Posted on 01/26/2016 6:25:54 AM PST by doldrumsforgop
ALONG with bank runs and market crashes, oil shocks have rare power to set monsters loose. Starting with the Arab oil embargo of 1973, people have learnt that sudden surges in the price of oil cause economic havoc. Conversely, when the price slumps because of a glut, as in 1986, it has done the world a power of good. The rule of thumb is that a 10% fall in oil prices boosts growth by 0.1-0.5 percentage points.
In the past 18 months the price has fallen by 75%, from $110 a barrel to below $27. Yet this time the benefits are less certain. Although consumers have gained, producers are suffering grievously. The effects are spilling into financial markets, and could yet depress consumer confidence. Perhaps the benefits of such ultra-cheap oil still outweigh the costs, but markets have fallen so far so fast that even this is no longer clear.
The world is drowning in oil. Saudi Arabia is pumping at almost full tilt. It is widely thought that the Saudis want to drive out higher-cost producers from the industry, including some of the fracking firms that have boosted oil output in the United States from 5m barrels a day (b/d) in 2008 to over 9m b/d now. Saudi Arabia will also be prepared to suffer a lot of pain to thwart Iran, its bitter rival, which this week was poised to rejoin oil markets as nuclear sanctions were lifted, with potential output of 3m-4m b/d.
Despite the Saudis’ efforts, however, producers have proved resilient. Many frackers have eked out efficiencies.
(Excerpt) Read more at economist.com ...
I read an analysis by another Freeper that pointed to the hyper-involvement of financial institutions in everyone’s lives, coupled to the fact that oil companies were losing their shirts, with the banks joined at the hip. Where once the oil companies would fail and fold, now the banks are holding the paper and therefore everyone suffers instead of just one segment.
Something to think about - I’m mentally chewing this gristle, myself.
At the current prices new frak oil and new offshore projects don’t pay and will end and market forces will drive up prices. Right now we are benefiting with low prices but proven reserves and production will start to fall. We need a price on oil that allows the US to be energy independent.
Quite a few thousands in the oil industry.
or someone with a PHD would flop around on the ground like a fish out of water.
What the heck is frak oil?
Most of the new domestic oil comes from the fracking process. Most of it is done in the Bakken oil play, North Dakota. Where have you been?
Whatever .. I remember reading that in spite of lower fuel prices ... we're still kickin' ass
I'm having an almost impossible time NOT associating life in America today with Donald trump
He has single handedly fired our collective asses UP !!
I almost got fired for saving the life of an Exxon engineer.
I grabbed him by the back of his neck and threw him out of the way before he was crushed by a forklift load of 9 5/8” casing.
The forklift operator had dumped the load on the rack and it was rolling too fast for the Exxon engineer so he got in front of the load and was going to stop it before it hit the other pipe on the rack.
Had I not pulled him out of the way he would have been crushed to the point he would have been pretty much cut in half.
The thanks I got, he tried to get me fired for putting my hands on an Exxon engineer.
When his boss got in my face about putting my hands on an Exxon employee I let him know I’d be more than happy to let him get crushed.
Exxon pulled their engineers out of the pipe yard.
When you consider the hundreds of products that use oil derivatives in their production, the price of fuel for millions of over the road trucks, the many millions who drive using the cheaper gas prices and the billions of dollars of savings going into their pockets and out into the economy, how can it not be good for the nation.
Low energy prices are good for the economy, but huge swings in the prices caused by manipulation aren’t.
Yes, because consumers (and producers) need higher prices and government needs more money/ liberal idiocy off
“So a KFC Bucket Chicken is now more expensive than Barrel of Oil”
Made with the same amount of oil!
I am now retired but at one time I was an Exxon engineer, although more of a desk jockey.
Do not think I would have made the case to get you fired, but to make a case for preventing a safety incident that could have been fatal.
And I am not stupid enough to believe I could stop 9 5/8” rolling toward me either.
When I was on a roustabout crew early on for my training, I found out there were lots of adjectives associated with engineers handed out by the crew, too. The incident you cited was likely one reason for those superlatives.
“A death knell for the oil industry.”
Not really, the oil is not going anywhere so it is a temporary thing.
My +40 years in the oil industry saw a number of cycles, both up and down.
I learned that since oil is a commodity, it is subject to swings.
When those swings are up, there is no better place to be than to be working in the oil industry, as far as pay and opportunity.
When they are down, it can get rough. I was laid off one time after working 27 years for a major.
The key is to recognize the cyclic nature, and during the upswing prepare for the down cycle.
It caused me to retire comfortably without regrets, even from losing my job after many years.
Many of the younger guys I worked around during the past 10 years had never seen the downside so thought they could spend indiscriminately. They were wrong.
Oh just been here in West Texas drilling and producing oil for the last 40 years. Fracing started long before the Bakken, like 70 years before and almost every well drilled since has been hydraulically fractured. My interest was in the term “frac oil” which is rather silly sounding to those of us in the business.
” . Fracing started long before the Bakken, like 70 years before and almost every well drilled since has been hydraulically fractured.”
Really?
IN my +40 years in industry of wells I drilled were overwhelmingly not fracced, perhaps only 5% of so.
The fraccing phenomena we are witnessing that has the majority of wells are being fracced is only for the last decade or so.
Perhaps what’s what you meant.
Can’t have the peasants paying less for everything!
Back when my business was paying north of $3.75 per gallon, and every waitress in North Dakota was driving a new F-350, nobody but nobody was suggesting any sort of price supports for the work I do.
I neither asked for, nor expected, any bailout of any sort.
What goes around, comes around.
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