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Oil Falls Below $40 for First Time Since 2009 as Glut Grows

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Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#41

Post by mikeash »

ryanmarsh wrote: post #30

Cheap natural gas also can mean cheap electricity, in case anyone was wondering about the effect this might have on companies such as Tesla. Natural gas produces more electricity in the U.S. than anything else, including coal (by a tiny margin).

I don't think this matters much for companies like Tesla. Electricity is already extremely cheap for a car. The average cost of electricity in the US is about 12.5 cents/kWh, which works out to 3.75 cents/mile for a Tesla. That's cheaper than a Prius at $2/gallon, despite being a substantially larger and heavier car. If you can get in on time-of-use rates and charge overnight when demand is low, it can be nearly free.

High gas prices can be good for Tesla, but lower electricity prices won't move the needle for most people.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#42

Post by mrsprout »

ori_b wrote: post #11

This is slightly worrying, because if we want to reduce CO2 emissions, we need to leave the oil in the ground. High prices may not be ideal economically, but they do reduce demand for oil, and increase demand for alternative energy.

We need to keep oil in the ground but also massively reduce our meat consumption. I think animal agriculture accounts for something like 50% of all greenhouse gasses, whereas the burning of fossil fuels accounts for less than 20%.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#43

Post by protomyth »

wvenable wrote: post #21
throwaway12309 wrote: post #4

One one hand, I'm a bit worried as I know various folks that are dependent on the oil industry and this will probably mean more layoffs/companies closing, on the other hand, I'm really happy to see this (helps many economies as well as ordinary folks) and it seems some of the changes from oil to other sources of energy are finally showing some results (I hope)

OPEC is trying to destroy the American shale businesses by making them unprofitable. There was huge investment in shale based on higher oil prices and if they can't recoup that investment OPEC stands to keep their monopoly.

Well, not all of OPEC, but the Saudi intent is to destroy the US shale business. While doing so, they seem to be hitting Russia and South America pretty damn hard. This is worrying since shale can go lower than Russia and Venezuela ($34 - $50 is the bottom depending on area of the balkans). Canada oil sands is higher since the oil is of lower quality.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#44

Post by washedup »

nostromo wrote: post #35
ori_b wrote: post #11

This is slightly worrying, because if we want to reduce CO2 emissions, we need to leave the oil in the ground. High prices may not be ideal economically, but they do reduce demand for oil, and increase demand for alternative energy.

Well, counter-intuitivley, consumer gas prices aren't falling nearly as much if at all. Personally I think the DOJ should investigate refineries, as none of the seem particularly eager to compete on price. They're making record profits as the price of crude collapses while the price of gasoline is flat. http://www.latimes.com/business/la-fi-refinery-profits-recor... It seems very fishy to me that we have so much crud…

There is a refinery problem in Indiana which is why gasoline is staying elevated even thought crude is falling. If anything happens along a refinement chain, there is a disconnect between market prices. The full affect is on the Chicago area, not sure how it is affecting other regional markets.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#45

Post by bkjelden »

ori_b wrote: post #11

This is slightly worrying, because if we want to reduce CO2 emissions, we need to leave the oil in the ground. High prices may not be ideal economically, but they do reduce demand for oil, and increase demand for alternative energy.

The current drop in prices seems to mostly be a price war between the Saudis and new producers in the US. It's probably not sustainable long term.

But, if increased crude production in the US has lowered the long-term equilibrium price, the US could increase fuel taxes to discourage increased consumption.

The only downside to this is that it'd be a very regressive tax increase.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#46

Post by washedup »

dwharrison wrote: post #25

And it will go lower! Canadian crude hit $23/bbl earlier in the week. North America is close to maxing out storage capacity...possibly within 90 days. We've not been this close to max storage capacity in more than 80 years. North American crude oil production currently exceeds demand (meaning what we have capacity to refine) by over 1 million barrels a day. All that extra is getting dumped into storage. And the sprea…

There are also some refinery problems in Indiana which is keeping gasoline at a premium when compared to oil.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#47

Post by toomuchtodo »

washedup wrote: post #46
dwharrison wrote: post #25

And it will go lower! Canadian crude hit $23/bbl earlier in the week. North America is close to maxing out storage capacity...possibly within 90 days. We've not been this close to max storage capacity in more than 80 years. North American crude oil production currently exceeds demand (meaning what we have capacity to refine) by over 1 million barrels a day. All that extra is getting dumped into storage. And the sprea…

There are also some refinery problems in Indiana which is keeping gasoline at a premium when compared to oil.

Gas prices are about 50 cents more per gallon in Chicago than the rest of the US right now due to this.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#48

Post by Dylan16807 »

dwharrison wrote: post #37
lexcorvus wrote: post #2

I remember ten years ago when worrying about Peak Oil was all the rage. You don't hear too much about that nowadays…

All the assumptions underlying the "Peak Oil" theory have been invalided by new technology. Eventually we'll get there, but not this century...and possibly never if non-petroleum energy sources are developed between now and the end of the century. Remember, petroleum was the answer to the "Peak Oil" problem of the 1840's & 50's. We were running out of whale oil...and the solution wasn't more efficient ways to hunt an…

"Peak Oil" just says we stop mining as much oil with a certain graph shape, not that the world ends. Transitioning to a new energy source is compatible and preferable.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#50

Post by adventured »

wvenable wrote: post #21
throwaway12309 wrote: post #4

One one hand, I'm a bit worried as I know various folks that are dependent on the oil industry and this will probably mean more layoffs/companies closing, on the other hand, I'm really happy to see this (helps many economies as well as ordinary folks) and it seems some of the changes from oil to other sources of energy are finally showing some results (I hope)

OPEC is trying to destroy the American shale businesses by making them unprofitable. There was huge investment in shale based on higher oil prices and if they can't recoup that investment OPEC stands to keep their monopoly.

That isn't going to happen. Fracking isn't going away, it's a technology. The Saudis are openly acknowledging their misjudgement of the situation at this point. The fracking technology shift is permanent, so long as regulations don't stop it. And it's going to spread across the globe with a little bit of time. What has been done in Texas, can be done in Mexico, for example.

If Pioneer or Apache implode, then Exxon will scoop them up at a big discount, and when oil rises back to $50+ or higher, Exxon starts the production back up. These wells are incredibly inexpensive now, they know where the oil is, and they're producing three times more oil per well than they were a few years ago.

Texas oil is now down to $10 to $20 / barrel cost wise, and the Bakken is down to closer to $40. The Saudis need $100 oil to balance their budget, they're currently vaporizing their reserves to play this game of chicken. Estimates are those reserves will be exhausted by the end of the decade if oil doesn't return to $80+.

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