Posted on 01/27/2015 7:04:25 AM PST by rktman
The world price of crude oil, which has been around 100 dollars a barrel for the past 6 years, has suddenly collapsed and is now tending below 50 dollars. Many are trying to understand this rapid decrease and have proposed various explanations.
Of course, the ready explanation is simply in terms of supply and demand; but this just begs the question. The supply of oil has increased sharply in recent months – mainly because of the prolific production of shale oil in the United States, thanks to the technologies of fracking and horizontal drilling. In fact, the US is now the world’s largest producer of crude oil and US imports of oil have dropped to the lowest level in 10 years.
(Excerpt) Read more at americanthinker.com ...
The price of oil didn’t “collapse”. The over-inflated prices of the last 6 years are back to where they should’ve been all along.
LOL! Yeah, but it’s sure been an expensive 6 years. I never thought I’d see it back at around the $2.00/gal level. Wonder how long it’ll last? Of course “they” are crying about tax revenues and some place are pushing to raise them because “the people are already ‘used to’ paying higher prices”. Uh, no thanks.
Some posters here on Free Republic have said that what Saudi Arabia is doing is trying to destroy many of our oil producers here in the USA and permanently damage the oil industry here. I suggested this very thing (below) ... for those who thought that is what Saudi Arabia is doing.
Quoting from article ...
One of the interesting issues is how to protect US producers from this kind of price manipulation. This problem has been faced before, in the 1980s, when much of the US production came from high-cost ‘stripper wells,’ (producing less than 10 barrels per day). Once the price falls below certain levels, such wells become uneconomical and have to be shut down — cemented shut, never to be re-opened.
To guard against this possibility, one needs to institute a variable import fee (VIF). The original proposal came from then-Senator David Boren, a Democrat from Oklahoma. The idea is: if the price drops below an agreed-upon level, the government will apply an import fee to produce what amounts to a floor price for imported oil. Note that this is not a tariff — although when applied it acts like a tariff, but only until the price goes up again — above the agreed-upon level. So this is simply a way to protect domestic oil production against foreign price manipulation.
Myself, the sooner the rest of the world does not depend on oil exporting countries, like those in OPEC, Venezuela, and Russia the better. Let ‘em make sandwiches outa the crude the were gouging the rest of the world with for so long.
Russia and Venezuela already are collapsing, love to see sheiks have to tighten their belts as they get back to herding goats and picking dates. These places have too much influence on world affairs with their petroleum exports.
Oil Prices Rise After King Abdullah's Death
January 22, 2015
Oil prices rose on the news of the death of Saudi Arabia's King Abdullah Thursday, but the king's death is not expected to change the course of oil prices over the next several months.
The price of U.S. crude was up 88 cents, or 1.9 percent, to $47.19 a barrel in after-hours trading. Brent crude, an international benchmark, was up 2.1 percent to $49.58 a barrel.
"Commodity markets might have a knee-jerk reaction but it will soon settle down," said Larry Goldstein, a veteran oil adviser at the Energy Policy Research Foundation.
Oil prices have plummeted nearly 60 percent since June. Global supplies have soared, thanks mostly to a boom in U.S. oil production, at a time when growth in global demand for crude has slowed.
Saudi Arabia occupies a unique position in world oil markets because it is one of the world's biggest producers, it has the strongest voice within OPEC as its largest exporter, and it is the only oil producer that has the ability to significantly increase or decrease output in response to changing market conditions.
So far, despite a big drop in oil revenue, Saudi Arabia has declined to cut production on its own or back a cut by OPEC in an effort to reverse the price decline. The country produced 9.6 million barrels a day in January, according to Platts, the energy information division of McGraw Hill. That's enough to satisfy 11 percent of global demand.
The question now is whether Abdullah's successor, his 79-year-old half-brother Prince Salman, will change the kingdom's oil policy.
That's unlikely in the near-term, analysts say. Saudi oil minister Ali Al-Naimi has expressed a desire to retire, but he is expected to stay on at least through OPEC's next scheduled meeting, in June.
"Naimi is a market-calming voice, and very well-respected," said Frank Verrastro of the Center for Strategic and International Studies. "Naimi will likely stay on during this period of uncertainty."
Salman's son is the country's deputy oil minister, but Verrastro says it's unlikely he will replace Naimi because Saudi Arabia does not have a history of naming members of the royal family to that position.
Goldstein expects that, if anything, the king's death could delay any decision by Saudi Arabia on whether to cut production or back an OPEC cut. That would help keep oil prices low.
"Continuity and stability is what they will be looking for," he says.
If that’s where they should have been all along ... then ... that’s basically going to put a lot of the oil producers here in the USA out of business. And “that” is going to have the curious effect of driving up the price of oil again ... LOL ...
While that may have been true on January 22 ... as of right now, oil is headed back down again ... :-) ...
We’ll eventually head back up to $80 to $100 a barrel for oil, once we hit the bottom for this decline right now. The world hasn’t given up its appetite for oil yet ... :-) ...
If you want to take away the influence of these oil producing nations, then you’ll need to develop a new form of energy that the world can use in place of oil. Sooner or later that will need to be done, but I really don’t see a single thing on the horizon to replace these oil producing nations. I think we’re stuck with them ... for our lifetimes, at least.
I bbelieve the damage to American oil production will be less severe this time around because the oil tech makes the wells easier to reopen to production once the price goes up again. The price may bounce around but will trend to a a level that balances this, subject to politics and war, of course.
Since the US is a net importer of foreign oil, who do you think will pay this tariff?
The real question is, how long can these oil producing nations handle cheap oil?
that depends a lot on how determined Europe and America are to destroy their economies. It seems that neither has given up on that project yet.
This is what we need. We have to protect domestic production. I am not compatible with Sharia Law.
Drill Baby Drill.
I’m thinking that no one in the USA will pay this tariff on foreign oil ... because ... the USA will meet its own demand from domestic producers of oil, who don’t have to pay this tariff. The tariff will only be paid IF we have to import foreign oil. If we keep our own domestic production going and supplying ourselves ... then there will never be any foreign oil imported.
SO ... you’re thinking that oil will eventually head back up to the $100 a barrel range?
That would be EVIL oil. The destroyer of the erf! That and all petroleum products. :>} Do these activists even have the slightest inkling of an idea just how many products use petroleum by-products?
This was the trend ... for the USA to become a net exporter of oil, with the dramatic increase in our domestic oil production. Of course, that was before Saudi Arabia decided to destroy our domestic oil production by driving it out of business with super cheap oil!
America the Oil Exporter
http://www.politico.com/magazine/story/2014/07/america-the-oil-exporter-108707.html#.VMew9EdOKrU
I’m all for supporting our domestic oil production in the USA and keeping these local producers in business ... instead of allowing Saudi Arabia to destroy our local oil production by driving them into bankruptcy with Saudi Arabia’s super cheap oil!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.