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It will close for a while then it will open em up, then dollar will devalue, then new oil contracts will mature... There is allot of forces that will drive up oil prices. No oil producing nation wants to keep oil prices this low. For us in the US, us pumping oil is a nice political position, but most oil producing countries depend on profits from it.
Certainly can't argue with most of that, except that the oil-dependent countries have not been able to gang up on the world the way they used to. Maybe something will change so that the power goes back in the hands of OPEC, but it certainly doesn't look like it now.
BTW, most of the countries we speak about need over 100$ per gallon to make money. Russia, in particular, is bleeding, but so are Iran and others.
Dollar is to strong, since we do export import with other countries and we are going to increase the interest rates. This Dollar strength is not going to keep though this year. But changing dollar value will not make me a super rich in oil alone, it's only a contributing factor.
Dollar strength also means that thing are to expensive to produce at home and might make it expensive for other courtesies to do business with us. many 3rd world nation that serve our economy peg dollars so that this situation does not harm their dependency of serving me.
While I think a rate increase is likely this year, it is not guaranteed. In addition, short term interest rates have limited impact on currency valuation. You are the only economist that thinks the US dollar will significantly decrease in value in 2015.
what is the sequence of events that will push the oil prices below what's it cost to pump ?
"to pump?" or to produce?
All these prices you see in the press are meaningless. The cost of production depends on how much the producers are plowing back into finding new oil. The shale producers and Saudis pretty-much know where the oil is, so it's not like "finding" it in the Gulf of Mexico.
Pumping doesn't cost that much. The cost of production might include exploration, well maintenance ( which includes re-fracking ) and other stuff at the home office that is averaged out over production.
The Saudis have costs like paying people to do nothing so that they won't get rebellions started. Now, they have the costs of flying bombing runs over Yemen to average out over their production. If you look at the Saudi economy as a corporation, their cost of production is probably well North of $100/bbl.
Since, pretty-much, none of the OPEC countries reinvest in their oil infrastructure the same way that, say, Chevron or Exxon does, their costs appear really low. If you look at their big picture, they really need oil back where it was last year. Bad.
The N. American producers horizontal wells will taper off and if not re-fracked, will produce les and less, but their cost "to pump" might only be a couple dollars a bbl.
They are obligated to drill more wells and increase production in the near term or lose the opportunity to produce in areas where they have already committed money.
In the mean time, there is no place to put the oil. It's not like copper or iron. You can't just stack it up. The US will just import less and less and overseas ( government ) producers will just have to throttle back.
In the 1980s, oil went from $50 to $9. In the 1990s, it went to around $20 from near $100 in the first Gulf War ( I don't remember if it was below $20, but it's not important. ). It's real important to keep the perspective of the past in mind.
History doesn't repeat itself, but it does rhyme. -- Joseph Anthony Wittreich or Mark Twain
The only thing that's probably a sure thing is that oil will go lower than any consensus is predicting. That is, it will go lower unless stuff goes badly on the Arabian Peninsula ...
All these prices you see in the press are meaningless. The cost of production depends on how much the producers are plowing back into finding new oil. The shale producers and Saudis pretty-much know where the oil is, so it's not like "finding" it in the Gulf of Mexico.
Pumping doesn't cost that much. The cost of production might include exploration, well maintenance ( which includes re-fracking ) and other stuff at the home office that is averaged out over production.
The Saudis have costs like paying people to do nothing so that they won't get rebellions started. Now, they have the costs of flying bombing runs over Yemen to average out over their production. If you look at the Saudi economy as a corporation, their cost of production is probably well North of $100/bbl.
Since, pretty-much, none of the OPEC countries reinvest in their oil infrastructure the same way that, say, Chevron or Exxon does, their costs appear really low. If you look at their big picture, they really need oil back where it was last year. Bad.
The N. American producers horizontal wells will taper off and if not re-fracked, will produce les and less, but their cost "to pump" might only be a couple dollars a bbl.
They are obligated to drill more wells and increase production in the near term or lose the opportunity to produce in areas where they have already committed money.
In the mean time, there is no place to put the oil. It's not like copper or iron. You can't just stack it up. The US will just import less and less and overseas ( government ) producers will just have to throttle back.
In the 1980s, oil went from $50 to $9. In the 1990s, it went to around $20 from near $100 in the first Gulf War ( I don't remember if it was below $20, but it's not important. ). It's real important to keep the perspective of the past in mind.
History doesn't repeat itself, but it does rhyme. -- Joseph Anthony Wittreich or Mark Twain
The only thing that's probably a sure thing is that oil will go lower than any consensus is predicting. That is, it will go lower unless stuff goes badly on the Arabian Peninsula ...
Thanks for your explanation. The volatility is too extreme for me here. One day up 5% the next day down 5%. Just looking at this gives me a headache, much less investing money in it.
Thanks for your explanation. The volatility is too extreme for me here. One day up 5% the next day down 5%. Just looking at this gives me a headache, much less investing money in it.
If you're investing instead of speculating, just stop looking.
All these prices you see in the press are meaningless. The cost of production depends on how much the producers are plowing back into finding new oil. The shale producers and Saudis pretty-much know where the oil is, so it's not like "finding" it in the Gulf of Mexico.
Pumping doesn't cost that much. The cost of production might include exploration, well maintenance ( which includes re-fracking ) and other stuff at the home office that is averaged out over production.
The Saudis have costs like paying people to do nothing so that they won't get rebellions started. Now, they have the costs of flying bombing runs over Yemen to average out over their production. If you look at the Saudi economy as a corporation, their cost of production is probably well North of $100/bbl.
Since, pretty-much, none of the OPEC countries reinvest in their oil infrastructure the same way that, say, Chevron or Exxon does, their costs appear really low. If you look at their big picture, they really need oil back where it was last year. Bad.
The N. American producers horizontal wells will taper off and if not re-fracked, will produce les and less, but their cost "to pump" might only be a couple dollars a bbl.
They are obligated to drill more wells and increase production in the near term or lose the opportunity to produce in areas where they have already committed money.
In the mean time, there is no place to put the oil. It's not like copper or iron. You can't just stack it up. The US will just import less and less and overseas ( government ) producers will just have to throttle back.
In the 1980s, oil went from $50 to $9. In the 1990s, it went to around $20 from near $100 in the first Gulf War ( I don't remember if it was below $20, but it's not important. ). It's real important to keep the perspective of the past in mind.
History doesn't repeat itself, but it does rhyme. -- Joseph Anthony Wittreich or Mark Twain
The only thing that's probably a sure thing is that oil will go lower than any consensus is predicting. That is, it will go lower unless stuff goes badly on the Arabian Peninsula ...
I agree with you, there is like different 3 prices that can be considered "cost". Since I already stated that this is a long term purchase, I am only concerned with what is going to happen a year from now. In the mean while I will get more oil if drops in price, below $40.
There is allot of roomers in the "news". Right now there is an oversupply of oil, that is fact. So will there be an oversupply of oil a year from now ?
I appreciate you guys trying to explain it to me, so I will bite.
You guys have heard of Putin, right ? Putin need oil to trade at $100, and what you are telling me is obstacle to Putin, It'ss a lack of war on Arabian Peninsula, right ?
I don't know. Why did you ask me? I have no intention of investing in oil.
I guess we agree on that
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