Morgan StanleyPosted on 12/11/2014 9:04:47 AM PST by SeekAndFind
Oil is crashing. On Thursday, WTI crude oil was falling again, moving back below $61 a barrel.
Much has been made of the "breakeven" oil price for the world's drilling projects. This is the level at which the price of oil covers the cost of extracting the oil.
A simpler way to look at when the biggest oil players will start feeling the squeeze from lower prices is the "cash cost."
"Without OPEC action, an outage, or other response, cash cost is the only true floor," Morgan Stanley analyst Adam Longson said.
Cash cost is basically what it takes to keep oil production going, not what it takes to make oil production profitable or for a government to hit its budget projection. If you drop below your cash cost on a project, you've got to turn out the lights.
As you can see on the far right, the Canadian oil sands and the US shale basins are very expensive to tap. Meanwhile in the Middle East, the Saudis, the Iraqis, and the Iranians basically stick a straw in the ground, and oil comes out.
Morgan Stanley
(Excerpt) Read more at businessinsider.com ...
“Royalties.” That sounds so . . . Saudi.
Steep wall on the right.....
But shutting down shale/fracking wells is easy and no future production is lost. Unlike the Saudi oil wells if they turn those off they lose future production because the well loses production capability due to the pressure decreasing.
So with Shale we can just cap it and come back when the price is right again. Meanwhile we get cheap Saudi oil and when it gets too high we turn on the fracking wells and keep the cost reasonable :-)
bfl
OPEN would be illegal in the USA
Price fixing is their only reason for existing
It’s worse than a monopoly.
dammit... I meant OPEC
LOVE it.
Liberal elites are horrified.
Teeming masses take to the roads to spew evil carbon!
Pickup and SUV sales soar.
God bless America!
Petro dollars hockey stick
We the people will get screwed in the end because the ruling class sees an opportunity in lower gas prices they just will not be able to resist, higher taxes.
Just watch.
Simple solution is to mandate preference for domestic producers when price level approaches domestic cash cost. In other words even if OPEC crude is offered in Houston at $25 per bbl, restrict it in favor of domestic crude at $35. The consumer won’t suffer much but OPEC sure will.
And right now OPEC led by Saudi Arabia is looking to drive domestic producers out of business in a price war.
And are such restrictions fair? Considering that most global oil producers do the same, then yes.
The issue is less about the price of oil but rather the dependency of each of these countries on that oil revenue. The Saudis and other Middle East countries have avoided the dreaded ISIS-like uprisings largely because they have increased social spending to placate the masses. Without expensive oil there is less money to spend on these social programs and that opens the regimes to increased political upheaval. Similar issue in Russia and Venezuela where oil income is one of the few things keeping the corrupt economy afloat.
Meanwhile, in the US, we are significantly less dependent on oil income as it is a much smaller share of our total GDP. The CEO of Exxon, in a recent article, said they have modeled how to be a profitable company even with $40 oil.
They are such unbelievable hypocrites, every day when Bush was in office the MSM (men who have sex with men media) railed about high gas prices. I'm not easily surprised, but I am truly at the audacity of headlines I've seen in the past few weeks, with horrible gloom and doom headlines about how bad low fuel prices are for America. When you read the actual article you find it is only bad if you are an enviro-freak (to include the idiots who sunk their fortunes into wind farms, electric cars, etc) or Muzzie oil barons and their entourage. Makes me sick.
Your assumption is false.
http://www.freerepublic.com/focus/chat/3233396/posts?page=102#102
What is the horizontal axis in that graph?
How would you do that? You want the federal government to tell private industry who they can buy from at what price?
No thanks. No way.
Just like the Magratheans did when the Galactic economy tanked.
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