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Posted on 01/25/2015 5:10:15 PM PST by blam
Myles Udland
January 25, 2015
Good evening!
The weekend is over in New York and near 7:05 pm ET, the price of West Texas Intermediate crude oil was down another 2.5% to $44.45 a barrel.
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(Excerpt) Read more at businessinsider.com ...
Saudi’s are losing $500 Million per day with this charade, and giving away more of their life blood at half the cost. It is a suicide mission. They will bankrupt companies and even countries, but in the end, they will stop giving away the store.
This activity cannot sustain.
However this is a huge economic, debt-less stimulus to the American economy entirely caused by fracking, and Obama did everything in his power to limit it, or stop it. He reduced drilling on federal lands, yet tries to take credit for it. The smiling stupid believe him.
Thanks. Plumb forgot to list the taxes -- which are a major part of the price of gasoline. California, in fact, also imposes a sales tax on gasoline -- a tax on a tax, which can reach 10% of the gross cost. And, this year, a brand new carbon credit/cap & trade tax will add another ten cents-or-so per gallon.
In the face of all these taxes, how can we possibly complain about the refiner pocketing something between a nickel and a dime per gallon?
In 1974 according to Joe Shell, president of the independent oil producers of California, after carter added the 10% well head tax, which he called an excess profit tax, the total taxes in California were 86% from the ground to the pump in California.
This activity cannot sustain.
There are so many things wrong in those few words, it's hard to know where to start...
The Saudis are not "losing money", they are simply making less than before, which is still a huge profit. At worst, they may have to sell off some foreign holdings while they adjust. They might also have to slow down purchases of foreign assets that won't pay off handsomely in the short or medium term -- and if that means they are not buying US debt, that's more likely to be trouble for us than them.
The Saudis have essentially decided they don't want to give up market share, and if they can ding Iran at the same time, great. Indeed, their "charade" consists essentially of "failing" to greatly decrease production, but instead they have put much effort into building their own plastics (etc.) industries. It appears they see more of a future in value added petro products, in the future, than in being a "gas station" like Russia. IMO, the Saudis are most likely correct.
Further, the Saudis really have no choice. As more and more production in the US and elsewhere comes on line, at a break even point somewhere in the $35 to $50 range, that "overcapacity" sets the upper limit on prices. If the Saudis cut production, and temporarily drive prices back up to, say, $80 / barrel, that only encourages the $50 producers all the more. The US has already surpassed Saudi production, and much more capacity (in the way of competition to OPEC) will come online in the US and elsewhere if prices are high.
If DC had any sense, they’d just let people consume gasoline (etc.) as appropriate for the new pricing, consumption would jump, and the revenue shortfall would fix itself.
As others have posted, much more than the price of oil contributes to the price at the pump.
Also, some traders (prices) of petro products are locked in for the commodity well in advance, to protect themselves from volatility in the market. This tends to buffer especially price decreases: Ever notice how prices usually creep downward, but if some crisis occurs somewhere, they may jump $.20 in a day?
Saudi Arabia's King Abdullah died. No. Really.
Any hiccup in the Middle East is guaranteed to send tremors thru the oil market.
As soon as it becomes apparent that the Saudis' oil policy remains unchanged, the price will subside again.
I'd add to that the situation in Yemen -there are some fears it could spill over into Saudi Arabia, tho' that fear seems to be subsiding a bit, at least for now.
In fact, prices recently spiked here in the Midwest, too, but now appear to be substantially on the way back down again. (We shall see!)
IMO, in the long run, even if the Saudis decided to cut production, the price increase that would occur would be temporary: The fracking cat is out of the bag, and higher prices will only encourage the $40(?) $50(?) producers who can increase production, to do so, eventually pushing prices back down. This is why the Saudis have said that $100 / barrel oil is gone for good, or at least for a long time.
It is and isn't.
If we had a normally functioning robust economy, it would be great. There was an article recently were it showed Texas was basically carrying this weak recovery. That's probably due to the oil boom. So, when the layoffs in that industry increase, they get to go out and compete for those part time McDonald's jobs that have been created in this recovery.
Also, the dollar is gaining strength. When you're a country with 18 trillion dollars in debt and you rely on a weaker dollar for exports, that's bad for the economy.
We will not have any meaningful recovery while BHO is in the WH. After he's gone...who knows?
I learn so much from FReeper comments.
No, it is not wrong, and you should study Opportunity Cost and Net Present Value. Your explanation is wanting, market share does not destroy other nations reserves, and if market share costs $500 million a day, then maybe it isn’t worth it.
They are pumping an additional one million barrels a day at half the price, to regain a market share that will vanish instantaneously when the price returns or technology lowers the lift cost. Oil is oil is oil, it is in the ground waiting to be taken, which technology is making cheaper and cheaper. They cannot fight that by losing $500 million a day. The NPV cost is too great for something they cannot eventually protect - oil is abundant and they should get used to it. Plastics will never compensate for it - since the price of virgin plastics is dropping all over the Earth!
The best explanation is to defund the Jihadists in Iran and Isis, and slow down Russia. Since the Saudi’s cannot make war, they will destroy their enemies ability to make war.
Why would you think that there is a dollar-for-dollar relationship between the price of oil and the price of gasoline. Oil isn't gas. Gasoline isn't oil.
The one is a product of the other. They're not the same thing.
This is why I was posting in question mode. I knew I could get the right answers here with my knowledgeable friends.
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