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200 plus oil

diggy70 said:
You are right, cause I never owned oil till it was like 50 bucks/barrel..But im still buying at 125, so i guess im the speculator..or fundamentalist
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Looks like he turned out to be both.


How many times do people need to buy into and then be hurt by these commodity conspiracy ideas before people stop believing them?
 
Perhaps I can shamelessly quote myself (from another thread) :) (Currently NYMEX light crude January '09 is $49.93/barrel--yay!)
Francesca R said:
I should elaborate anyway . . .

The high price of oil is not by itself any kind of a statement on whether there is "free market capitalism" in energy. It probably has a lot more to do with so-called inelastic supply-demand, which--according to simple economics--makes for a volatile clearing price. (This, incidentally, means that it is "just as easy" for oil to drop to $50 as go to $230 from today's $140)

Second, the extent to which oil may be distorted by perverse incentives (those that kill capitalism, for example) has IMO really nothing at all to do with the companies in the sector being large. As mentioned above, they have to be large because it is a scale business--in the extreme.

Supply should not be so inelastic in a capitalist system. There is more oil to be explored/discovered. But the incentives for that to happen are blunted by various geopolitical risks (see Venezuela, Russia, Nigeria, The Gulf) which makes it an unfortunately poor risk reward trade for the boss of BP to invest what would otherwise be a sensible amount in finding the next few North Seas.

I would suppose/hope that the long term effect of this is good for alternative energy (and the oil giants will re-invent themselves that way anyway). In the shorter term it is a lot more problematic.
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DmKrispin said:
I almost veered off the road this morning.

$1.49

I never thought I'd see gas under $3 again.

Wow.
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Frankly I hope we see it back over $3 as soon as possible. Oil is very price inelastic so it can change rapidly with changes in demand when you are near production capacity. With prices dropping I don’t expect to see much in the way of new production, so when demand starts to increase prices will go back up.

Demand won’t increase until the global economy starts to pick up. So, just as falling oil prices were a leading indicator of very bad economic news, I’m expecting rising oil prices to be a leading indicator of a recovery.
 
The current volatility is pretty remarkable, some analysts are predicting a low of $20 a barrel, from a high of $150. Long-term the longer that oil prices remain low, the higher they will spike in the future. Refinery projects, alternative energy projects, conventional oilfield development and higher cost oil developments are all being cut back, deferred or shelved. When global growth gets back on track $200 may sound cheap :)
 
lomiller said:
So, just as falling oil prices were a leading indicator of very bad economic news, I’m expecting rising oil prices to be a leading indicator of a recovery.
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Hardly a "leading" indicator since it peaked in July this year and ecomonies have been slackening since a year before. Also the covariance between oil and global final demand is not great. There might be linkages (well there are) but they are too weak for your statement to be very reliable IMO.
 
UnrepentantSinner said:
Whoo! Hoo! Gas has dropped like a rock to $3.20/gal. ;)
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DmKrispin said:
I almost veered off the road this morning.

$1.49

I never thought I'd see gas under $3 again.

Wow.
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My above post was on Oct. 16th. Today the price at suburban Dallas stations is $1.75/gal.

diggy70 said:
You are right, cause I never owned oil till it was like 50 bucks/barrel..But im still buying at 125, so i guess im the speculator..or fundamentalist
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Travis said:
Looks like he turned out to be both.
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I'd can think of any number of more accurate adjectives to describe him.

Andyandy, I'd like to see prices remain about where they are or a little higher. That will encourage exploration and a reduction in consumption but not be the drain on the economy that the speculator prices were/would be.
 
Francesca R said:
Hardly a "leading" indicator since it peaked in July this year and ecomonies have been slackening since a year before.
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There were other indicators, but the fall in the price of oil led both the really big unemployment numbers and the negative growth n umbers.

Francesca R said:
There might be linkages (well there are) but they are too weak for your statement to be very reliable IMO.
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All we can do is wait and see
 
Never thought oil would go below $80 a barrel. This will help the world economy rebound, but also give a false sense of security. I am sure alternate energy sources are being taken off the priority list.

glenn
 
Sounds like time to start refilling the strategic petroleum reserve.

I would also push for an increase in fuel taxes to fund infrastructure projects. If nothing else, this would give us some taxes to cut when oil bumps back over $100 a barrel again.

Now that the stock market, housing, oil and commodity bubbles have burst, what is next? Gold?
 
89.9p a litre at ASDA today, and of course unlike when it went up to the dizzy heights of 120p a litre and we were told that meant we all had to immediately scrap our cars and all the pensioners would die this winter and our children would have to walk through 6 foot high snow drifts to get to school, the media is remarkable quiet about this news.
 
lomiller said:
Frankly I hope we see it back over $3 as soon as possible. Oil is very price inelastic so it can change rapidly with changes in demand when you are near production capacity. With prices dropping I don’t expect to see much in the way of new production, so when demand starts to increase prices will go back up.
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Wrong ... or at least that's my opinion. Too many folks now know that just leaving things "as is" is way too risky. Besides, there are many alternate energy sources existing now (e.g.; wind farms) than in past oil tight situations. It's in the public's face.

Demand won’t increase until the global economy starts to pick up. So, just as falling oil prices were a leading indicator of very bad economic news, I’m expecting rising oil prices to be a leading indicator of a recovery.
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No again. The economy was already in trouble in late 2007/early 2008 ... rising oil prices simply exacerbated the situation. The only thing that people can look to as any sort of silver lining right now is some affordable energy. I'm not saying we're out of trouble yet, but higher costs anywhere on the map right now will simply prolong a recovery.
 
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Hindmost said:
Never thought oil would go below $80 a barrel. This will help the world economy rebound, but also give a false sense of security. I am sure alternate energy sources are being taken off the priority list.

glenn
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Evidence? ... or just opinion?
 
lomiller said:
There were other indicators, but the fall in the price of oil led both the really big unemployment numbers and the negative growth n umbers.
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Correlation does not conclude causation.

All we can do is wait and see
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And that's the best course of action ... trying to manipulate things beyond what is controllable can lead to disaster.
 
lomiller said:
the fall in the price of oil led both the really big unemployment numbers [ . . . ]
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No it didn't (I assume you are referring only to the US economy now . . .):

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000

[ . . . ] and the negative growth n umbers.
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No it didn't:

http://www.bea.gov/newsreleases/national/gdp/2008/pdf/gdp308a.pdf (Table 1 page 5)

All we can do is wait and see
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Quite--not reliable :)
 
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Just thinking said:
Evidence? ... or just opinion?
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It certainly seems to be happening in the UK, plans to build a large offshore wind farm seem to be falling apart as various partners pull out, banks are unwilling to stump up the cash and political will for green energy dissipates. Oil price will be a factor in this, though maybe it is more a casualty of the general credit crunch:

One of the UK's largest wind farm projects is in doubt after the credit crunch has forced a backer to pull out.

Statoil, the Norwegian oil giant, is now looking for a new joint venture partner to help develop the £700m offshore wind project off the Norfolk coast. If built, the 108 turbines would provide enough electricity for the homes of a city the size of Cambridge.

Statoil's original partner, the Nobel Peace Prize-winning company Ecoconcern, pulled out about two months ago. It is understood that the European green energy firm could not raise the £350m finance needed to fund its share of the construction costs.

In August, the then business secretary John Hutton gave planning approval for the Sheringham Shoal project. But since then all forms of debt financing, particularly for large risky projects like offshore wind, have become much harder.
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low oil price will probably have a greater effect on possible development of Canadian tar sands and other oil reserves with a high extraction value. At $150 a barrel they made economic sense, at $50 a barrel they don't.
 
andyandy said:
At $150 a barrel they made economic sense, at $50 a barrel they don't.
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Syncrude, admittedly the most established tar sands producer says their break even point is around $20 per barrel. I.E. as $20 per barrel they can run their existing operations without loosing money. Obviously new players need more to cover capital costs but the point where they loose interest seems to be around $40 per barrel.

Remember energy represents a very large percentage of tar sands production costs so dropping oil prices also reduces production costs substantially.
 
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