Page 1 of 2 12 LastLast
Results 1 to 15 of 19

Thread: Rude, crude oil and toilet paper wars

  1. #1
    Join Date
    Mar 2008
    Location
    SW Michigan
    Posts
    668

    Rude, crude oil and toilet paper wars

    While I wish I could enjoy the low price of gasoline right now while I sit at home alternating between the workshop, kitchen, and computer, my tanks are full with the likelihood of staying full for the next few weeks with the stay at home order.

    Meanwhile, our "ally" in the middle east is pledging to further increase crude production in a glutted market in their war with another unnamed foreign oil producing country in an attempt to totally crush any competition so they have near unfettered control of the crude market. This of course can have serious impact on our own oil industry. Kill the competition, control the market, control pricing, rule the world. I think if it weren't for the virus, this situation would be dominating world news headlines and be the focus and concern of most world governments. Perhaps the timing is calculated, while the news is all about ways to not contract the virus, latest graphs and models,and lack of TP and hand sanitizer, one entity is positioning itself for total dominance in the liquid gold market. Stock up now if you are able, could be trouble ahead imo.

    Conspiracy theory? Maybe, and I hope that's the case but there is a lot on the line here.
    Pray for wisdom for our leaders.

  2. #2
    The Saudis face a problem. They have a lot of oil but the world is moving away from fossil fuels (independent of the Corona virus) and that's going to create a glut of oil in the world. There are many producers of crude and each will sell at any price that's over their cost of production.

    Saudi has low cost of production so I think they're going to produce while they can and get the money out of their reserves. It doesn't do them any good to hold on to the reserves.

    Yes, they'll drive the high cost producers out of business - including US shale oil producers. But low energy costs will benefit the US.

    As soon as the price of oil goes up above another country's production cost, they will come on line, add to the supply and the price will stabilize at that level. In other words, I don't see any way the Saudis, or anybody else, is going to be able to increase the price of oil any significant amount.

    This all started because Russia wouldn't go along with a production cut in order to keep the price of oil higher.

    While this won't have much impact on the US, some countries are going to be hurt very badly - such as Venezuela which really depends on oil revenue.

    Mike
    Go into the world and do well. But more importantly, go into the world and do good.

  3. #3
    A week or so ago some news story explained a significant benefit of the pandemic; due to self-isolation all over the world, air pollution levels are free-falling because transportation in general is at a near standstill. I'm still wondering why gas is still averaging $2.30 a gallon around here... After the '08 bust gas went well below a buck. I still remember during the mid 70's energy crisis, 'they' said we would be out of oil in 20 years. It's been 45 years now, the world population has grown by roughly 3.5 billion in that time, increasing oil demand, and yet given all that the world seems to be just loaded with oil. Sounds like the Saudis may be shooting themselves in the foot?

    To be sure however, I have no idea how oil markets are driven...
    ========================================
    ELEVEN - rotary cutter tool machines
    FOUR - CO2 lasers
    THREE- make that FOUR now - fiber lasers
    ONE - vinyl cutter
    CASmate, Corel, Gravostyle


  4. #4
    Join Date
    Sep 2007
    Location
    Longview WA
    Posts
    27,347
    Blog Entries
    1
    I still remember during the mid 70's energy crisis, 'they' said we would be out of oil in 20 years. It's been 45 years now, [edited]
    It depends on who the 'they' were. Many people make and repeat 'information' that is made up on the spot. Many of these same people never come back to say how wrong they were.

    To be sure however, I have no idea how oil markets are driven...
    They are driven by people trying to create and maintain personal wealth by any means they can.

    Read up on Standard oil > https://en.wikipedia.org/wiki/John_D._Rockefeller

    It is the same old supply and demand story. Control the supply and the price for demand rises.

    Currently the major drive against wind and solar energy is from the fossil fuel industry trying to control not only the supply of energy but also the sources of energy.

    jtk
    "A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
    - Sir Winston Churchill (1874-1965)

  5. #5
    Look at this article - it says the price of some oil could go negative.

    Mike
    Go into the world and do well. But more importantly, go into the world and do good.

  6. #6
    Join Date
    Mar 2008
    Location
    SW Michigan
    Posts
    668
    Quote Originally Posted by Mike Henderson View Post
    Look at this article - it says the price of some oil could go negative.

    Mike
    Right. And that's why I think it may not be such a great thing. The richest OPEC nations can outlast the competition, and that is their goal imo and others much smarter than I. Once the competition is gone, that sets the stage for them to set whatever price they care to. We export much of our oil and like you mentioned before, much of it is produced at high cost. President Trump mentioned he is concerned about the direct and ripple effects this will have not only on our producers but globally. Competition keeps prices down in the long term; short term, gluts like we are seeing now artificially lower gas pump prices. And yes, I am aware that the pandemic is also affecting supply, but the Saudi's are determined to increase production and outlast the competition because they have lots of cash and are in a superior position economically than most of the rest of the world's oil producers. The lack of demand because of the virus strengthens their long term goal.

  7. #7
    Join Date
    Jun 2012
    Location
    New Westminster BC
    Posts
    2,981
    All the more reason to accelerate the transition away from fossil fuels like oil and to renewable energy sources like wind, solar, hydro, geothermal etc.

  8. #8
    Join Date
    Apr 2005
    Location
    Central MA
    Posts
    1,584
    Keeping our reserves in the ground is never a bad thing. We know where they are and the cost to access them; when the market price is higher than the production cost domestic producers will resume production. In the mean time having access to cheap energy at someone else’s expense is not hurting the US one bit.

  9. #9
    Quote Originally Posted by Jon Grider View Post
    Right. And that's why I think it may not be such a great thing. The richest OPEC nations can outlast the competition, and that is their goal imo and others much smarter than I. Once the competition is gone, that sets the stage for them to set whatever price they care to. We export much of our oil and like you mentioned before, much of it is produced at high cost. President Trump mentioned he is concerned about the direct and ripple effects this will have not only on our producers but globally. Competition keeps prices down in the long term; short term, gluts like we are seeing now artificially lower gas pump prices. And yes, I am aware that the pandemic is also affecting supply, but the Saudi's are determined to increase production and outlast the competition because they have lots of cash and are in a superior position economically than most of the rest of the world's oil producers. The lack of demand because of the virus strengthens their long term goal.
    Saudi Arabia is hurting with the price of oil so low. They run a big annual budget and I think I read that their reserves (money in the bank) are somewhere about $500 billion. If they spend that they'll have to start borrowing or reduce the benefits they're paying to their citizens (and the other things they spend money on).

    But suppose every other country stopped shipping oil because of the low price. They aren't going to scrap all their extraction and refining equipment - they'll just idle it. And if Saudi tries to raise the price of oil, they'll just come back into the market.

    There's only two ways we'll see high oil prices in the future:
    1. The oil producers join together and limit supply, or
    2. The world starts to use a LOT of oil. And right now, most countries are moving towards renewable energy.

    Mike
    Go into the world and do well. But more importantly, go into the world and do good.

  10. #10
    Join Date
    Apr 2013
    Location
    Kansas City
    Posts
    2,652
    Quote Originally Posted by Mike Henderson View Post
    While this won't have much impact on the US, . . . "
    Mike
    I don't think that's true. Low oil prices have a negative effect on the stock market that was happening independent of the health crisis. With oil prices that low, then US oil supplies, especially shale oil and fracked oil becomes too expensive to sustain production. There are oil wells shutting down and the resultant unemployment in the oil industry.

  11. #11
    Quote Originally Posted by John Lanciani View Post
    Keeping our reserves in the ground is never a bad thing. We know where they are and the cost to access them; when the market price is higher than the production cost domestic producers will resume production. In the mean time having access to cheap energy at someone else’s expense is not hurting the US one bit.
    So let’s apply this same scenario to say ….oh, maybe …wood, for instance??

    We have plenty of trees, know where they are, and the cost to access them (as lumber). It goes with this of course, that we have lumberjacks, harvesting equipment, transports, and mills to process these trees.

    And those evil Amazonian BIG LUMBER barons are flooding the market with cheap wood. We’ll just enjoy that access to cheap wood at someone else’s expense - - not hurting us one bit!

    So Weyerhaeser, Georgia Pacific, West Frasier, Sierra Pacific, and all the boutique domestic producers will just bide their time, shut down facilities, and idle equipment. Waiting. Surely you can just hit the re-start button and it will all come back at 100% capacity. And of course the people who actually do the work for these companies will just bide their time as well. Surely they wouldn’t even consider a job change? You know, for one with a paycheck?

    Kind of like the US steel industry.

    Be careful what you wish for.

  12. #12
    Quote Originally Posted by Stan Calow View Post
    I don't think that's true. Low oil prices have a negative effect on the stock market that was happening independent of the health crisis. With oil prices that low, then US oil supplies, especially shale oil and fracked oil becomes too expensive to sustain production. There are oil wells shutting down and the resultant unemployment in the oil industry.
    And on the positive side, drivers pay less for gasoline, airlines pay a less for fuel, etc.

    Mike
    Go into the world and do well. But more importantly, go into the world and do good.

  13. #13
    Quote Originally Posted by Jon Grider View Post
    Not sure why I'm having trouble posting? And why Mike's quote isn't separated from mine? And my reply is in Mikes box?Mods can you fix this?
    You have to start your text after the [/QUOTE]. You obviously started it before that because my name (Mike) is at the bottom of your posting.

    Mike

    [Just an added comment: Technology in the oilfield has allowed increased production to the point that there's a glut of oil, even before the virus. Oil prices were falling before the Saudi's move. In fact, the Saudis tried to get Russia to limit production in order to hold up the price and the Russians refused. That's when the Saudis turned on the tap and drove prices down.]
    Last edited by Mike Henderson; 04-02-2020 at 10:46 AM.
    Go into the world and do well. But more importantly, go into the world and do good.

  14. #14
    Join Date
    Mar 2003
    Location
    Upland CA
    Posts
    5,548
    Mike,

    You forgot one way oil prices could spike.....War.

    WWII would have lasted longer if Germany could have gotten more oil, or developed the synthetic stuff they were working on.

    Hate to say it, but what better time for some nutcase to start a war, than during a world wide pandemic.
    Rick Potter

    DIY journeyman,
    FWW wannabe.
    AKA Village Idiot.

  15. #15
    Quote Originally Posted by Mike Henderson View Post

    While this won't have much impact on the US, some countries are going to be hurt very badly - such as Venezuela which really depends on oil revenue.

    Mike
    Quote Originally Posted by Stan Calow View Post
    I don't think that's true. Low oil prices have a negative effect on the stock market that was happening independent of the health crisis. With oil prices that low, then US oil supplies, especially shale oil and fracked oil becomes too expensive to sustain production. There are oil wells shutting down and the resultant unemployment in the oil industry.
    I'm not sure it's true either. For reasons I definitely do not understand, the stock market seems to be at least somewhat hinged to oil prices. For example, today crude prices surged 35%, and the stock market is up (at least as of when I am typing this), and this despite the record unemployment claims and us staring into the black hole of the Coronavirus outbreak.
    In my own little world, lower oil prices are better for me at the gas pump, but if it means the stock market tanks, I don't think it's good for any of us.

    A couple of weeks ago when we were having massive drops in the stock market, I heard some of the talking heads saying that a lot of the influence was coming from crashing oil prices, but coronavirus was camouflaging it. Again, I wish I understood the relationships better.

    I did not think the domestic oil industry was so large that it could drag the entire market down. Maybe it is a derivative impact on the commodities market? If anyone can provide a simpleton's explanation, please do!
    Edwin

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •