictions in your lifetime ?

There are already working models. Dubai is planning to start an air taxi service in the next few years and Uber wants to have flying taxis available for the 2028 Olympics.