Jefferyz:
I think you'll start to see prices go down more shortly - My guess is the fuel that's currently in the pumps was purchased back when prices were higher; the gas station still wants to make a profit on it, so it won't get cheaper for you til they buy their next batch.
Quote:
And how much oil have we been shipping out and selling to other countries? 
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I assure you the oil companies don't care whether the oil produced in the US stays here or not, as long as they get top dollar for it. Don't believe me? Here is a telling quote that Harold Hamm, CEO of Continental Resources (the largest producer in the Bakken), gave at the Williston Basin Petroleum Conference last month. When talking about the transportation bottlenecks that result in Bakken oil being $15 more expensive than oil from other places, he said:
Notice he didn't say "we need pipeline to get oil to American refineries". I'm not faulting the guy for wanting to make a buck - just remember that quote the next time one of these guys starts beating his chest about "breaking our addiction to foreign oil".
But before I start getting wayyyyyyy off topic, your post got me thinking. We all want to pay less at the pump. But when you step back and look at it, low gas prices are bad for North Dakota's economy. A lot of people support drilling as much as possible because they think increasing oil supply will reduce the price of gas. And it will. But in truth, the last thing in the world an oil producer wants is cheap oil! Why would you want to sell your product any cheaper than you have to? It is in a business' best interest to keep supply low enough that they can sell their product for the highest price that the customer is willing to pay. And despite what some would have you believe, there are still
billions of barrels in the ground - it isn't going anywhere, and they can always pump more out once demand starts to outstrip supply. So the best thing oil producers can do is manage growth and production responsibly so that gas prices stay high enough to make a profit, but low enough that customers can continue to afford to buy it. By doing this, they could ensure that instead of going through these painful boom-bust cycles every few years or so, oil producing states like ND, OK, WY, TX, etc. would have stable and productive economies for the long term.
Ha, ha, ha.
It would be really easy if there were just a couple of oil producers - they could manage supply easily, and react to changes in demand by pumping more or less oil to control price. Problem is, in this boom, there are
hundreds of companies trying to make a buck. And at $100 a barrel, they make a lot of bucks. So they all want to produce as much oil as possible, and get it to market as fast as possible. But here's the nightmare scenario: the more oil they take out of the ground, the more of it there is to sell. And just like when a department store gets overstocked on an item, they have to drop the price to move the excess inventory. So oil goes to $90. You'd think companies would start to cut back on production a little, just until the inventory goes down some, but they have money tied up in equipment, research, payroll, and other costs. So they keep drilling in hopes that even at a slimmer profit margin they can make enough money to recoup their investment. Supply keeps going up, oil goes down to $80. Then, something unexpected happens: most of Europe goes bankrupt, and/or into recession. Europeans stop driving as much, factories with trucks and fleet vehicles shut down. Demand falls - $70 oil. Still, contracts have been signed, rigs set up, drilling continues. Soon, Europeans can't afford to buy products from the US anymore, American factories close, US goes further into recession, Americans lose their jobs, start driving less - $50. Smaller operators start going belly up because they can't turn a profit, employees are laid off (hope they put some of those fat paychecks in the bank). Less production occurs, but demand is still low, so inventories continue to rise. America is in a crushing recession, and just had a few thousand oil workers join the ranks of the unemployed. Oh, and Americans stop buying as many Chinese products. China then goes into recession, stops using as much gas, etc. - $40 oil. Millions of barrels of oil waiting to be sold, wells capped, ND empties out again (aren't you glad you kept the property tax?).
The good news? Although the world economy is in the toilet, with oil now at $40 a barrel, companies are spending less on gas. They start spending the money they used to spend on gas to hire more people, to develop better products, invest in research. Economies start growing again, companies start consuming more gas. The average American, European, & Asian has more money, and starts driving more. Uh oh, where did all those millions of barrels of oil go? Oil jumps to $140. The RVs start heading up to Williston. Here we go again.
So everybody that thinks America can drill itself to prosperity is probably right. It just might not go as smoothly, or happen as quickly as they thought.
This post has gone on a lot longer than I had planned, but I guess what I'm trying to say is that the rosy picture guys like Harold Hamm like to paint about how long the good times are going to last and how invested in the state they are needs to be viewed with a healthy amount of skepticism. Not saying their intentions are bad, or that they are consciously lying. They are giving us a sales pitch; they are going to base their predictions on the best case scenario. Of course they are going to downplay the possibility of other operators flooding the market, or the impact of unexpected events.
And finally, there was an article on Yahoo!/CNBC today about the effect increased production is having on oil prices.
Click here to read it. Just some more food for thought.
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