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Crude Falls Below $30 a Barrel for the First Time in 12 Years

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Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#71

Post by waterlesscloud »

kevin_thibedeau wrote: post #59
dharma1 wrote: post #56

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-...

It's not like they didn't have decades to diversify their economies.

The OPEC sovereign funds have their fingers in about a million pies. The elites are gonna be fine.

What that means for the arab in the street is a different question.

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#72

Post by gaius »

mrfusion wrote: post #47
gaius wrote: post #35

Earlier quoted context omitted.

The Scottish independence movement will quietly slink away, since their plans were predicated on $100/barrel!

Explain.

Government spending in the UK is controlled by something called the Barnett Formula, which presently results in about £60Bn/year being transferred from England to Scotland. Should Scotland have become a separate country, this river of money would have run dry overnight. The Scottish Nationalists calculated that with oil at $100/barrel, they could manage without it. However a) the price of oil collapsed and b) the part of Scotland that actually "owns" most of the oil, the Shetlands, was adamant that it wanted to stay part of the UK. So 28 out of 32 voting districts in Scotland, decided the present arrangement suited them well enough!

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#73

Post by baltcode »

msandford wrote: post #55
zdean wrote: post #38

Earlier quoted context omitted.

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…

I think we're going to see prices cycle like this for at least a few more swings. If there were no speculators in the oil markets you might see slightly more stable prices but there's a tremendous amount of speculation which adds to the price swings, which make the underlying activities more severe. It takes anywhere from a couple of months to a couple of years to go from "acquired mineral rights" to "pumping oil out…

Shouldn't intelligent speculators drive down the price swings? If there are going to be price swings, shouldn't speculators make money by issuing futures and options, thereby decreasing the eventual swings?

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#74

Post by msandford »

baltcode wrote: post #73
msandford wrote: post #55

Earlier quoted context omitted.

I think we're going to see prices cycle like this for at least a few more swings. If there were no speculators in the oil markets you might see slightly more stable prices but there's a tremendous amount of speculation which adds to the price swings, which make the underlying activities more severe. It takes anywhere from a couple of months to a couple of years to go from "acquired mineral rights" to "pumping oil out…

Shouldn't intelligent speculators drive down the price swings? If there are going to be price swings, shouldn't speculators make money by issuing futures and options, thereby decreasing the eventual swings?

The big oil companies do a fair amount of this I'm sure, but do you really want to bet a few billion as to exactly how much oil will cost in 2-6 years?

The US consumes 20 million barrels a day, so at current prices that's $600 million a day at $30/bbl and $2 billion a day at $100/bbl. How much do you think you'd have to buy or sell in the futures market to move the price to smooth it out?

Finally, it's very, very hard to know what's short term volatility and what's long term structural. Everyone "knew" that oil prices were going to be high forever because of peak oil and declining production. Turns out, maybe not.

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#75

Post by TheOtherHobbes »

tonyedgecombe wrote: post #61
dharma1 wrote: post #56

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-...

Yes, it's going to be interesting to see how this unfolds politically, particularly in Saudi Arabia.

The IMF thinks Saudi has cash reserves to cover five years - which is more than competing countries have.

So they can play white knuckle poker and out-wait everyone else, then jack up prices again around 2019/20 - just in time to kill any recovery that might be happening by then.

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#76

Post by Apocryphon »

alkonaut wrote: post #7
s_kilk wrote: post #2

Anyone who knows this stuff care to explain what the consequences of this are likely to be?

Domestic political turmoil in the countries whose budget depend largely on the oil price: See e.g. election upset in Venezuela, Russia aggressive in middle east potentially to overshadow news of worsened economy at home, Turmoil in Nigeria etc). Internationally it means states like Russia won't have the same economical and political clout they had at $100+, so instead will rely on other means to throw their weight ar…

Politically, it's pretty scary when petrostates get their economies disrupted...

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#77

Post by Apocryphon »

ck2 wrote: post #54
liveoneggs wrote: post #31

Earlier quoted context omitted.

"become"?

Well it's been pretty quiet from there since 9/11 I mean the USA made more than 15 domestic terrorists since 9/11 I'm just wondering what happens when the comfortable over there have to give up their luxuries - do they take it in stride or does their belief system go to extremes to compensate?

It's quiet, mostly, in North America. If you're in the Levant, on the other hand

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#78

Post by wingsonfire »

rubberstamp wrote: post #46
wingsonfire wrote: post #25

Countries that export crude are having recession.. To name few Canada, Russia, Brazil, Nigeria, Venezuela, Australia (commodities not just crude), at the same countries like India who import and depend heavily on crude are having good times (relatively). So finally is it crude that runs all economies and everything else is overrated.. That scenario if true is so scary!

Oh, people in India are not having a good time. Retail gas/diesel prices have barely changed. Retail price is still the same as when crude prices where at $99/barrel. Taxes has been raised whenever crude prices falls, so the retail price remains the same.

That is true but think what will happen if Crude was still at 100$. Can you imagine trade deficit? Rupee would have crashed

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#79

Post by Andaith »

wingsonfire wrote: post #25

Countries that export crude are having recession.. To name few Canada, Russia, Brazil, Nigeria, Venezuela, Australia (commodities not just crude), at the same countries like India who import and depend heavily on crude are having good times (relatively). So finally is it crude that runs all economies and everything else is overrated.. That scenario if true is so scary!

Australia has managed to avoid recession so far. I know that's only technically true, but that's the best kind of true. (We had a lot of defense spending in one quarter that pushed us over the line between contracting/expanding.) It'll be interesting to see how Q1 2016 goes. Even if it is a recession, it's not a normal one, since unemployment is going down.

Re: Crude Falls Below $30 a Barrel for the First Time in 12 Years

#80

Post by rubberstamp »

wingsonfire wrote: post #78
rubberstamp wrote: post #46

Earlier quoted context omitted.

Oh, people in India are not having a good time. Retail gas/diesel prices have barely changed. Retail price is still the same as when crude prices where at $99/barrel. Taxes has been raised whenever crude prices falls, so the retail price remains the same.

That is true but think what will happen if Crude was still at 100$. Can you imagine trade deficit? Rupee would have crashed

rise in oil prices has never caused rupee to crash too much. Rupee has fallen a lot in last couple of years, but thats not due to increase in crude price. The govt could do better to support exports. There is still too much bureaucracy red tapes which discourages business. Unless this changes for better, it will not do any good in the long run.
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