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The global oil market is broken, drowning in crude nobody needs

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Re: The global oil market is broken, drowning in crude nobody needs

#181

Post by crazygringo »

a3n wrote: post #165
zozbot234 wrote: post #120

Earlier quoted context omitted.

> The market is broken because demand is way down, but production isn't being lowered to match. Given these prices, shale oil and tar sands production is going to shut down at some point. This is good news in a way, because these are among the dirtiest sources of oil in terms of environmental impact. Saudi Arabia extracts "light" oil and it's a frickin' desert, so the environmental impact of that extraction is quite…

> Saudi Arabia extracts "light" oil and it's a frickin' desert, so the environmental impact of that extraction is quite a bit lower all things considered. Wait, what? A desert is just as much an ecosystem as a rainforest or a city.

Are you seriously claiming that, say, the sand of the Sahara (or the ice at the south pole) is as rich as, say, the Amazonian rainforest?

Sure I guess technically anything is an ecosystem, but some clearly support far more life (and variety of life, and sometimes exclusive life) than others. They obviously have different ecological "value".

Also pumping oil in the desert doesn't lead to the local residents being able to set their tap water on fire, you know, the way fracking can.

Re: The global oil market is broken, drowning in crude nobody needs

#182

Post by auntienomen »

krapp wrote: post #140
lstodd wrote: post #132

Earlier quoted context omitted.

No, it's a mistake - oil most certainly does not have anything like a fixed supply that is going to run out. The supply grows alongside with the price people are willing to pay for it. As you yourself pointed out. Nowadays the demand falls, the prices fall, this would be followed by a fall in production. But whatever happens oil will be available at an affordable price because world just doesn't work without it. If o…

Obviously oil has a fixed supply... there is by definition only a finite amount of it, given that we live on a spheroid with a finite volume out of which to extract it. Supply doesn't grow with demand, as that would imply new oil is somehow being created with demand and that, given infinite demand, there would also be infinite supply. What does grow with demand is technological innovation and effort, and while we wer…

Given high enough price, we can extract oil from carbon in the air, at least as long as the sun keeps shining.

Re: The global oil market is broken, drowning in crude nobody needs

#183

Post by crazygringo »

wyxuan wrote: post #109
tech-historian wrote: post #96

I love the different names for various types of oil: sweet, sour, light, etc. As if it was edible. Description of the names: https://en.m.wikipedia.org/wiki/Sweet_crude_oil https://www.thebalance.com/the-basics-of-crude-oil-classific...

I mean in the old days, they did try to distinguish then by tasting them

I thought you were joking but that's actually what the first link says!

"Nineteenth-century prospectors would taste and smell small quantities of oil to determine its quality."

Thanks, TIL.

Re: The global oil market is broken, drowning in crude nobody needs

#184

Post by wernercd »

vikramkr wrote: post #122
ptero wrote: post #77

Earlier quoted context omitted.

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…

That depends on what you define as a market that isn't broken. In a perfect free market the oil producers make zero profits and this is a move towards fixing the market

"in a perfect market producers make zero profits"

In what world would any company make zero profits in a "perfect" sense?

Companies exist to make profit...

Re: The global oil market is broken, drowning in crude nobody needs

#185

Post by [deleted] »

mrfusion wrote: post #89
fulafel wrote: post #23

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.

[deleted]

Re: The global oil market is broken, drowning in crude nobody needs

#186

Post by wernercd »

eropple wrote: post #168
hutzlibu wrote: post #156

Earlier quoted context omitted.

" In a perfect free market the oil producers make zero profits" Where does this conclusion come from?

From...economics? Profit is market inefficiency, whether due to missing information or inadequate competition. Perfect efficiency drives prices down to the marginal cost of a good or service. Micro 101 stuff.

"Profit is market inefficiency" Profit is motive to do something.

No profit = no motive.

"perfect efficiency" means "no market" in this definition. It's a make believe process that will literally never happen. Companies that work with perfect efficiency close their doors.

Re: The global oil market is broken, drowning in crude nobody needs

#188

Post by gpm »

matthewaveryusa wrote: post #85
9nGQluzmnq3M wrote: post #15

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.

Given that you're asking this question, USO ETF. The alternative is options trading which is a bit more complicated but, if you're interested, is really fun to learn about.

> USO Fund Description

> USO holds near-month NYMEX futures contracts on WTI crude oil.

https://www.etf.com/USO

Without looking any deeper I don't think this is what OP is looking for. They want to bet that oil delivered a year from now is under-priced today, while buying this ETF is betting that oil delivered a month from now is under-priced today (and holding this ETF is repeatedly renewing that bet). It's a completely different thing.

Re: The global oil market is broken, drowning in crude nobody needs

#189

Post by krapp »

lstodd wrote: post #149
krapp wrote: post #140

Earlier quoted context omitted.

Obviously oil has a fixed supply... there is by definition only a finite amount of it, given that we live on a spheroid with a finite volume out of which to extract it. Supply doesn't grow with demand, as that would imply new oil is somehow being created with demand and that, given infinite demand, there would also be infinite supply. What does grow with demand is technological innovation and effort, and while we wer…

Tech, innovation - they are just the other words for "infinite supply". Yes, it is not physically infinite. But it is effectively. As long as someone is willing to pay for it, it will be provided. And even cheaply - look, what's 1970's $12/barrel in nowadays dollars? $50? $100? We are so nowhere near running out of oil, that the whole possibility is best ignored.

>As long as someone is willing to pay for it, it will be provided. And even cheaply

This is only true until it isn't. At some point oil will become economically and technologically infeasible and alternatives will win out, because no one wants the million-dollar a barrel oil economy that results when we have to resort to mining Titan for it.

Re: The global oil market is broken, drowning in crude nobody needs

#190

Post by robk »

0xff00ffee wrote: post #178
9nGQluzmnq3M wrote: post #15

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.

If you have to ask how to do this on HN, you're too late. Pricing has already been set by Black-Scholes, and unless you have a seat on the CBOE you're better off going to Vegas.

Come on now reddit wallstreetbets is up there with Vegas now for gamblers looking for a fix
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