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Oil Falls Below $40 for First Time Since 2009 as Glut Grows

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Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#161

Post by crdoconnor »

eloff wrote: post #135
slayed0 wrote: post #23

Earlier quoted context omitted.

The other way to look at this is that if the price is able to find equilibrium at a low enough point, it will not be economically feasible to extract certain types of oil from the ground (e.g. tarsands). The real question is how much of an effect low prices will have on demand.

Yes, but that's temporary. As demand exceeds supply again (because we're running out of oil) then the prices rise and suddenly all these unconventional oil projects become feasible again. The only way to keep that oil in the ground is to eliminate the market for oil at profitable extraction prices through very cheap energy alternatives. It's very difficult to solve the problem through regulation because you need all…

It's a very easy problem to solve through regulation. Just tax carbon emissions.

The hard thing about it is not scuppering economic growth (plenty of ways to achieve that), but keeping a lid on lobbying and bribes by the carbon industry until their political back is broken and renewables can take over.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#162

Post by crdoconnor »

bkjelden wrote: post #45
ori_b wrote: post #11

This is slightly worrying, because if we want to reduce CO2 emissions, we need to leave the oil in the ground. High prices may not be ideal economically, but they do reduce demand for oil, and increase demand for alternative energy.

The current drop in prices seems to mostly be a price war between the Saudis and new producers in the US. It's probably not sustainable long term. But, if increased crude production in the US has lowered the long-term equilibrium price, the US could increase fuel taxes to discourage increased consumption. The only downside to this is that it'd be a very regressive tax increase.

>The current drop in prices seems to mostly be a price war between the Saudis and new producers in the US. It's probably not sustainable long term.

In the medium term renewables will take over. It no longer makes sense to build an oil fired power station any more. In a few more years it will probably be cheaper to drive electric (it already is if you just count the energy cost).

We might still continue making plastics and fertilizer from oil, but even for them the oil is substitutable. At that point we'll probably be more worried about the supply of other commodities and oil will be no more important to us than copper or iron ore.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#163

Post by crdoconnor »

lingben wrote: post #108
elektromekatron wrote: post #89

This could screw Russia. They have lost a hell of a lot of revenue already on this. I do wonder if that is the point.

Not just Russia but every single nation that has a major part of their economy in oil production: Venezuela, Iran, Saudi Arabia, Norway, Canada, etc. Although to be fair, Northern Europeans manage their oil extremely well. Their 'rainy day' fund is now in the trillions. http://graphics.wsj.com/oil-producers-break-even-prices/

There's going to be carnage in the financial markets when the oil producing nations' start selling off their assets in order to pay for necessities.

Saudi has already started issuing bonds. Once they start selling off their trillion dollar sovereign wealth fund the ripple effect will be felt on asset prices all around the world. It has the potential to cause a self-reinforcing feedback loop as well.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#164

Post by mistermann »

redthrowaway wrote: post #155
mistermann wrote: post #152

Earlier quoted context omitted.

> Housing prices in Alberta have collapsed. Sales have collapsed perhaps, but not prices. We shall see if $30 oil can take the wind out of Canadian real estate, I'll believe it when I see it, the confidence level of Canadians when it comes to housing is extremely high.

You're right. Sales are down 30% in Calgary, but prices have only dropped 1.6%. [1] Still, that's compared to a 9% rise for the rest of Canada. [2] I'd still expect them to drop significantly more as laid-off oil workers burn through their savings and find themselves unable to pay their mortgage. [1] http://www.creb.com/Seller_Resources/Housing_Statistics/ [2] http://public.tableau.com/shared/S48Y522MR?:display_count…

Actually, not going up 10% a year in Canada pretty much could be considered a collapse!

> I'd still expect them to drop significantly more as laid-off oil workers burn through their savings and find themselves unable to pay their mortgage.

One would think so, but real estate seems to be able to often defy both logic and mathematics.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#165

Post by dingaling »

douche wrote: post #81
ExxEmmEff wrote: post #15

Earlier quoted context omitted.

Thing is, most people in the States still have day jobs that they commute to. Demand for gas hasn't really gone anywhere. Meanwhile, for the first time in... Forever, diesel is cheaper then gasoline. [1] [1] http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm

For a long time, diesel was cheaper than gasoline. It's only been the last 10-15 years that diesel has been more expensive.

Indeed, here's a breifing paper for the UK House of Commons that discusses the price relationships:

http://www.parliament.uk/briefing-papers/SN04712.pdf

Basically demand is the driver of prices, with diesel engines becoming more popular year-on-year but the refineries unable / unwilling to commit more production to diesel because that leaves them with a surplus of less-desirable products from the refining process, too.

The result is that the UK imports diesel and exports petrol.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#166

Post by eloff »

crdoconnor wrote: post #161
eloff wrote: post #135

Earlier quoted context omitted.

Yes, but that's temporary. As demand exceeds supply again (because we're running out of oil) then the prices rise and suddenly all these unconventional oil projects become feasible again. The only way to keep that oil in the ground is to eliminate the market for oil at profitable extraction prices through very cheap energy alternatives. It's very difficult to solve the problem through regulation because you need all…

It's a very easy problem to solve through regulation. Just tax carbon emissions. The hard thing about it is not scuppering economic growth (plenty of ways to achieve that), but keeping a lid on lobbying and bribes by the carbon industry until their political back is broken and renewables can take over.

When you can get all of the world's major economic powers to agree on that, then you can say it's easy. In principle it's easy, but in reality good luck!

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#167

Post by crdoconnor »

eloff wrote: post #166
crdoconnor wrote: post #161

Earlier quoted context omitted.

It's a very easy problem to solve through regulation. Just tax carbon emissions. The hard thing about it is not scuppering economic growth (plenty of ways to achieve that), but keeping a lid on lobbying and bribes by the carbon industry until their political back is broken and renewables can take over.

When you can get all of the world's major economic powers to agree on that, then you can say it's easy. In principle it's easy, but in reality good luck!

Australia managed to do it without the agreement of other countries. It wasn't any bullshit about competitiveness that caused the repeal either. It was pressure from the coal industry.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#168

Post by guelo »

pm90 wrote: post #100
sliverstorm wrote: post #57

Earlier quoted context omitted.

Capacity doesn't increase, but costs do decrease as the cost of raw materials drops. Now, obviously price is only partly determined by cost.

That's kinda the whole point. There is nothing for refineries to gain by reducing the price of gas because...nobody is going to sell gas at a lower price and take over the market because...the EPA does not allow one to build refineries. Free markets y'all.

Free markets don't account for negative externalities so they have to be regulated y'all. In any case, gasoline prices do move so there must be some market forces at work, but it's a mystery at least to me. I'd love to read an explanation.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#169

Post by maxerickson »

a8da6b0c91d wrote: post #158
maxerickson wrote: post #148

Earlier quoted context omitted.

Demand and supply have both increased during the price decline: https://www.iea.org/oilmarketreport/omrpublic/ That suggests that supply has increased more than demand.

This is temporary. The fracking operations are in the process of going belly up, but pumping like mad in the meantime.

Demand going up is not sputtering, it is contrary to your theory. It seems likely that fracking is more viable at $40 than you think.

Re: Oil Falls Below $40 for First Time Since 2009 as Glut Grows

#170

Post by maxerickson »

angersock wrote: post #70
nostromo wrote: post #35

Earlier quoted context omitted.

Well, counter-intuitivley, consumer gas prices aren't falling nearly as much if at all. Personally I think the DOJ should investigate refineries, as none of the seem particularly eager to compete on price. They're making record profits as the price of crude collapses while the price of gasoline is flat. http://www.latimes.com/business/la-fi-refinery-profits-recor... It seems very fishy to me that we have so much crud…

Consumer gas is an inelastic demand--they've got people by the neck. People had forty years to figure out, "Shit, what happens if gas gets expensive", and they did the wrong thing. Let'em pay.

It's an interesting question. How many people have made choices that at least somewhat accounted for uncertainty in oil prices? You can't see the retirees who stayed in their suburban home instead of moving to rural Wyoming (I don't mean that there are tens of millions matching that description, I mean there are things that are really hard to measure).
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