Results 1 to 24 of 24

Thread: reasons for falling oil prices ...

  1. #1
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default reasons for falling oil prices ...

    the 'tin foil hat' crowd is of the opinion that the real long term 'break even' price of oil production vs oil consumption is in the $35 / barrel range. Production costs in the middle east, Nigeria and other areas that pump 'light sweet crude' are allegedly on the order of $10-15 / barrel. Production costs in areas that have 'heavy crude' like Argentina and Russia are on the order of $30 / barrel. Production costs of making synthetic oil from coal via the Fischer-Tropsch process are on the order of $35 / barrel. The 'tin foil hat' crowd attributes prices higher than these levels to short term 'fear factors' i.e. Israeli war, Katrina refinery damage, Alaska pipeline shutdown.

    Additionally, the 'tin foil hat' crowd is of the opinion that the Saudis and other OPEC members are waking up to the facts that A). America might actually be serious about reducing it's dependence on FOREIGN oil, either via new discoveries like the Jack 2 deep well or by removing political / environmental obstacles to develop known oil reserves in Alaska and off all three US coasts ... and B.) at current world oil prices, non-OPEC members like Russia and Venezuela are getting very rich and powerful despite their much higher 'heavy crude' production costs thus threatening OPEC's ability to effectively control the world's oil supply. Further concern exists due to Russia's bypassing of OPEC via the construction of pipelines to Europe, by Venezuela's exclusive supply contracts with China etc. Thus there is reason to believe that OPEC members are now bumping up oil production in order to pull a 'WalMart' on the Russians and Venezuelans before a sizeable piece of the world's oil market (and a sizeable piece of OPEC's ability to control overall supply thus prices) is effectivel 'lost' to them.

    If this has any basis in reality, we should expect to see further and significant declines in the world price of oil in the near future.

  2. #2
    God/dess Deogol's Avatar
    Joined
    Dec 2003
    Posts
    5,493
    Thanks
    120
    Thanked 50 Times in 35 Posts

    Default Re: reasons for falling oil prices ...

    There were a lot of speculators driving up an oil bubble too. Oil bubble - bah-loop!

  3. #3
    God/dess Casual Observer's Avatar
    Joined
    Jun 2004
    Location
    Boston MA
    Posts
    5,670
    Thanks
    35
    Thanked 144 Times in 74 Posts

    Default Re: reasons for falling oil prices ...

    Well, El Nino is in effect now, so the Northeast won't be buying nearly as much heating oil as a result. Speculation can be a bitch.
    Idealism is fine, but as it approaches reality, the costs become prohibitive.

    William F. Buckley, Jr.

  4. #4
    Featured Member lunchbox's Avatar
    Joined
    Sep 2005
    Location
    falling from grace
    Posts
    1,943
    Thanks
    0
    Thanked 8 Times in 6 Posts

    Default Re: reasons for falling oil prices ...

    Quote Originally Posted by Casual Observer
    Well, El Nino is in effect now, so the Northeast won't be buying nearly as much heating oil as a result. Speculation can be a bitch.
    El nino is pretty permanent these days.

  5. #5
    God/dess Bridgette's Avatar
    Joined
    Apr 2002
    Location
    Gettin the fuck outta Dodge!
    Posts
    14,241
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: reasons for falling oil prices ...

    Fiance and I were driving last night and saw gas for $2.73. That's by far the cheapest I've seen it for months. I almost did a double take and was even a little annoyed that I'd just filled up the day before.

    I still think it's pathetic. Although it's nice to see there might be a glimmer of hope....

    Quote Originally Posted by pheno View Post
    When you lead a nontraditional life don't try to measure it with traditional milestones.

  6. #6
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: reasons for falling oil prices ...

    more news on the subject ...



    Of course, the fact that the US election is only 6 weeks away has absolutely nothing to do with falling oil prices !!! What will be extremely interesting to see is whether or not Joe Sixpack's memory extends back farther than six weeks LOL.

  7. #7
    God/dess
    Joined
    Aug 2002
    Location
    Phoenix is home, work in Upper Midwest Boonies
    Posts
    3,274
    Thanks
    0
    Thanked 107 Times in 61 Posts

    Default Re: reasons for falling oil prices ...

    We paid $2.21 for gas in Iowa today. Every day it is dropping by several cents a gallon. If I remember correctly, last year around the holidays gas was around $2.09-2.19 a gallon before it gradually inched up.

  8. #8
    God/dess FBR's Avatar
    Joined
    May 2003
    Posts
    8,351
    Thanks
    85
    Thanked 342 Times in 244 Posts
    Blog Entries
    3
    My Mood
    Mellow

    Default Re: reasons for falling oil prices ...

    $2.17 here today. Its nice to see the reduced price but Im sure the energy companies will offset with increases in oil/natural gas prices during the upcoming heating season.

    FBR
    Once again I have embraced my addiction and have put off the moral dilemma to another day.

  9. #9
    God/dess Deogol's Avatar
    Joined
    Dec 2003
    Posts
    5,493
    Thanks
    120
    Thanked 50 Times in 35 Posts

    Default Re: reasons for falling oil prices ...

    Quote Originally Posted by Melonie
    more news on the subject ...



    Of course, the fact that the US election is only 6 weeks away has absolutely nothing to do with falling oil prices !!! What will be extremely interesting to see is whether or not Joe Sixpack's memory extends back farther than six weeks LOL.
    I can hardly wait to see the graph showing prices falling before election day and then raising right after it.

  10. #10
    Senior Member
    Joined
    Aug 2006
    Posts
    137
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: reasons for falling oil prices ...

    LOL I believe the election is the single biggest factor short term.

  11. #11
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: reasons for falling oil prices ...

    I can hardly wait to see the graph showing prices falling before election day and then raising right after it
    well, if true (and I happen to think that it is as well), this will provide a nice investment opportunity to buy back into the oil royalty stocks like BPT at the 'bottom'.

  12. #12
    Sitri
    Guest

    Default Re: reasons for falling oil prices ...

    So, let me see. One Saudi pulls an estimate of 18% out of his ass and like a miracle oil prices drop, gas prices drop, the people feel good and cheer (yea) and in 60 days we go and re-elect the encumbents. It just doesn't work that way. Oil reserves are "Proven" and "Possible". We don't have "Hypothetical".

    As I adjust my tin hat, this doesn't make sense. Let me give you a microcosm of the Oil Industry. I could write a book but I will summarize.

    A close relative of my was the chief geologist for the Cook inlet. I was part of a very small group that picked up a lot of leases in the Cook inlet in the 90's. One of these was Redoubt Shoals. I won't go through all of the history here, but to summarize, the industry was dominated by the majors and we faced constant road blocks from the state of Alaska and the majors to getting these leases on-line.

    After a lot of work, we sold them to Force Energy a small highly leveraged independent. An agressive company it was causing worry for the majors. It wasn't long before oil dropped to $10 / barrel for a very short time which forced Force Energy into bankruptcy. Poof... all of the stock was worthless and there went $30,000.

    Then... Oil went back up immediately. Redoubt was acquired by Forest Oil and opened up. The proven reserves have fluctuated since then. Proving that proven is not so.

    I guess the point I am making is that the Oil industry is not subject to free market forces when it comes to actually getting oil out of the ground. It is nature, politics, monopolies, and world events that drive the price. It wouldn't matter if we had only tapped 1% of the reserves.. you still have to get it in the tank.

    I bet that after the elections a "crisis" will drive gas and oil right back to where it is today.

  13. #13
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: reasons for falling oil prices ...

    ^^^ obviously this phenomenon isn't unique to the oil industry ! In every industry there is an extremely well funded extremely well connected base of 'major' players, who can afford to muster huge financial / political resources and shoulder short term losses in order to 'pressure' an upstart or small time competitor (i.e. the WalMart syndrome). This can be done by 'manipulating' market prices, by naked short selling of the competitor's stock, by locking up sub-suppliers, by the co-incidental passage of new legislation or other gov't action (i.e. your oil leases), and a host of other possibilities.
    ~
    Last edited by Melonie; 09-15-2006 at 10:17 PM.

  14. #14
    Featured Member GnBeret's Avatar
    Joined
    Jul 2004
    Posts
    796
    Thanks
    0
    Thanked 7 Times in 7 Posts

    Default Re: reasons for falling oil prices ...

    Quote Originally Posted by Melonie
    ... "the 'tin foil hat' crowd is of the opinion that the real long term 'break even' price of oil production vs oil consumption is in the $35 / barrel range.
    While I would hardly consider myself a member of "the 'tin foil hat' crowd," especially when it comes to the Oil & Gas Industry, the $35/bbl figure is damned close to where I'd peg the new 'floor price' of crude to have been set (i.e., $32/bbl-$34/bbl), albeit, for very different reasons having nothing to do with any such 'break even' point (whatever, exactly, that actually is?). That said, I wouldn't get too excited as the 'floor price' is just that, i.e., the price below which crude will not be allowed to fall regardless of actual market conditions - and even though crude realistically ought to be trading at about $40/bbl-$42/bbl given the currently existing 'actual market conditions,' I wouldn't even expect to see the price drop below the mid-$50's/bbl range for so long as we have several HD's camped out in the Mid-East.


    Quote Originally Posted by Melonie
    ... Thus there is reason to believe that OPEC members are now bumping up oil production in order to pull a 'WalMart' on the Russians and Venezuelans before a sizeable piece of the world's oil market (and a sizeable piece of OPEC's ability to control overall supply thus prices) is effectivel 'lost' to them.
    Ja ja ja!!! Don't kid yourself - OPEC in general, and the Saudis in particular, are way too wise in the ways of the World energy market to make the kind of gross miscalculations that such an enormous error in judgment would necessarily have to be based upon. Besides, Venezuela, if anything, is doing its level best (whether Chavez realizes it or not!) to lower production over the mid to long range future by not only damaging the Hell out of its own fields through unsound (non-existent!) reservoir engineering/management but, in addition thereto, by grossly retarding the development of what had appeared to be very promising finds in several other South American countries. As for Russia, they're still years away from being able to supply crude, as opposed to natural gas, in amounts significant enough to cause OPEC any real concerns and, given their estimated reserves, will not be 'Wal-Marted' by OPEC or anyone else once they finally get it in gear and become a major World supplier - they will have to be 'co-opted' instead, and OPEC/Saudis know this.
    "That's your answer Old Man? I guess you're a Hard Case too...."
    - Luke
    "Some men, you just can't reach...."
    - Boss, re Luke

    If there's one thing in my life these years have taught me,
    it's that you can always see it coming, but you can never stop it.
    -Cowboy Junkies

  15. #15
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: reasons for falling oil prices ...

    'break even' point (whatever, exactly, that actually is?)
    the 'tin foil hat' crowd refers to the 'break even' point as a long term oil price floor above which non-conventional oil technologies (like synthetic oil from coal, oil shale extraction) and alternate fuel technologies (like sugar cane ethanol) begin to look profitable versus the long term capital investment costs necessary to build the infrastructure plus operating costs. They would point to the early 80's example where the super-high oil price increases during the Carter years spawned actual serious interest in non-conventional oil technologies and alternate fuel technologies ... complete with gov't tax incentives to invest in them. The 'tin foil hat' crowd holds that once OPEC saw that the west was making serious moves to eventually circumvent middle eastern oil supply dependence, that they overpumped like crazy and pushed the world oil price back down to the point where none of the alternative technologies could ever turn a profit ... which in turn led the US gov't to cancel their tax incentives on the basis of 'throwing good money after bad'

    (snip)"In 1982 through 1985, the Termination of Energy Tax Credits
    In December 1982, the 1978 ETA energy tax credits terminated for the following categories of non-renewable energy property: alternative energy property such as synfuels equipment and recycling equipment; equipment for producing gas from geopressurized brine; shale oil equipment; and cogeneration equipment. The remaining energy tax credits, extended by the WPT, terminated on December 31, 1985."(snip)

    Inflation adjusted world oil prices ( from ) ...
    1978 = $45.13
    1979 = $67.42
    1980 = $89.48
    1981 = $77.49
    1982 = $64.96
    1983 = $57.48
    1984 = $54.48
    1985 = $49.25
    1986 = $25.92
    1987 = $30.74
    1988 = $24.78

    it also took all the way until 2004 for the long term inflation adjusted world oil price to again rise higher than $30.00 per barrel and again reawaken the financial possibility of non-conventional oil technologies and alternative technologies 'breaking even' against the price of imported OPEC oil. Thus the theory goes that OPEC is now responding in the same way it did in 1981-1986 in order to supress the serious development of non-conventional oil technologies and alternative technologies which could eventually threaten it's role of predominant world oil supplier (and world oil price controller).

    However, there does appear to be one difference this time i.e. the US gov't has involved corn farmers on a huge scale in its subsidy scheme for ethanol, rather than involving only big energy corporations in its subsidy scheme as was the case in 1978. As such, there will be much more political support to continue paying for corn / ethanol subsidies even if the financial incentive for continued production of ethanol versus purchasing middle eastern crude oil disappears completely - which could mean the permanent 'switching' of 5%-10% of US oil consumption into ethanol via ethanol fuel additive mandates. It's a small percentage of the total, but a huge number in terms of dollars lost to OPEC - while at the same time causing a 'tolerable' increase in US blended gasoline prices to cover the much more expensive 5%-10% comprised of ethanol (at $2.50-$3.00 per gallon wholesale versus $ 1.58 for wholesale gasoline, equals a 10c-12c-15c per gallon overall markup on blended gasoline cost depending on actual ethanol price premium and the actual percentage of ethanol in the blend ?) which most US gasoline buyers don't even realize they're paying for. Floating this price subsidy scheme is a piece of cake considering that most US gasoline buyers don't realize that they're already paying 40-60-80 cents per gallon in gasoline road taxes and gasoline sales taxes to federal, state and local govt's !
    ~
    Last edited by Melonie; 09-17-2006 at 06:24 PM.

  16. #16
    BrunetteGoddess
    Guest

    Default Re: reasons for falling oil prices ...

    $2.29/gallon today when I filled up. Who would have know I'd be so happy to fill my car up for under $20!

  17. #17
    Senior Member
    Joined
    Aug 2006
    Posts
    137
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: reasons for falling oil prices ...

    There was a column this morning by neo con cheerleader Charles Krauthammer "preparing" everyone for an attack on Iran. He postulates that oil will be at 100-150 dollars a barrel, that Iran will make the Strait of Hormuz almost impassable and that this will, of course, draw our Navy into battle to reopen the sea lane. He admits,almost with a flourish, that we'll be in a world wide depression due to this action. Nasty scenario by any measure!

  18. #18
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: reasons for falling oil prices ...

    ^^^ again, this is very heavy on politics and rather light on economics. However, I also saw some 'less than objective' reports stating that a number of US minelayser and minesweepers have been given 'ready to sail' orders for October 1st. As every serious investor should already know, the hedge funds depend on price volatility to make their profits more so than an absolute but gradual rise or fall in prices. Oil suddenly jumping from $60 to $100+ per barrel would be an absolute windfall for anybody holding 'long' options.

    There is also some 'conspiracy theory' speculation that US / European supplies of crude oil, as well as storage facilities being filled to capacity with distillates (gasoline, heating oil etc.), as well as natural gas storage facilities being filled to capacity, has been a calculated behind the scenes move over the past year to prepare for the possible blockading of Iran's oil shipping and other sea freight terminals in the Persian Gulf. Cutting off Iran's oil export revenues, cutting off Iran's supplies of imported gasoline and diesel fuel, on top of US / European banks freezing Iranian accounts, would put a huge amount of leverage on the Iranian gov't within a very few weeks.
    ~
    Last edited by Melonie; 09-20-2006 at 10:11 AM.

  19. #19
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: reasons for falling oil prices ...

    supplies keep growing, and the price keeps dropping ...

  20. #20
    Featured Member tootsie's Avatar
    Joined
    Feb 2005
    Location
    on my couch
    Posts
    1,305
    Thanks
    26
    Thanked 38 Times in 19 Posts

    Default Re: reasons for falling oil prices ...

    Quote Originally Posted by FBR
    $2.17 here today. Its nice to see the reduced price but Im sure the energy companies will offset with increases in oil/natural gas prices during the upcoming heating season.

    FBR

    holy christ that's cheap! our's is 289!

  21. #21
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: reasons for falling oil prices ...

    ^^^ just shows to go you just how much of the 'pump price' of gasoline is due to state and local taxes plus state laws requiring 'boutique' fuel additives. According to Bloomberg, today's large volume wholesale price of NY unleaded gasoline (without taxes or 'boutique' fuel additives) was $1.47

  22. #22
    God/dess Bridgette's Avatar
    Joined
    Apr 2002
    Location
    Gettin the fuck outta Dodge!
    Posts
    14,241
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: reasons for falling oil prices ...

    Ehhh, I long for the gas price wars circa 1990

    Quote Originally Posted by pheno View Post
    When you lead a nontraditional life don't try to measure it with traditional milestones.

  23. #23
    God/dess doc-catfish's Avatar
    Joined
    Nov 2002
    Location
    123 Tornado Alley Way, Hooterville USA
    Posts
    6,322
    Thanks
    0
    Thanked 36 Times in 30 Posts

    Default Re: reasons for falling oil prices ...

    Quote Originally Posted by Bridgette
    Ehhh, I long for the gas price wars circa 1990
    I'll take the winter of 1998-99 when it dropped to $0.719 a gallon.

    Interestingly enough, I remember being in high school in 1990 right after Iraq invaded Kuwait and discussing in class how we were fearing that gas was going to skyrocket to $2/gallon.

    And now, sixteen years later, gas is now $2-$2.50/gallon and here we are having a discussion about how much the price has fallen.
    Former SCJ now in rehab.

  24. #24
    God/dess Deogol's Avatar
    Joined
    Dec 2003
    Posts
    5,493
    Thanks
    120
    Thanked 50 Times in 35 Posts

    Default Re: reasons for falling oil prices ...

    I think some areas are still high because they can get it for that much - taxes, etc. are not that much of an issue.

    I know in some places in California, it was a Chevron or a Shell station one had a choice of. I'll let the lack of competition speak for it's self.

    I also suspect that bodunk wyoming has low gas prices simply so the media can trumpet "Lower gas prices!" I haven't seen the price really fall that much out here. It has fallen, yes, but not by much to get excited about.

Similar Threads

  1. Prices falling as retailers offer big discounts
    By eagle2 in forum Dollar Den
    Replies: 5
    Last Post: 07-04-2011, 02:20 AM
  2. Oil prices fall as dollar weakens
    By eagle2 in forum Dollar Den
    Replies: 2
    Last Post: 05-20-2011, 02:40 AM
  3. Replies: 0
    Last Post: 06-22-2008, 04:00 PM
  4. how high will oil prices go this summer ?
    By Melonie in forum Member Boards
    Replies: 10
    Last Post: 05-16-2008, 02:57 PM
  5. Replies: 6
    Last Post: 02-08-2007, 04:45 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •