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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

#31

Post by usefulcat »

tsotha wrote: post #14
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.

Whether this is bad from the environmental standpoint depends on why the price is low. The price may be low because demand is off.

US oil production increased considerably over the past few years, then the Saudis deliberately increased production to drive down the high prices that had in part enabled the increased US production.

"Saudi Arabia has maintained a high level of oil production despite the slump in crude oil prices, arguing it needs to protect its market share in an economy in flux because of the glut of U.S. oil."

http://www.upi.com/Business_News/Energy-Resources/2015/07/13...

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

#32

Post by 1971genocide »

The capital cost for the saudis is $15 and they are okay pushing it to $20.

One paradoxical fact about the drop in oil prices is there is a uptick in investment in renewable !

The market for renewable is not only folks who care about prices but also people who are worried about emission and self-sufficiency ( this is more to do with countries )

So a drop in oil prices is leading to greater investment in solar and wind which I do not think the saudis expected !

Another interesting analysis is the fact that the boom and bust cycle in oil is getting much shorter. Economists are not exactly sure why that is happening.

One think to worry about is this deflation might bifurcate and cause another recession. Only time will tell.

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

#33

Post by jsprogrammer »

droffel wrote: post #9
varelse wrote: post #3

And yet gas is still over $3 a gallon. Funny that...

Well, gasoline production consumes oil, which means that the price should theoretically lag behind oil's price for a period of time at least equal to the time it takes to go from crude to a final product. In addition, most gas stations will buy gasoline futures a few months out to stabilize their costs, and when oil price falls, the cost of the underlying gas purchased is still at the negotiated futures contract pric…

>In addition, most gas stations will buy gasoline futures a few months out to stabilize their costs, and when oil price falls, the cost of the underlying gas purchased is still at the negotiated futures contract price. So it makes sense that the price wouldn't fall in tandem with crude prices.

Only if the gas station is speculating and trying to arbitrage the market. Otherwise, they would reduce the price to reflect the updated price of the underlying futures.

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

#35

Post by nostromo »

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.

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 crude building up, yet consumers aren't seeing any real benefit from cheaper gas, cheaper shipping, or cheaper domestic flights.

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

#36

Post by protomyth »

varelse wrote: post #3

And yet gas is still over $3 a gallon. Funny that...

MN had a refinery problem so depending on your area of the country, barrel price might not be a determining factor. Diesel in ND is cheaper than gas.

Now, if we could standardize on one gas formula for the entire US, things might go better.

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

#37

Post by dwharrison »

lexcorvus wrote: post #2

I remember ten years ago when worrying about Peak Oil was all the rage. You don't hear too much about that nowadays…

All the assumptions underlying the "Peak Oil" theory have been invalided by new technology.

Eventually we'll get there, but not this century...and possibly never if non-petroleum energy sources are developed between now and the end of the century.

Remember, petroleum was the answer to the "Peak Oil" problem of the 1840's & 50's.

We were running out of whale oil...and the solution wasn't more efficient ways to hunt and kill whales (though that did extend the life of the industry by a couple of decades). The solution was an entirely new energy source.

Petroleum will undergo the same transition...and the new recovery technology has bought the world a few additional decades to find that solution...

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

#38

Post by jessaustin »

tsotha wrote: post #14
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.

Whether this is bad from the environmental standpoint depends on why the price is low. The price may be low because demand is off.

In fact it's low because supply is increased. Saudi was annoyed by North American innovation, and sought to dissuade private investors from financing any more of it. Private investors do wish that the price were higher, but it turns out that exploration and production costs are now low enough for North American production to be profitable still. For the most part, despotic regimes who control various national oilfields are suffering in the current market. Either Saudi don't care which of their competitors go out of business, or they have other reasons to keep production high over the medium term.

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

#39

Post by afarrell »

ryanmarsh wrote: post #30

Cheap natural gas also can mean cheap electricity, in case anyone was wondering about the effect this might have on companies such as Tesla. Natural gas produces more electricity in the U.S. than anything else, including coal (by a tiny margin).

More importantly, natural gas often decides the price of electricity in areas where it is only a small fraction of electricity production.

Google "Location Based Marginal Pricing"

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