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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

#201

Post by chiefalchemist »

vikramkr wrote: post #127
chiefalchemist wrote: post #124

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.…

Fracking is also better for carbon emissions and helped price out coal, which is a huge environmental benefit. Nothing is black and white

Yes and no - but perhaps mostly no. Let me explain, please.

Coal was a fraction of market share. It was on its way out regardless. However, a lower oil price increases consumption across the board. Thus it wouldn't take much increase for oil's aggregate pollution to exceed oil + coal.

Yes maybe on a per kilowatt basis oil is better than coal. But given the usage of oil, that is the scale, the price drop triggered increases in consumption could in fact cover and then exceed the gain from less coal.

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

#202

Post by lainga »

CydeWeys wrote: post #81
bpsh wrote: post #79

Earlier quoted context omitted.

Unfortunately the goal is to drive out US Shale ...

So fracking stops in the US. Win-win-win?

Someone (Matt Levine??) on Bloomberg said that "Russia and Saudi Arabia seem to have accepted that periodically bankrupting US fracking operations is a cost of business". Periodically - because US oil extraction is done by many firms in a country with strong bankruptcy law, and after 2 or 3 years SA and RU will stop dumping, prices will rise, and they'll spring right up again (barring some drastic change in world oil consumption.) So it's more like Don'tlose-don'tlose-losetemporarily.

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

#203

Post by ghshephard »

crazygringo wrote: post #181
a3n wrote: post #165

Earlier quoted context omitted.

> 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…

Taken to the extreme, we have the "environmentalists" in Kim Stanley Robinson's "Mars" series.

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

#204

Post by wernercd »

quadrangle wrote: post #199
wernercd wrote: post #186

Earlier quoted context omitted.

"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.

Well, sorta but um no. If no profit includes a situation where everyone involved is paid at least enough that they are willing to do the work, then there is by definition motive to do the work. These economic models are simplistic to the point of stupidity. But motivation to do the work can be totally priced in to the equations as a cost of doing business. Profit beyond that is what must, in the models, end up at zer…

Everyone involved includes those who put forth the capital to start businesses. The profit goes to them eventually via the stock market.

Individuals won't put up millions or billions to start large companies without a reason.

"models" remove human motivations and will never be realistic.

It's why Socialism and Communism are perfect on paper... but fail spectacularly in real life.

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

#205

Post by beefield »

hutzlibu wrote: post #156
vikramkr wrote: post #122

Earlier quoted context omitted.

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

Don't quote me, it is ages since I had my economics book open last time, but if I recall correctly, there is a confusing terminology here. Zero profit means in the context of economice profits that exceed risk adjusted return. That is, even in a perfect market, in the models you are allowed to pay a decent return to your capital, but not more. These extra profits are called almost as confusingly "rents" in economics. That's why "rent-seeking" is considered bad even if it is fine that your landlord collects rents from you. Two different things and one word.

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

#207

Post by Klinky »

wernercd wrote: post #184
vikramkr wrote: post #122

Earlier quoted context omitted.

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...

Even in the real world the idea that "companies exist to make profit" sounds wrong. Companies exist to ideally output goods or services, and profit is a tool to ensure they can continue making those goods or services. It can be hard for a company to exist without making a profit, but not the reason they exist.

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

#208

Post by kortilla »

axus wrote: post #46

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.

That’s not a broken market. That’s just standard behavior when a supply cartel falls apart. Eventually those producing at a loss will be forced to stop.

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

#209

Post by kortilla »

0xff00ffee wrote: post #174
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…

This is exactly why "fair trade" products like coffee and chocolate exist. There is an agreement to have an absolute minimum purchase price to prevent a big corporation from clobbering the competition by taking a loss, then jacking up the price. See also: rideshare. VC pumps in billions so that Lyft & Uber can be cheaper than taxis at a HUGE loss -> taxis go out of business -> Lyft & Uber jack up their prices because…

That’s called a cartel. See OPEC.

If that’s all “fair trade” is, that’s an impressive marketing tactic.

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

#210

Post by savanaly »

wernercd wrote: post #184
vikramkr wrote: post #122

Earlier quoted context omitted.

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...

You're thinking of accounting profit, the person you're replying to was thinking of economic profit.

https://www.investopedia.com/ask/answers/033015/what-differe...

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