Oil and Gas Prices

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Harvey Harvey
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Oil and Gas Prices

This came up in another thread... what is driving the price per barrel down right now.

I just saw a piece on the Financial Times of London, which reported these factors:

• Increasing US production from fracking, our imports are way down
• A slowdown the world economy, especially China
• Fracturing of OPEC with Saudi Arabia continuing to produce at a high level
• Increased fuel efficiency of automobiles

The theory on the Saudi's is that their goal (besides keeping their own revenue high) is to put the hurt on Iran who is isolated by sanctions and very dependent on higher oil prices.  A side effect of this is that this also is hammering Russia.

Among US, Europe, China and Russia the US economy is (by the FT at least) viewed to be in the best shape, relatively.

"You just need to go at that shit wide open, hang on, and own it." —Camp
x10003q x10003q
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There is also a glut of natural gas in the USA. Many power companies are switching from oil (and coal) to NG for electricity generation. Also, many homeowners are switching from oil to NG for heating. I did 2 years ago and my heating bill is now about 35% of what is was with oil. The switching to NG in New England (electric and heating) is actually raising the price of NG in New England because the pipelines have not been expanded to keep up with demand yet.
MC2 5678F589 MC2 5678F589
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In reply to this post by Harvey
Stronger US dollar is contributing, too. This is the most important thing to me.

U.S. dollar kicking ass against the Euro, cheaper fuel and cheaper plane tickets to Europe is pretty awesome for knocking off a couple of bucket list items.
Z Z
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The Saudi's this week lowered oil prices to the U.S. and raised them elsewhere in the world.  The reason is that they are threatened by the huge increase in US oil production.  If oil prices go down to a certain point that will lower us production long term.  A cartel controls prices to protect their interests sometimes those interests are to prevent competition with lower prices.
if You French Fry when you should Pizza you are going to have a bad time
Snowballs Snowballs
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Saw on the news a town in Texas has gas at $2.27 a gallon.

There's an excellent book on the oil industry called " The Prize ". Oil most definitely is THE prize. Without it life would be very different. Not only does it fuel our transportation making today's cities and large population possible, but it yields plastics, medicines, asphalt on and on. Before oil, factories only worked during daylight.

Oil, it's " The Prize ".
Harvey Harvey
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Politics and environment aside, after so many years of being owned by OPEC it's fun to watch them squirm.
"You just need to go at that shit wide open, hang on, and own it." —Camp
Snowballs Snowballs
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Indeed. It will be even more fun if it turns out they're powerless to stop US production increases.

Iraq has some very low extraction costs. Just a few years ago it was listed at $3 per barrel vs Saudi's $18 per barrel.
Snowballs Snowballs
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Coach Z wrote
  A cartel controls prices to protect their interests sometimes those interests are to prevent competition with lower prices.
That reads like a page right out of John D Rockefeller's play book. It's a game long played in oil's history.
MC2 5678F589 MC2 5678F589
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Harvey wrote
Politics and environment aside, after so many years of being owned by OPEC it's fun to watch them squirm.
Oh how it has changed:
However, while the Trump administration refuses to aid hard-pressed institutions that employ around 25 million Americans, it has gone all-out to help the oil industry.

Trump’s possible success in brokering a deal to cut global oil production — I say “possible” because oil prices haven’t moved much, which suggests that markets aren’t impressed — made headlines Monday. But I haven’t seen much commentary about just how strange it is for a U.S. president to be playing that role.

First, since when is it the president’s job to organize international cartels?

Second, why are higher oil prices in the U.S. national interest? We’re not a major oil exporter — in fact, we import more oil than we export. And if Trump’s cartel were actually successful in raising oil prices back to what they were before the current price war, U.S. consumers would pay a heavy price, on the order of $200 billion a year.

So why is propping up oil prices a priority? Trump says that it’s about jobs. But U.S. oil and gas extraction employs only around 150,000 workers. That’s less than 1 percent of the number of jobs America has lost in the past three weeks. It’s only around 0.1 percent of total U.S. employment. It’s a rounding error compared with the jobs at risk in hospitals and local government, which Trump is refusing to help.

So what makes oil worthy of aid when hospitals aren’t?

One answer is that investors have sunk a lot of money into oil, even though few jobs were created. Net fixed assets in oil and gas extraction are around $1.8 trillion, almost twice the total for hospitals, despite far smaller employment. So maybe this isn’t about protecting jobs, it’s about protecting capital.

And this capital happens to be very G.O.P.-friendly: The oil and gas sector makes big political contributions, almost 90 percent of them to Republicans. This is, by the way, in strong contrast to education, which accounts for a majority of state and local government jobs and gives most of its contributions to Democrats.

Finally, while America isn’t a net oil exporter, Russia and Saudi Arabia are basically petrostates that export oil and almost nothing else. So propping up oil prices is a way for Trump to help his two favorite autocrats.

In sum, Trump’s response to the economic fallout from Covid-19 is looking a lot like his fumbled response to the virus itself. He’s in denial about the problem; he’s blocking essential action because of personal political vendettas; and his party is opposing desperately needed aid because of its anti-government ideology.

The economics of dealing with a pandemic were never going to be easy. But Trump and company are almost surely going to make things even worse than they had to be.
From: https://www.nytimes.com/2020/04/13/opinion/jobs-republicans-covid.html
Peter Minde Peter Minde
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Re: Oil and Gas Prices

Gcaptain.com reporting that because consumption is way down, the recent agreement on oil production has barely nudged prices in the market. As refineries are full to capacity, VLCCs are being used to store oil on the water.

Good find, MC2.
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