Posted on 11/29/2014 8:41:39 AM PST by Kaslin
Russia is trying to maintain its energy stranglehold over Europe by backing movements across the continent to demonize fracking, the head of NATO alleged. It is part of Russia’s broader use of soft power and covert means to complement its more overt efforts to reassert influence in Europe and keep countries there from developing alternatives to an energy addiction worth $100 million a day to Moscow.
http://www.foreignpolicy.com/articles/2014/06/20/russias_quiet_war_against_european_fracking
And this http://rt.com/uk/209827-fracking-chemical-toxic-report/ is an example of lies and disinformation from Putin.
Yep, this is caused by lessened demand- caused by lack of economic growth- caused by the advance of socialism.
Of course at some point we could support oil prices by removing navy assets from the Straits of Hormuz.
That make two of us. Side benefit: Venezuela and Russia's economies are being CRUSHED by low oil prices. Russia is no friend of the Saudi's, and I'm wondering how much of the Saudi decision to keep pumping is to crush Russia and punish them for involvement in Iran's nuclear program.
“Saudi wells break even at about $10 per barrel.”
But the Saudi government budget breaks even at about $70 per barrel and that is what matters.
Suppose neither supply excess nor demand reduction took place in the time period relevant?
Just as an FYI for ppl, NoDak does not get WTI’s price.
If oil is priced at $65, NoDak gets $16 less, per the NoDak Industrial Commission’s tracking of Bakken sweet. It was recently quoted at $58 on a day when WTI was $74.
With WTI now at $65, NoDak producers get $49/barrel.
The entire field will fold and close. Quickly. Suppliers will cut them off rather than get stiffed.
The more theories I read, the more this looks like simple supply and demand. The canary has been telling us that the world economy is weak. Any one producer, even the Saudis, would be foolish to try to move the market. This is not 1986. Saudi surplus capacity is now comparatively tiny and they have ramped up social expenditures to nose bleed territory over the intervening decades. The Saudis know that very well. U.S. Shale oil half-cycle costs are under $40 and any production shut in would be restored quickly if prices rise again in a year or so. Anyone in this environment thinking that this is a game of chicken is doing a disservice to their country or their stockholders.
Someone this past week commented that one of the reasons the Saudis are dropping prices is to generate as much capital as possible in the event ISIS gets a foothold in their country. Not sure how much truth there is to that belief.
Hi algore!
How’s this:
Reward U.S. producers for progress in lowering cost of production @ U.S. fields with a tariff on imported oil. Proceeds of the tariff to be split between revenue to the Govt., specifically directed to pay down the U.S. debt, and some $$ as direct rewards for reducing production costs. Possibly some portion of the reward $$ should be allocated to “capital only for new refinery construction or increased capacity @ current U.S. refineries.”
I’m sure this proposal needs some “refinement” itself, but the basic idea is the ol’ carrot (incentives for U.S. production) and a “stick”, not aimed specifically at the Saudis, but instead at all importers. As mentioned multiple times on this thread, the Saudis can withstand somewhat lower prices better than can their political rivals. My guess is that in the big picture, low global prices are more advantage than disadvantage to the Saudis, at this point. Also, since they can’t really force prices up, those who might wish them to do so have little leverage.
Hey. Wanna buy my SUV?
The Saudis did not cause the oil price decline. They have not varied production hardly at all for years.
There has been no significant change to supply. Shale has increased at the same rate it has for over 18 months. And demand did not crater starting in June.
Supply and Demand probably do NOT explain this price crash. The dollar’s spike against other currencies does. Look at Copper, and Gold and Silver and others. They all have been smashed too.
The price of production for shale wells is not $40. That’s just absurd. NoDak prices a new well at $10 million and that’s with a 5 year 5% loan. The well requires $2.5 million per year just for loan service. Then you have 18% royalty to the land owner. 5% NoDak extraction tax. Trucks haul the oil and the production disposal water coming up. Those drivers don’t drive free. Then you have to haul fresh water back to the well to clean out salt encrustation. That ain’t free either.
AND the damn wells die fast. They are down to 150 barrel/day within 2 years, but that loan service charge and trucking fees don’t stop.
Forget $40. That’s absurd. All businesses can claim low breakevens just by excluding costs (like salaries haha).
US producers already receive a reward for lowering cost. The reward is call, lower costs.
U.S. fields with a tariff on imported oil.
Why are you trying to penalize the refining industry and all of the consumers that buy their products?
Why do you want to create an advantage to foreign refineries?
Why do you want to destroy the surplus refinery capacity we have and the jobs that go with them?
why do you want to send more money to the federal government?
Speculators can make money with the price moving up or down, in the short-term. It is but speculation will not last as months of oil continue to go through supply and demand.
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