121–130 of 303 posts
What happened to "Peak Oil"? Was there some assumption in those projections that proved to be wrong?
It came, and past. Production is down from the peak, and down from last month too.
The market is broken because demand is way down, but production isn't being lowered to match. Saudi Arabia intends to keep their production high. The other producers are losing money but haven't reduced output, because changing output levels is more expensive than taking the loss.
This does indicate market inefficiencies, but such tactics -- flooding the market with cheap products to kill competition, then raising prices back -- is pretty common. I have seen it everywhere from cell phone marketing to grocery stores. I have personally seen, twice, Stop and Shop moving in, dropping prices, driving a less-well-funded competitor out, then going back to business as usual. I do not see that the curr…
Earlier quoted context omitted.
is the price war the reason, the consequence or the accelerator of the current market?
The price war was unintentionally started just as demand began to be wholesale destroyed by the response to the COVID pandemic. Supply was reduced, but demand was reduced even more by a halting of the global economy. Saudia Arabia was trying to bring Russia in line with OPEC+ price targets, but Russia has enough state cash reserves and a much lower state budget break even point (~$40/barrel vs Saudi Arabia's ~$80/bar…
This is the same reason the Obama administration did little to discourage fracking from hockey stick'ing. Given the state of the economy was one of the few tools they had to goose the economy. Essentially, like it or not, selling out Mother Nature for the economy.
https://www.forbes.com/sites/rrapier/2016/01/15/president-ob...
Serious question: how do I invest in some of those $10 barrels of oil? It seems like a contract to deliver oil at $10 in 2021 is likely to be worth more than by next year.
A contract to deliver oil in 2021 is known as a future [0], you can trade these on the market. The "problem" facing you is that the market also understands that the price of oil is going to go up, a barrel of WTI Light Sweet Crude Oil is $21.84 for delivery this May, but $35.53 for delivery next may [1]. [0] https://en.wikipedia.org/wiki/Futures_contract [1] https://www.cmegroup.com/trading/energy/crude-oil/light-swe…
The upside is - damange to the environment aside - oil is a universal currency. Lowing the cost of energy is like printing money and mailing everyone a cheque; without the inflation. (It's also why oil is has been used as an economic weapon). Lowing the cost of energy impacts everyone. It's like being The Fed and lowing interest rates, but better since Joe & Jane Q Public benefit every time they pull up to the pump.…
Keeping oil prices low punishes not only Russia but Iran and Venezuela, so that could be a major reason why the Saudis are flooding the market.
Markets are broken when oil usage develops towards sustainable levels? We have to drastically cut down oil use, let's not pretend that the pre-corona oil consumption was tolerable, much less desireable. Now would be a good opportunity make internaltional agreements to cap oil consumption and extraction to its current level in shutdown, and when the shutdown starts to get rolled back, the shock will be smaller as risi…
I hate to disagree but the free market is often a great guide to tell us how much we need of something. The USSR tried telling industries how much to produce each year and we can agree that didn’t turn out well. Of course oil is a problem but a tax or cap and trade system would make more sense to address it.
Taxes and cap-and-trade systems are indeed the mechanisms of how current international agreements try to attempt CO2 emissions, they're a fine way to implement it.
Earlier quoted context omitted.
I'm unclear how that's supposed to work. Oil goes below $30 for an extended period of time. So long that all the shale producers go bust. So long that no one buys up all those assets but instead just lets them go fallow. After all that time Saudia Arabia now lets the price rise. How much time will it be over $30 before the shale producers start up again? Will it really pay off compared to the amount of time they had…
“ How much time will it be over $30 before the shale producers start up again?” I work in this field, and the answer to your question is “instantaneously.” The largest operators will not go out of business because they have sufficient exposure to non-shale assets; they will simply immediately drill the wells they had planned to drill when the crisis hit. Capital will rapidly find its way into the hands of the people…