Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Oil price: Brent crude hits 11-year low

bbc.co.uk

Post reply on HN
Print view View original

31–40 of 58 posts

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

#31

Post by Inthenameofmine »

shiftpgdn wrote: post #29
simonh wrote: post #22

Earlier quoted context omitted.

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 compani…

So we'll just see vertical integration of previously separate firms into well capitalized monoliths again. This might take a but of time, but I can't see why big investors would not do it.

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

#32

Post by at-fates-hands »

unabridged wrote: post #30
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.

>> 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.

They've been talking about the regime imploding for practically 30 years now. Robert Baer predicted the collapse of the regime over a decade ago:

http://www.theatlantic.com/magazine/archive/2003/05/the-fall...

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

#33

Post by xixi77 »

crdoconnor wrote: post #24
simonh wrote: post #22

Earlier quoted context omitted.

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.

No; but it will be pumped as soon as it hits 80 again, preventing price from going up from there. Although 50 is probably a better number.

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

#34

Post by anthonybsd »

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…

> were not profitable under $50/barrel.

It's important to distinguish marginal cost vs profitability. A company can be operating at a loss for years (if not decades) as long as marginal cost of the product doesn't exceed their marginal revenue. To bring this in the context of oil prices: cost of extraction of conventional oil is around $3-5 dollars. This is how much it costs to operate a well with some minimum maintenance. However, this dismisses the cost of development of the well, i.e. of R&D. If you count that in you get closer to $15-$30 depending on the oil field. Higher for offshore, and higher for shale still. Cost of extraction for fracking is around $15 a barrel, but the R&D costs are much higher, to the tune of $40-60 total. Companies can sustain sunk R&D costs for a long time as long as they are maintaining healthy marginal profit. They will naturally not invest into new fields but that cushion can take years to have effect on the prices.

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

#35

Post by the4aces »

crdoconnor wrote: post #24
simonh wrote: post #22

Earlier quoted context omitted.

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.

A lot of the cost comes from CAPEX at the front end of the life cycle of the well. There are a lot of wells out there that can produce a marginal barrel of oil for <$20. Once the companies get recapitalized or go through bankruptcy that is the new cost that will need to be looked at.

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

#36

Post by AnimalMuppet »

crdoconnor wrote: post #24
simonh wrote: post #22

Earlier quoted context omitted.

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.

No, but it means that the Saudis can't raise prices much past $80/bbl. And I'm not sure that $80 is the right number for a lot of the fracking wells - the number that I seem to recall is $50. (I freely admit that I'm working from vague memory here, and could easily be wrong...)

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

#37

Post by mikeash »

jeromeflipo wrote: post #6

"The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil." - Sheikh Zaki Yamani

That's such a bad comparison. Stone is way more common and was being used by far fewer people.

I sincerely hope it's true, but it's one of those snide comments that attempts to make legitimate concerns look stupid.

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

#38

Post by gotchange »

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.

> but I don't think we'll ever see $100+ per barrel oil again.

It would just take a small scale war in the Persian Gulf (KSA vs Iran) for the crude oil barrel to pierce through the $100 dollar level and soar even further.

Never say never.

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

#39

Post by dragontamer »

gotchange wrote: post #38
simonh wrote: post #22

Earlier quoted context omitted.

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.

> but I don't think we'll ever see $100+ per barrel oil again. It would just take a small scale war in the Persian Gulf (KSA vs Iran) for the crude oil barrel to pierce through the $100 dollar level and soar even further. Never say never.

Note that Iranian Oil Sanctions have only been recently lifted. The current oil prices is WITHOUT Iran in the market.

Come next year, Iranian Oil will join the world market and drive prices lower.

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

#40

Post by jstalin »

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…

Russia has also been increasing production and Iran's oil is just waiting to hit the market...
Post reply on HN