Oil price: Brent crude hits 11-year low • Hacker News Board

Re: Oil price: Brent crude hits 11-year low

#21

Post by refurb » Tue, Dec 22, 2015, 4:02 PM UTC

saryant wrote: post #10

hwstar wrote: post #3

Quasi "outages" in California refinery crackers are bucking the price decreases of gasoline in California. In 30 states, gasoline is under $2/gal but in California, it is north of $2.50, and it isn't even the expensive summer blend.

California's fuel prices will always be higher than other states because their blend is stricter than most of the rest of the nation and far fewer refineries are built to produce that blend.

I was going to say.

Last Christmas prices dropped significantly. There were $2.25 to $2.50/gal in California, but almost $1.20/gal in Arizona and New Mexico.

California has another $0.30-$0.50/gal in taxes that other states don't have. The price will always be higher.

Re: Oil price: Brent crude hits 11-year low

#22

Post by simonh » Tue, Dec 22, 2015, 4:02 PM UTC

shiftpgdn wrote: post #15

Don't get used to it. The low oil prices are a result of the Saudis not reducing production and continuing full steam ahead regardless of profitability in order to drive other producers and sources such as North American fracking out of business. Most mom and pop oil companies have already been bought or have gone bankrupt as they were not profitable under $50/barrel. Supermajors will begin to go bankrupt and surviva…

Oil producers going bankrupt isn't going to magically make their assets and production capacity disappear. It will just get bought up by better capitalized investors. Meanwhile Iraq, Iran and others are ramping up production right now. We're going to see further oil price fluctuations over the coming decades for sure, but I don't think we'll ever see $100+ per barrel oil again.

Re: Oil price: Brent crude hits 11-year low

#23

Post by swalsh » Tue, Dec 22, 2015, 4:03 PM UTC

shiftpgdn wrote: post #15

Don't get used to it. The low oil prices are a result of the Saudis not reducing production and continuing full steam ahead regardless of profitability in order to drive other producers and sources such as North American fracking out of business. Most mom and pop oil companies have already been bought or have gone bankrupt as they were not profitable under $50/barrel. Supermajors will begin to go bankrupt and surviva…

The conspiracy side of me wonders if this move was completely of the Saudis engineering. Imagine if you're on the Obama administration, you're having problems with Putin, and you're looking to gain a legacy with major climate legislation.

If I was Obama circa several months ago, i'd send Kerry over to the Saudis, i'd say "I intend to do everything I can to reduce carbon emissions, people want me to do it, and it needs to be done. There's maybe 20 or 30 real good years left. Who owns those years is up for grabs, but you're in the best position. Here's how we can solve both of our problems."

Re: Oil price: Brent crude hits 11-year low

#24

Post by crdoconnor » Tue, Dec 22, 2015, 4:07 PM UTC

simonh wrote: post #22

shiftpgdn wrote: post #15

Don't get used to it. The low oil prices are a result of the Saudis not reducing production and continuing full steam ahead regardless of profitability in order to drive other producers and sources such as North American fracking out of business. Most mom and pop oil companies have already been bought or have gone bankrupt as they were not profitable under $50/barrel. Supermajors will begin to go bankrupt and surviva…

Oil producers going bankrupt isn't going to magically make their assets and production capacity disappear. It will just get bought up by better capitalized investors. Meanwhile Iraq, Iran and others are ramping up production right now. We're going to see further oil price fluctuations over the coming decades for sure, but I don't think we'll ever see $100+ per barrel oil again.

>Oil producers going bankrupt isn't going to magically make their assets and production capacity disappear. It will just get bought up by better capitalized investors.

Oil that can't be pumped profitably at < $80 / bbl isn't going to be magically become profitable when a better capitalized investor steps in.

Re: Oil price: Brent crude hits 11-year low

#25

Post by simonh » Tue, Dec 22, 2015, 4:07 PM UTC

norea-armozel wrote: post #20

shiftpgdn wrote: post #15

Don't get used to it. The low oil prices are a result of the Saudis not reducing production and continuing full steam ahead regardless of profitability in order to drive other producers and sources such as North American fracking out of business. Most mom and pop oil companies have already been bought or have gone bankrupt as they were not profitable under $50/barrel. Supermajors will begin to go bankrupt and surviva…

Do the Saudis have enough cash on tap to out last the big firms? I have to wonder if they're willing to play chicken for much longer.

What are they going to do? Reduce production? They'd have to slash it to the bone to materially affect oil prices right now and the benefits of any rise would be realized by the other producers. Their reduced sales would offset any price rise.

OPEC just doesn't control enough production capacity to dictate to the market any more. All the producers have become so dependent on oil revenue their response to falling prices has been to increase production as much as possible. They can't afford to cut production and thus cut their revenues without massively exacerbating the damage to their economies.

Re: Oil price: Brent crude hits 11-year low

#26

Post by crdoconnor » Tue, Dec 22, 2015, 4:07 PM UTC

norea-armozel wrote: post #20

shiftpgdn wrote: post #15

Don't get used to it. The low oil prices are a result of the Saudis not reducing production and continuing full steam ahead regardless of profitability in order to drive other producers and sources such as North American fracking out of business. Most mom and pop oil companies have already been bought or have gone bankrupt as they were not profitable under $50/barrel. Supermajors will begin to go bankrupt and surviva…

Do the Saudis have enough cash on tap to out last the big firms? I have to wonder if they're willing to play chicken for much longer.

They've got about 5 years of cash left. They can play chicken for a while yet.

They're better capitalized than almost every oil producer in America for sure. Even once prices go back up again the memory of all of the bankruptcies is still going to linger on and drive up the cost of capital.

I doubt as many investors going to be willing to go all in on a second round of chicken with the Saudis.

Re: Oil price: Brent crude hits 11-year low

#27

Post by int0x80 » Tue, Dec 22, 2015, 4:07 PM UTC

shiftpgdn wrote: post #15

Don't get used to it. The low oil prices are a result of the Saudis not reducing production and continuing full steam ahead regardless of profitability in order to drive other producers and sources such as North American fracking out of business. Most mom and pop oil companies have already been bought or have gone bankrupt as they were not profitable under $50/barrel. Supermajors will begin to go bankrupt and surviva…

Then it should be a good time to buy oil stocks?

Re: Oil price: Brent crude hits 11-year low

#28

Post by norea-armozel » Tue, Dec 22, 2015, 4:09 PM UTC

simonh wrote: post #25

norea-armozel wrote: post #20

Earlier quoted context omitted.

Do the Saudis have enough cash on tap to out last the big firms? I have to wonder if they're willing to play chicken for much longer.

What are they going to do? Reduce production? They'd have to slash it to the bone to materially affect oil prices right now and the benefits of any rise would be realized by the other producers. Their reduced sales would offset any price rise. OPEC just doesn't control enough production capacity to dictate to the market any more. All the producers have become so dependent on oil revenue their response to falling pric…

Do you think this is part of a larger plan to get as much cash before they switch over to some other industry? I know they've been working on solar and other renewables, but are they investing in any firms outside of Saudi Arabia in that regard? I mean building a few solar plants is not much compared to say owning a specific share of a solar panel producer or its equivalent.

Re: Oil price: Brent crude hits 11-year low

#29

Post by shiftpgdn » Tue, Dec 22, 2015, 4:12 PM UTC

simonh wrote: post #22

shiftpgdn wrote: post #15

Don't get used to it. The low oil prices are a result of the Saudis not reducing production and continuing full steam ahead regardless of profitability in order to drive other producers and sources such as North American fracking out of business. Most mom and pop oil companies have already been bought or have gone bankrupt as they were not profitable under $50/barrel. Supermajors will begin to go bankrupt and surviva…

Oil producers going bankrupt isn't going to magically make their assets and production capacity disappear. It will just get bought up by better capitalized investors. Meanwhile Iraq, Iran and others are ramping up production right now. We're going to see further oil price fluctuations over the coming decades for sure, but I don't think we'll ever see $100+ per barrel oil again.

You're not technically wrong but think about the entire oil and gas production ecosystem. A supermajor outsources the vast majority of their work to services firms. The seismic is shot by one company, analyzed by another. A land company then obtains the rights to do the drilling on behalf of an oil company. Then the drilling is performed by another company who had all of their tools made by about 20 different companies. Once raw crude is out of the ground/rocks/whatever another company trucks or ships it to a storage facility run by yet another company. It is then refined (usually by a supermajor) and distributed.

Think about what will happen when 98% of the companies have gone bust. How quickly will you get the tools and more importantly people back into the industry once the Saudis have run the price of oil up to $300/barrel?

Re: Oil price: Brent crude hits 11-year low

#30

Post by unabridged » Tue, Dec 22, 2015, 4:14 PM UTC

shiftpgdn wrote: post #15

Don't get used to it. The low oil prices are a result of the Saudis not reducing production and continuing full steam ahead regardless of profitability in order to drive other producers and sources such as North American fracking out of business. Most mom and pop oil companies have already been bought or have gone bankrupt as they were not profitable under $50/barrel. Supermajors will begin to go bankrupt and surviva…

I used to think this also, that they would eventually turn down production and raise prices. But now I believe the Saudis are in a race to cash out everything they can before either their regime is toppled or battery technology makes oil less desirable.