61–70 of 88 posts
Many oil producing nations require $50+/barrel oil to have a balanced budget. After their foreign exchange reserves are depleted (a few years from now), they will start accumulating more debt at their current spending levels, and will likely have to cut public spending. This might not go down so well in some Gulf states http://uk.businessinsider.com/imf-regional-economic-outlook-...
Yukon XL Denali here I come! Seriously though, I thought Saudi and worldwide peak oil was in 2005. Is that a myth or are prices not really constrained by supply until way past the peak?
This is speculation on my part, but I would think that the threat to the oil producers is not that they may run out of the stuff in 100 years...rather, it's that oil may become obsolete before then (because alternative energy). At $30/barrel, it puts tremendous pressure on electric cars, solar, wind, etc. At $100+/barrel, they were creating a major incentive for the alternatives to thrive. I'd like to hear about this…
Anyone who knows this stuff care to explain what the consequences of this are likely to be?
The Scottish independence movement will quietly slink away, since their plans were predicated on $100/barrel!
Interesting perspective: Oil Limits And The End Of The Debt Supercycle http://davidstockmanscontracorner.com/2016-outlook-oil-limit...
The article doesn't show at all that there are diminishing returns from human labor. What we have, instead, is that even if technology is making labor ever more productive, these gains in productivity are going more and more towards companies and investors (mostly thanks to the competition from Chinese laborers) instead of (western) non-elite workers. Just look at the big fat profits of most big companies.
The article is thought provoking, but as it usually happens when trying to find a simple explanation to complex phenomena, it doesn't stand to deeper scrutiny.
Earlier quoted context omitted.
In addition to that, sanctions lifted from Iran. Iran and Saudi Arabia are the most influential members of OPEC and they don't get along whatsoever. Meaning the Saudis and the Iranians will break rank and try to claw out more market share by ramping up production. Additionally, more in response to rtpg's comment: it is very costly and technically challenging to stop or reduce oil production, hence the price volatilit…
I also suspect Saudi Arabia is trying to rattle sabers with Iran for a variety of reasons. The recent execution of the Shia cleric had to be aimed at Iran. Plus the Yemen conflict etc.
It's all about dollar strength and currency pegs/stability. Oil exporting countries need to continue to export as much oil as possible to acquire the dollars needed to (try to) maintain a peg or the stability of their currency. Or they can devalue and risk social instability once domestic inflation rises.
Interesting perspective: Oil Limits And The End Of The Debt Supercycle http://davidstockmanscontracorner.com/2016-outlook-oil-limit...
> Ultimately, diminishing returns with respect to human labor–what some of us would call falling inflation-adjusted wages of non-elite workers–tends to bring economies down. The article doesn't show at all that there are diminishing returns from human labor. What we have, instead, is that even if technology is making labor ever more productive, these gains in productivity are going more and more towards companies and…
This seems illogic to me - if you have to compete with cheap labour you have to cut your costs in one way or another, pay less to your work force, make them more efficient, accept smaller profits or what have you. Putting more money - in absolute terms - into the pockets of the capitalists only makes it harder for you to remain competitive. Therefore I could at best see that capitalists receive a larger share of the cake in relative terms but not in absolute terms due to competition with cheap labour.
Earlier quoted context omitted.
Fascinating. Never considered the price pressure of finite storage capacity. That said, about half the article could be summed up in "commodity prices are falling because demand from most of the global working class is falling".
There's a second effect. Companies that are near 100% indebted (and a dropping oil price will seriously lower their expected value, therefore getting them far closer to their debt limits even if they don't actually loan anything). Such companies, how do they respond to price shocks ? You have capital invested, and debt to pay back. But capital is a sunk cost, the debt won't disappear because you stop pumping. Therein…
- more producers (US, Iran's embargo over, other countries exploring shale)
- other sources of energy (solar, , etc)
It's worth pointing out that this is still before Iran comes online. Once that happens (possibly in a few days) prices could fall further.
On the other hand, one has to time production to ramp-up before renewables become too dominant. Interesting calculus.