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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

#141

Post by mhuffman »

sliverstorm wrote: post #57
ams6110 wrote: post #55

Earlier quoted context omitted.

Refining capacity doesn't increase because of a drop in crude oil prices. If supply of gasoline cannot be increased, prices will not fall even if the raw crude price falls. The EPA has been hostile to refinery expansion or new refinery construction.

Capacity doesn't increase, but costs do decrease as the cost of raw materials drops. Now, obviously price is only partly determined by cost.

This is more of a lack of competition issue. A lot of gas suppliers have regional contractors that basically have a lock on entire regions and their prices. There is no incentive to reduce price.

Also, since we can not export crude, but can export distillates, we can sell gas to other countries, increasing demand to some extent.

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

#142

Post by dade_ »

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…

Many refineries were closed by oil companies with the intention to reduce supply and raise prices. Now there is a glut of crude, and they don't have the capacity to take advantage of the low crude cost / high refined product cost. https://books.google.ca/books?id=74brGsoymBoC&pg=PA35&lpg=PA...

Recently they have also been deferring maintenance to keep capacity of their refineries as high as possible and now failures are causing major shutdowns.

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

#143

Post by redthrowaway »

dwharrison wrote: post #54
washedup wrote: post #46

Earlier quoted context omitted.

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

That primarily impacts Canadian heavy crude exports. The BP Whiting refinery was the primary consumer of Canadian crude. Few other refineries (other than some on the Gulf coast) are configured to handle the product. That's why Canadian crude prices are collapsing...and why the price of gasoline in the upper midwest is going up. The only other option for Canadian crude to pipeline export to the Texas gulf coast. The p…

We're already getting squeezed. We officially entered into a recession a while back. Housing prices in Alberta have collapsed. Every other province is about to get squeezed as all the oil patch workers head home and look for jobs. Buying things online sucks, and travelling is a terrible idea. Budget's shot to hell in the middle of an election, which is good if it helps force Harper out.

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

#144

Post by saryant »

a8da6b0c91d wrote: post #130
giarc wrote: post #128

Earlier quoted context omitted.

So to cater to OP's comment, if it needs to get to $75, how does he/she invest.

Physical USD cash. There's going to be a lot of deflation as huge defaults, including national defaults, sweep the land. I don't think you understand the dynamics. Oil will stay down and much less will be pumped. Without cheap abundant oil you don't get enough credit circulating in the economy that people can afford higher prices. There is no more cheap abundant oil. The higher cost drillers will simply go bankrupt a…

America is now the world's swing producer, because our drillers are more sensitive to market pressure than the sovereign producers of OPEC or Russia. If supply becomes tight, American producers can very quickly ramp up production and then shut it in again when demand falls. There's also no reason to believe that further technological innovation won't further reduce the costs of American production, especially in tight oil. Nobody thought that was even possible 15 years ago, today everyone in the country has an opinion on fracking.

Domestic producers have already shown tremendous resiliency in the face of the current glut—the smart ones have learned to cut costs in the same way the Seven Sisters did during previous oil crises. The fortress balance sheets of the majors will also shield the industry and allow continued R&D investment.

Furthermore, America's mature capital markets will ensure that capital is available to the new industry of independent producers driving the surge in domestic production. They can quickly respond to market signals and demand rises and falls.

Higher cost drillers will go bankrupt, the smart ones will survive and buy up the assets of the fallen.

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

#145

Post by saryant »

jfoutz wrote: post #137
adventured wrote: post #60

Earlier quoted context omitted.

No they can't. They can play the game for about three more years, max. And that's at the risk of destabilizing their kingdom. They're currently issuing debt [1] for the first time in a decade or more, trying to slow the erosion [2] of their $670 billion of reserves. As of today they've lost 10% of their financial reserves in one year, and that's going to get a lot worse as the new lower average price of oil sets in a…

They could also cut social programs. Scaling back the subsidies for face throwing acid might buy them some time.

And that's how the House of Saud will finally fall.

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

#146

Post by douche »

paulsutter wrote: post #138
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 solution is a 10x better energy source. And it's only going to happen if smart people get focused on it. Fluctuations in the price of oil affect funding, etc, but the people working on the problem are a bigger issue. Elon Musk is doing his best to drive down the price of batteries and solar power. What will you work on? Baseload power probably needs nuclear. There are a number of nuclear energy startups right now…

We already know how to build nuke plants to replace coal. Fear-mongering over exceptional incidents at first and second generation sites like Chernobyl, Three-mile Island and Fukushima, and the extreme regulatory restrictions and NIMBYism are the problem there, not anything technical or economic.

Hell, you've got Germany closing perfectly good clean nuclear plants, that have to be replaced with new coal-burning plants, due to misguided environmental activism.

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

#147

Post by DrNuke »

paulsutter wrote: post #138
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 solution is a 10x better energy source. And it's only going to happen if smart people get focused on it. Fluctuations in the price of oil affect funding, etc, but the people working on the problem are a bigger issue. Elon Musk is doing his best to drive down the price of batteries and solar power. What will you work on? Baseload power probably needs nuclear. There are a number of nuclear energy startups right now…

Innovative nuclear may be well priced out of the market at this rate but research (Gen IV, fusion) is going very fast nowadays and will only go faster with eDesign and cloud computing.

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

#148

Post by maxerickson »

a8da6b0c91d wrote: post #130
giarc wrote: post #128

Earlier quoted context omitted.

So to cater to OP's comment, if it needs to get to $75, how does he/she invest.

Physical USD cash. There's going to be a lot of deflation as huge defaults, including national defaults, sweep the land. I don't think you understand the dynamics. Oil will stay down and much less will be pumped. Without cheap abundant oil you don't get enough credit circulating in the economy that people can afford higher prices. There is no more cheap abundant oil. The higher cost drillers will simply go bankrupt a…

Demand and supply have both increased during the price decline:

https://www.iea.org/oilmarketreport/omrpublic/

That suggests that supply has increased more than demand.

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

#150

Post by mhurron »

alexqgb wrote: post #86
mhurron wrote: post #63

Earlier quoted context omitted.

Pretty clear the majority of people don't care. So just hope that when the music stops, you're already dead.

And hope your children are dead too, and also your grandchildren.

Bringing children into the world where you expect that as the future seems a little irresponsible.
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