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Wrong again! The bolded part is wrong, the rest of your post is correct, just irrelevant.
It is well documented that this glut is a supply side glut. Your vision of the demand for oil is limited, and ignores the real drivers in the market (speculators notwithstanding).
Due to the technological advances made in the last decade (thank you America for being GREAT, even if our so-called President doesn't think so), the price of oil remains low.
In America, there are litterally 10's of thousands of wells drilled and completed, ready to produce when the price makes it viable. Those are the less efficient wells, there already thousands of wells that are viable and producing like crazy.
Abroad, much of the middle east is ready to come back online: Iraq, Iran, Syria (if political situation allows).
Russia is pumping like crazy
OPEC, and specifically Saudi can produce oil for cheep. The production cost is estimated around $10/bbl, last I checked (when I was there, talking to the Aramco Execs, in person), but the social cost of oil in Saudi is estimated at $70/bbl, hence why they produce no matter the cost. They have to keep the cash flowing to keep the populous quiet.
and US, and I'm sure other country's, reserves are at record levels. Tanks are full, tankers sitting off-shore full of oil, for storage.
If the price goes up, more of that production hits the market, and there is downward pressure on oil. If demand goes up, more of that production hits the market, and there is downward pressure.
Nobody knows what will really happen, but when I sit at the table with global strategists for THE TOP COMPANIES IN THE WORLD who service the oil industry, it is widely accepted that we are in for $40-70$ oil for the foreseeable future, unless a major geo-political event really throws things off.
I don't mean to give you a hard time, but the notion that people driving more for work, or for fun, or to ship goods would have any meaningful effect on the global oil markets is naive. The things influencing the markets right now are supply and speculators. With supply, as already stated, you have OPEC, you have American Enginuity, and you have other countries coming back into global markets. All of that is on top of pent-up supply due to reserves, capped wells, and new discoveries. Bubba's F-350 ain't going to put a dent in that!
You are taking this way more seriously than the OP deserves.
In the OP's binary world, things are as simple as buying/driving another F350.
In any event, that sort of answer is all the naivete expressed in the OP requires.
Wrong again! The bolded part is wrong, the rest of your post is correct, just irrelevant.
It is well documented that this glut is a supply side glut. Your vision of the demand for oil is limited, and ignores the real drivers in the market (speculators notwithstanding).
Due to the technological advances made in the last decade (thank you America for being GREAT, even if our so-called President doesn't think so), the price of oil remains low.
In America, there are litterally 10's of thousands of wells drilled and completed, ready to produce when the price makes it viable. Those are the less efficient wells, there already thousands of wells that are viable and producing like crazy.
Abroad, much of the middle east is ready to come back online: Iraq, Iran, Syria (if political situation allows).
Russia is pumping like crazy
OPEC, and specifically Saudi can produce oil for cheep. The production cost is estimated around $10/bbl, last I checked (when I was there, talking to the Aramco Execs, in person), but the social cost of oil in Saudi is estimated at $70/bbl, hence why they produce no matter the cost. They have to keep the cash flowing to keep the populous quiet.
and US, and I'm sure other country's, reserves are at record levels. Tanks are full, tankers sitting off-shore full of oil, for storage.
If the price goes up, more of that production hits the market, and there is downward pressure on oil. If demand goes up, more of that production hits the market, and there is downward pressure.
Nobody knows what will really happen, but when I sit at the table with global strategists for THE TOP COMPANIES IN THE WORLD who service the oil industry, it is widely accepted that we are in for $40-70$ oil for the foreseeable future, unless a major geo-political event really throws things off.
I don't mean to give you a hard time, but the notion that people driving more for work, or for fun, or to ship goods would have any meaningful effect on the global oil markets is naive. The things influencing the markets right now are supply and speculators. With supply, as already stated, you have OPEC, you have American Enginuity, and you have other countries coming back into global markets. All of that is on top of pent-up supply due to reserves, capped wells, and new discoveries. Bubba's F-350 ain't going to put a dent in that!
While neither you nor I can predict the future, your post didn't address the debt concerns associated with tight oil producers. Also, it is possible that there are geo-political implications associated with this as well.
As you said, the Russians are pumping like crazy. Why? Because Russians sell their oil on the global market in USD, but they pay for their operations in rubles. This is important because the dollar is highly inversely correlated with the price of crude. Likewise, the ruple is highly correlated with the price of crude. The USD appreciated by roughly the same percentage that crude depreciated in price, while the ruple depreciated by roughly the same percentage that crude depreciated in price.
This is important because the Russians can pump with impunity. This isn't the case for American tight oil producers, as they were leveraged at much higher break even prices, which is why the energy sector portion of the high yield bond market in particular is experience higher and higher default rates. Much of the industry is currently in chapter 11, in a race to the bottom.
It's not just the $500 billion in energy sector junk bonds that's at risk or even the $1.9 trillion high yield bond market itself, but the multiple trillion dollars of derivatives that were supposed to be utilized to mitigate risk, that will almost undoubtedly cause a liquidity crises at some point in time in the relatively near future, so long as oil prices are kept low.
Furthermore, IOCs are not profitable with their upstream production, instead relying on profits coming from their downstream operations. Additionally, many IOCs have abandoned long term projects due to shortsightedness, focused on today's return to shareholders, rather than future operations and long term profitability.
If things don't change quickly, not only will there be a massive liquidity crises which will likely bring the global banking system to the brink of collapse, but it will also likely result in an "oil shock" as many of the tight oil producers will be forced offline.
I think it would be remiss for me not to say that this has extremely negative implications for this service based economy.
Consumption down? Things are slower than Arctic ice melt. I give it until July to break loose if it doesn't then we are in a recession, courtesy of the "the clueless organizer". Hopefully the great Trump can turn things around.
He has a long way to go to match party animal Obama and moochella!!!
Seriously? Melania Trump costs the taxpayers much much more than Michelle did (while making no effort to give back anything to the country), and Melania has spent, what all of 3 hours at the WH?
As for 'party animal' Obama, Trump has been in office 30 days, and has played golf for 6 of them. Comics are so impressed with his leisure time that it is now the butt of late night comedy:
“Six times in 30 days,” Stephen Colbert marveled Tuesday night on Late Show. “That does explain the bumper sticker on Air Force One: ’I’d rather be golfing, and there’s a 20 percent chance that I am."
You still haven't told us the actual point of your original post, unless of course it was posted disingenuously relating to economics, but solely to bash Obama and promote the current so-called president.
Wrong again! The bolded part is wrong, the rest of your post is correct, just irrelevant.
It is well documented that this glut is a supply side glut. Your vision of the demand for oil is limited, and ignores the real drivers in the market (speculators notwithstanding).
Due to the technological advances made in the last decade (thank you America for being GREAT, even if our so-called President doesn't think so), the price of oil remains low.
In America, there are litterally 10's of thousands of wells drilled and completed, ready to produce when the price makes it viable. Those are the less efficient wells, there already thousands of wells that are viable and producing like crazy.
Abroad, much of the middle east is ready to come back online: Iraq, Iran, Syria (if political situation allows).
Russia is pumping like crazy
OPEC, and specifically Saudi can produce oil for cheep. The production cost is estimated around $10/bbl, last I checked (when I was there, talking to the Aramco Execs, in person), but the social cost of oil in Saudi is estimated at $70/bbl, hence why they produce no matter the cost. They have to keep the cash flowing to keep the populous quiet.
and US, and I'm sure other country's, reserves are at record levels. Tanks are full, tankers sitting off-shore full of oil, for storage.
If the price goes up, more of that production hits the market, and there is downward pressure on oil. If demand goes up, more of that production hits the market, and there is downward pressure.
Nobody knows what will really happen, but when I sit at the table with global strategists for THE TOP COMPANIES IN THE WORLD who service the oil industry, it is widely accepted that we are in for $40-70$ oil for the foreseeable future, unless a major geo-political event really throws things off.
I don't mean to give you a hard time, but the notion that people driving more for work, or for fun, or to ship goods would have any meaningful effect on the global oil markets is naive. The things influencing the markets right now are supply and speculators. With supply, as already stated, you have OPEC, you have American Enginuity, and you have other countries coming back into global markets. All of that is on top of pent-up supply due to reserves, capped wells, and new discoveries. Bubba's F-350 ain't going to put a dent in that!
Nice.....it's rare to see a reasonable argument concerning this topic.
While neither you nor I can predict the future, your post didn't address the debt concerns associated with tight oil producers. Also, it is possible that there are geo-political implications associated with this as well.
As you said, the Russians are pumping like crazy. Why? Because Russians sell their oil on the global market in USD, but they pay for their operations in rubles. This is important because the dollar is highly inversely correlated with the price of crude. Likewise, the ruple is highly correlated with the price of crude. The USD appreciated by roughly the same percentage that crude depreciated in price, while the ruple depreciated by roughly the same percentage that crude depreciated in price.
This is important because the Russians can pump with impunity. This isn't the case for American tight oil producers, as they were leveraged at much higher break even prices, which is why the energy sector portion of the high yield bond market in particular is experience higher and higher default rates. Much of the industry is currently in chapter 11, in a race to the bottom.
It's not just the $500 billion in energy sector junk bonds that's at risk or even the $1.9 trillion high yield bond market itself, but the multiple trillion dollars of derivatives that were supposed to be utilized to mitigate risk, that will almost undoubtedly cause a liquidity crises at some point in time in the relatively near future, so long as oil prices are kept low.
Furthermore, IOCs are not profitable with their upstream production, instead relying on profits coming from their downstream operations. Additionally, many IOCs have abandoned long term projects due to shortsightedness, focused on today's return to shareholders, rather than future operations and long term profitability.
If things don't change quickly, not only will there be a massive liquidity crises which will likely bring the global banking system to the brink of collapse, but it will also likely result in an "oil shock" as many of the tight oil producers will be forced offline.
I think it would be remiss for me not to say that this has extremely negative implications for this service based economy.
Hope we don't bail out the banks again.
The oil industry suffering? Fine by me. Payback is a wondrous thing
The oil industry suffering? Fine by me. Payback is a wondrous thing
There simply isn't enough M3 in existence to cover the loss from derivatives. This crises could be so large that it will affect US sovereignty. It would not surprise me if all sovereign banking functions are consolidated into one global entity after this occurs.
This is why people like Warren Buffet called derivatives weapons of mass destruction. The problem is that people don't see this, so their priorities are all mixed up.
Instead of ensuring that the impending infrastructure plan lowers our dependence on foreign entities and makes the US more averse to risk, they are focusing on social issues, which are irrelevant without the Constitution.\
People are very easily brain-washed and manipulated in this country.
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