What Is Happening To The Price Of Oil Folks?

[The Masked Tulip]

Does anyone have any views on what is going on with the oil price?

Is it falling as a result of a slowdown / deflation in the global economy?

Or is it more to do with a war between Saudi Arabia and the other producers in the Middle East, Russia and the US? Are the Saudis trying to put the US shale gas producers out of business?

(Or is someone making a fortune from all the oil that the ISIS lot have nicked?).

If it is the Saudi's driving down the price of oil then surely it is a game of brinkmanship to see who gives in first? I read that Saudi needs oil at 80 bucks a barrel whilst the US and Canadian shale producers need it nearer 100 bucks.

Some are saying that, in the short-term, Saudi could sustain an oil price at the mid-60s mark, to even the low 60s, to try and break the US shale producers.

Thoughts?

[winkie]

Free trade competition between all forms of fuels .....like wanting to start a similar new business with high set up costs and your main rival pricing you out by trying to undercut you....maybe, just a thought.

[interestrateripoff]

Possible more complex, to keep shale oil out they'd need so suppress the price for decades and I doubt that will happen. However it does appear to be posing all sorts of issues economically as a dramatic price deflation will send shockwaves throughout the global economy.

Has the recent price increase triggered a fall in demand as alternatives are sort out? Which is exactly what the free market should be doing?

[Guest UK Debt Slave]

Does anyone have any views on what is going on with the oil price?

Is it falling as a result of a slowdown / deflation in the global economy?

Or is it more to do with a war between Saudi Arabia and the other producers in the Middle East, Russia and the US? Are the Saudis trying to put the US shale gas producers out of business?

(Or is someone making a fortune from all the oil that the ISIS lot have nicked?).

If it is the Saudi's driving down the price of oil then surely it is a game of brinkmanship to see who gives in first? I read that Saudi needs oil at 80 bucks a barrel whilst the US and Canadian shale producers need it nearer 100 bucks.

Some are saying that, in the short-term, Saudi could sustain an oil price at the mid-60s mark, to even the low 60s, to try and break the US shale producers.

Thoughts?

America is much less dependent on OPEC oil than it was 10 years ago. The Shale gas revolution has totally shaken up the global market for oil. America has HALVED it's use of OPEC oil

OPEC has been forced to slash oil prices to remain competitive.

Market forces working as they should do basically, though I suspect it wont last.

[The Masked Tulip]

According to this WSJ article it can causes problems for US oil service companines (ETF: OIH?) by oil companies spending less on equipment. But that it could increase profits at US refineries who buy Saudi oil.

Prices of various oil related companies appear to be falling on the news though.

http://online.wsj.com/articles/saudi-oil-price-cut-upends-market-1415063053

[Giraffe]

The North Sea will get hammered if this trend continues. I've been part of mass redundancies in the past in that industry due to persistent price slides. Can't see it being any different this time. Those oil companies do like to pay those dividends to their shareholders.

[Wurzel Of Highbridge]

Deflation

Cost deflation from falling oil prices is silently welcomed be central banks and government. It's asset deflation that they will not allow under any circumstances, hence all the delation rhetoric when cost inflation was soaring around 5% a few years ago.

If anything it will give consumers more money to spend, boost consumer spending and employment.

[Executive Sadman]

If it is the Saudi's driving down the price of oil then surely it is a game of brinkmanship to see who gives in first? I read that Saudi needs oil at 80 bucks a barrel whilst the US and Canadian shale producers need it nearer 100 bucks.

Some are saying that, in the short-term, Saudi could sustain an oil price at the mid-60s mark, to even the low 60s, to try and break the US shale producers.

Thoughts?

Saudi oil is incredibly cheap...even when oil was $8 a barrel in the late 90s, they were still producing, at a total cost of about $2 a barrel. OK, its probably a bit more than that now, but saudi oil is the easiest to access of its quality worldwide.

Yanks and Canadians probably you are right about though.

http://uk.reuters.com/article/2009/07/28/oil-cost-factbox-idUSLS12407420090728

Saudi Arabian crude is the cheapest in the world to extract

because of its location near the surface of the desert and the

size of the fields, which allow economies of scale. The operating cost (stripping out capital expenditure) of

extracting a barrel in Saudi Arabia has been estimated to be

around $1-$2, and the total cost (including capital expenditure)

$4-$6 a barrel.

[winkie]

Deflation

Cost deflation from falling oil prices is silently welcomed be central banks and government. It's asset deflation that they will not allow under any circumstances, hence all the delation rhetoric when cost inflation was soaring around 5% a few years ago.

If anything it will give consumers more money to spend, boost consumer spending and employment.

Yes, and also if people had enough spare money to save, money that didn't keep getting devalued all the time because of inflation they wouldn't need to invest in stocks and share paying dividends built from debt that will never be repaid only reliant on inflation paying for it.....what a system we have.

Edited November 4, 2014 by winkie

[The Masked Tulip]

So the difference appears to be that US and Canadian shale producers need $100 to make a profit but the Saudis, even though they can get it out of the ground really cheaply, need it at $80ish in order to fund their 27 million population... buy fast cars, London houses, give guns, allegedly, to... etc, etc

[The Knimbies who say No]

Hard to see the price being sustained at current levels with the Fed taper and wages under pressure. Sharply down since July to multi-year lows, I'll be delighted if Deflation Dog barks the price lower still to levels last seen prior to the crash (i.e. sub ~$70).

It seems to me that elevated fuel prices on the back of lax credit creation has been a great example of Govt policy being used as a weapon against ordinary people, for the benefit of city types and Govt tax receipts. Hard to say how much extra taxation has been gathered by giving the bankrupt city the ammunition to speculate on commodities. 20p, 30p per litre perhaps over the past six years? A few hundred quid a year for many motorists I'd venture.

Also skews the fuel economy calculations and the oft-presented case for buying a newer car to boot.

[Wurzel Of Highbridge]

Yes, and also if people had enough spare money to save, money that didn't keep getting devalued all the time because of inflation they wouldn't need to invest in stocks and share paying dividends built from debt that will never be repaid only reliant on inflation paying for it.....what a system we have.

Frankly those in power do not want us accumulating capital to use against them and their banking system, hence the low interest rates (for savers), the high house prices, the student debt. The entire system has been rigged against the average person being able to accumulate capital so those that have it can rule.

[The Knimbies who say No]

Saudi oil is incredibly cheap...even when oil was $8 a barrel in the late 90s, they were still producing, at a total cost of about $2 a barrel. OK, its probably a bit more than that now, but saudi oil is the easiest to access of its quality worldwide.

Yanks and Canadians probably you are right about though.

http://uk.reuters.com/article/2009/07/28/oil-cost-factbox-idUSLS12407420090728

Saudi Arabian crude is the cheapest in the world to extract

because of its location near the surface of the desert and the

size of the fields, which allow economies of scale. The operating cost (stripping out capital expenditure) of

extracting a barrel in Saudi Arabia has been estimated to be

around $1-$2, and the total cost (including capital expenditure)

$4-$6 a barrel.

$3/barrel extraction cost was achievable about 5 years ago in the Middle East so the cost base should still be pretty low for many fields. The problems are more likely to be the Govt spending promises made of the back of triple digit oil.

[winkie]

Frankly those in power do not want us accumulating capital to use against them and their banking system, hence the low interest rates (for savers), the high house prices, the student debt. The entire system has been rigged against the average person being able to accumulate capital so those that have it can rule.

Well they can't have it all ways.....growing numbers of people with little in the way of income and assets, no savings and spending or borrowing power can't create growth or inflation.......big society innit.....lend, borrow and share from each other....survival mode.

[Executive Sadman]

So the difference appears to be that US and Canadian shale producers need $100 to make a profit but the Saudis, even though they can get it out of the ground really cheaply, need it at $80ish in order to fund their 27 million population... buy fast cars, London houses, give guns, allegedly, to... etc, etc

Well, need, want...2 different things...fast cars and houses can fall in value or cost too!

If oil falls below $80 a barrel, i cant see the Saudi's just refusing to produce, put it that way.

Personally the conspiracy theorist in me looks towards the US invasion of Iraq and their hostility to Iran and see's it as a demonstration of force by the americans...as if to say dont sell us the product we want at a cost we find acceptable and there will be trouble....IIRC in one of his blog entries years ago Denninger even once said most of the US military budget should be added to the price of oil to get a true view of its 'cost'...as the military exists mainly to secure cheap (or not so cheap...add in military expenditure and its over $200 a barrel) oil.

this excerpt from his book would seem to reinforce that view.

http://books.google.co.uk/books?id=Co-RDtIx7cAC&pg=PA174&lpg=PA174&dq=denninger+military+oil+price&source=bl&ots=5oU85DOoad&sig=zF_LcsTEzhgu4C4tJr9P2C7uuQs&hl=en&sa=X&ei=xZ1YVN-kBIuQ7Aak4IC4Aw&ved=0CE0Q6AEwCQ#v=onepage&q=denninger%20military%20oil%20price&f=false

Saudi has no shortage of skeletons in the closet that the yanks could exhibit to justify an invasion.

[dances with sheeple]

The North Sea will get hammered if this trend continues. I've been part of mass redundancies in the past in that industry due to persistent price slides. Can't see it being any different this time. Those oil companies do like to pay those dividends to their shareholders.

Thought Hamish had been a bit quiet of late.

[The Masked Tulip]

Well, need, want...2 different things...fast cars and houses can fall in value or cost too!

If oil falls below $80 a barrel, i cant see the Saudi's just refusing to produce, put it that way.

Personally the conspiracy theorist in me looks towards the US invasion of Iraq and their hostility to Iran and see's it as a demonstration of force by the americans...as if to say dont sell us the product we want at a cost we find acceptable and there will be trouble....IIRC in one of his blog entries years ago Denninger even once said most of the US military budget should be added to the price of oil to get a true view of its 'cost'...as the military exists mainly to secure cheap (or not so cheap...add in military expenditure and its over $200 a barrel) oil.

this excerpt from his book would seem to reinforce that view.

http://books.google.co.uk/books?id=Co-RDtIx7cAC&pg=PA174&lpg=PA174&dq=denninger+military+oil+price&source=bl&ots=5oU85DOoad&sig=zF_LcsTEzhgu4C4tJr9P2C7uuQs&hl=en&sa=X&ei=xZ1YVN-kBIuQ7Aak4IC4Aw&ved=0CE0Q6AEwCQ#v=onepage&q=denninger%20military%20oil%20price&f=false

Saudi has no shortage of skeletons in the closet that the yanks could exhibit to justify an invasion.

I was reading a few days ago someone who was saying that Obama wanted cheap gas prices for the US elections - today - and that once the elections are out of the way that the price of oil would shoot up.

[The Masked Tulip]

Brent crude tumbles as Saudi escalates Opec oil price war

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11207301/Brent-crude-tumbles-as-Saudi-escalates-Opec-oil-price-war.html

Dollar smashes through resistance as mega-rally gathers pace

http://www.telegraph.co.uk/finance/economics/11206596/Dollar-smashes-through-resistance-as-mega-rally-gathers-pace.html

[rantnrave]

A few months ago someone posted a chart of oil price spikes and US bouts of QE. The correlation was very strong.

[longgone]

who gives a toss , the prices at the pumps never change ,

[ChumpusRex]

who gives a toss , the prices at the pumps never change ,

Oh, they have. Not as much as you'd like, but they have.

I've been going through my mileage records, and I was filling up at £1.39/l unleaded last year (not a motorway service station). I've most recently filled up for £1.22/l

As to the price of crude, I do wonder how much lower it can fall. It seems that OPEC, Saudi particularly, are pumping like crazy. Saudi are rumoured to be almost up to "surge" capacity, last seen when oil prices had their massive spike to $150. What their motiviation isn't clear?

Perhaps, they are trying to starve out the shale oil producers? Perhaps, they've committed too much government expenditure predicated on high oil revenues, and are now faced with having to pump even faster into a soft market, just to make ends meet. Perhaps they're worried that oil-alternative technolgies are starting to appear (e.g. commercially viable electric cars) and are trying to make them as uneconomic as possible.

[RDW]

who gives a toss , the prices at the pumps never change ,

Just shows you how much of the price is to do with duty and tax and to be fair fixed production costs, and how much is to do with the actual price of oil.

[Bloo Loo]

Oh, they have. Not as much as you'd like, but they have.

I've been going through my mileage records, and I was filling up at £1.39/l unleaded last year (not a motorway service station). I've most recently filled up for £1.22/l

As to the price of crude, I do wonder how much lower it can fall. It seems that OPEC, Saudi particularly, are pumping like crazy. Saudi are rumoured to be almost up to "surge" capacity, last seen when oil prices had their massive spike to $150. What their motiviation isn't clear?

Perhaps, they are trying to starve out the shale oil producers? Perhaps, they've committed too much government expenditure predicated on high oil revenues, and are now faced with having to pump even faster into a soft market, just to make ends meet. Perhaps they're worried that oil-alternative technolgies are starting to appear (e.g. commercially viable electric cars) and are trying to make them as uneconomic as possible.

Either way, they are shafting the SuperPowers, both USSA and USSR.

Perhaps the Saudis are at the end of their supply possibility, and are taking an attitude..."if we are going down, we are taking everybody else with us"

[R K]

It's going to $300, gold is going to the moon, hyperinflationary collapse dude!!

Oh sorry, that was sooooo 2008

[crashmonitor]

That was before the US became the largest producer of energy in the world courtesy of shale gas and changed the rules, which were Despotic regimes and Jihadists could hold the world economy to ransom and gold gained from that fear.

Edited November 4, 2014 by crashmonitor