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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

#241

Post by hutzlibu »

vikramkr wrote: post #231
hutzlibu wrote: post #225

Earlier quoted context omitted.

"Extend your intuition to imagine that you have perfect competition where there are infinitely many identical goods all competing to the lowest price either no differentiation, and people will price at zero profit. " But this is not reality. I doubt doing abstractions like these are helpful in understanding anything, when the base is so far off.

Yes nobody is denying that these arent reality. They're models, and you get far more sophisticated models after econ 101

Ok. But then we are back at the beginning:

"In a perfect free market the oil producers make zero profits"

where this statement does not make sense, unless you apply weird economic definitions.

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

#242

Post by Mirioron »

outside1234 wrote: post #235
elamje wrote: post #234

Earlier quoted context omitted.

I think most people forget that the American oil industry is one of the largest in the world, i.e. it employs a ton of middle and upper class labor. For that reason, it makes this a political issue. For instance, just one aspect of oil that is huge in the US is Shale production, which is not profitable at the current WTI price per barrel. What does that mean? Well, hundreds of thousands of people, or more likely mill…

Oil jobs are not the only things these people can do. There is an argument to be made that renewables, like solar, actually would increase employment - especially of middle class labor.

Sure, but nobody wants to be the guy to go up to hundreds of thousands of people and tell them that they're fired. The skills needed to work in an oil production company aren't the same as solar.

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

#243

Post by kevin_thibedeau »

AnthonyMouse wrote: post #219
ogre_codes wrote: post #217

Earlier quoted context omitted.

Right now national politics is so broken and the Republicans are so against any kind of carbon tax it's impossible. Individual states could probably slip in an increase in gas taxes while gas prices are low, but it's unlikely... Who would want to be the governor seen as increasing taxes at the beginning of economic troubles? In general any kind of tax increase at the moment is going to fall flat.

One of the best ways to do a carbon tax is to pay the revenues back as a dividend. States aren't allowed to print money, so you could reasonably have a bunch of blue states right now say that they're going to start paying dividends to people to help them out because they have to stay home, and hey let's fund it with a gas tax -- which people don't mind nearly as much right now because they're staying home anyway. And…

The battery taxes won't be far off.

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

#244

Post by fulafel »

elamje wrote: post #234
AnthonyMouse wrote: post #213

Earlier quoted context omitted.

> Now would be a good opportunity make internaltional agreements to cap oil consumption and extraction to its current level in shutdown Really what they should do right now is take the opportunity to put in place a carbon tax. That would raise current prices back to previous prices, but it would also suppress demand even after the pandemic passes, so that the wholesale price stays low. You'd essentially have the tax…

I think most people forget that the American oil industry is one of the largest in the world, i.e. it employs a ton of middle and upper class labor. For that reason, it makes this a political issue. For instance, just one aspect of oil that is huge in the US is Shale production, which is not profitable at the current WTI price per barrel. What does that mean? Well, hundreds of thousands of people, or more likely mill…

Ah, the good old employment argument for destroying the planet. We are so wise and far sighted if we let this happen...

It would be make more economic sense to pay these people to stay home and do nothing!

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

#245

Post by mordymoop »

TooSmugToFail wrote: post #228
mordymoop wrote: post #103

Earlier quoted context omitted.

“ 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…

Two questions: — I thought US shale break-even is between $45 and $55, is that correct? — What's your opinion on how long until the debt starts imploding with the US shale producers? Cheers, S

“US Shale” is many plays, each play having sweet spots, so breakeven is a range, not a fixed number. Some areas still look okay at $30 but not many.

US shale producers have already started imploding, you can see it in the stock prices and the cessation of drilling.

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

#246

Post by cheez »

fulafel wrote: post #244
elamje wrote: post #234

Earlier quoted context omitted.

I think most people forget that the American oil industry is one of the largest in the world, i.e. it employs a ton of middle and upper class labor. For that reason, it makes this a political issue. For instance, just one aspect of oil that is huge in the US is Shale production, which is not profitable at the current WTI price per barrel. What does that mean? Well, hundreds of thousands of people, or more likely mill…

Ah, the good old employment argument for destroying the planet. We are so wise and far sighted if we let this happen... It would be make more economic sense to pay these people to stay home and do nothing!

try being poor

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

#247

Post by crisdux »

bpsh wrote: post #79
praptak wrote: post #60

That's another piece of good news. Two countries with a particularly shitty track records are in a lose-lose situation.

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

It's way more complex than that. This is completely between the Saudi's and Russians. US shale is just a unintended consequence (tho temporarily good for them.)

Damage to US shale is unintended and the Saudi's know it will be very temporary. The US companies have a near endless supply of capital, especially now with the federal government being on a spending spree. The shale fields can be easily turned off and on. Loans can be restructured and renegotiated. The last time the Saudi's tried to aim their efforts at the US it ACTUALLY caused the US shale oil companies to consolidate, innovate and they brought their production costs down significantly! The US oil industry is extremely resilient.

The goal for the Saudi's is to bring the Russians to the negotiating table and get them to agree to a meaningful cut in oil production, nothing less than 1 million bpd. They've basically said this. Their strategy is completely aimed at the Russians. The Saudi's are filling EVERY port and transfer station in the world with their cheap crude. The Russians transport all their oil in pipelines. If demand drops for Russian oil, they will be forced to turn off their wells because their pipelines can't handle extra oil, and the Russians have no where to store the extra. The Russians don't want to turn off their oil wells because its dangerous, it usually takes them offline for a long time, and they're expensive to get started again.

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

#248

Post by csours »

wallacoloo wrote: post #233
csours wrote: post #134

It's easy to say "we live in a Just-In-Time Economy", but it's things like this that really demonstrate the implications. The supply chain is set up to flow, so when demand drops or spikes up you get a flood or a shortage. If there's a flood, some companies will go out of business, leaving the survivors with a bigger slice of the pie. If there's a shortage, companies will respond, and some will over-react and build o…

If there’s a shortage, new players might enter to fill that gap though. It doesn’t have to lead to concentration in that direction.

Sure, but there will still be an oversupply when demand goes back to normal.

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

#249

Post by therealdrag0 »

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?

Will that reduce the availability of Gas causing more dependency on Coal, though?

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

#250

Post by RestlessMind »

outside1234 wrote: post #235
elamje wrote: post #234

Earlier quoted context omitted.

I think most people forget that the American oil industry is one of the largest in the world, i.e. it employs a ton of middle and upper class labor. For that reason, it makes this a political issue. For instance, just one aspect of oil that is huge in the US is Shale production, which is not profitable at the current WTI price per barrel. What does that mean? Well, hundreds of thousands of people, or more likely mill…

Oil jobs are not the only things these people can do. There is an argument to be made that renewables, like solar, actually would increase employment - especially of middle class labor.

So if someone is in their late 30's or 40's, having made an entire career in oil industry, with a family and mortgage - your proposal to them is to make their jobs obsolete and that they should seek a career in an at-best tangentially related field like solar?

Look, I get that climate change is one of the most important problems we are facing. But if we want to devise a solution, it has to pass the "political viability" test. Else, you are only inviting a radicalized electorate.

Example: "yellow vests" in France, which is supposed to be a rich society with plenty of resources to withstand the shock from rearranging an oil-based economy, with people supportive of generous social safety nets. If France can't get a gas tax passed without fierce nationwide protests, forget about making oil jobs redundant in Texas, let alone in developing countries like Nigeria or Kazakhstan.

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