Free Republic

Cratering crude-oil prices may be a blessing to cash-strapped American consumers, but it’s a double-edged sword when it comes to the overall economy. The problem for the overall economy is not so much the drop in oil prices as it is the velocity at which oil prices have fallen. The plunge from a peak of just over $100 per barrel in the early summer to today’s $58 — a massive 42 percent drop in just a few short months, most of which has come in the last 90 days — could make anyone’s head spin. The rapid fall in crude...

When it comes to crude oil and other hydrocarbons, the United States is bursting at the seams. The United States has very rapidly become a powerhouse as an exporter of finished petroleum products, natural gas liquids, other oils including ethanol, and even crude oil — with total gross exports of all of these combined expected to reach 5 million barrels per day (mb/d) or more by the end of this year, up a stunning 4 mb/d since 2005. Total oil exports in 2014 pushed the commodity to the top of the list of U.S. exports by category, far surpassing all...

Here are the numbers that explain why the Russian economy is imploding in the face of a tumbling oil price and Western sanctions. Oil and gas energy represents two thirds of exports of around $530bn (£339bn). Without them, Russia would have a massive deficit on its trade and financial dealings with the rest of the world - which is why Russia's central bank expects a capital outflow of well over $100bn this year and next.

Just two weeks ago a sole gas station in Oklahoma swept headlines for dropping gas prices below $2 a gallon. Today, 13 states have joined that list and the trend is expanding. Gas for less than $1.90 a gallon can be found in at least one station in Oklahoma, Louisiana and Ohio, according to CNN. CNN cites ten additional states– Alabama, Arizona, Colorado, Indiana, Mississippi, Missouri, Nebraska, New Mexico, Texas and Virginia– that now have gas below $2 a gallon. “What we’re seeing is markets at work,” Heritage Foundation economist Nick Loris said. “Significant increases in supply and a relatively...

As we noted previously, counterparty risk concerns (and thus financial system fragility) are starting to rear their ugly heads. In the mid 2000s, it was massive one-way levered bets on "house prices will never go down again." When the cracks started to appear, the mark-to-market losses in derivatives led to forced liquidations and snowballed systemically. In the mid 2010s, it is massively levered one-way asymmetric bets on "commodity prices [oil] will never go down again." Meet WTI-structured-notes... the transmission mechanism for oil-price-shocks blowing up the financial system. Because nothing says exuberant ignorance like limited upside, unlimited downside OTC (illiquid) derivatives...

People who own all-electric cars where coal generates the power may think they are helping the environment. But a new study finds their vehicles actually make the air dirtier, worsening global warming. Ethanol isn't so green, either. "It's kind of hard to beat gasoline" for public and environmental health, said study co-author Julian Marshall, an engineering professor at the University of Minnesota. "A lot of the technologies that we think of as being clean ... are not better than gasoline."

It is the F-word that dares not speak its name at the Washington Post. At least not in the WonkBlog story about plunging oil prices by Chris Mooney. That word is "fracking." Mooney is notorious for his antipathy towards fracking but his failure to attribute the large increase in U.S. oil production to it is laughable. Here is Mooney noticing that oil prices are going way down but fails to credit it to you-know-what due to his ideology:

In the US, the land rig count fell 28 units to stand at 1,820 last week. A decline in vertical oil drilling activity took the rig count lower. Horizontal oil drilling (ie activity in the unconventional oil plays) was only down 7 rigs on the week—about in line with normal seasonal trends this time of year. Much of this week's activity decline was due to a slowdown in conventional drilling in the Permian Basin. The number of vertical rigs in the Permian fell by 13 to 188. The Permian horizontal rig count was only down 7 to 360. While...

NEW YORK (TheStreet) -- OPEC doubled-down on its commitment to current levels of oil production, triggering a fresh selloff in crude prices on Monday. The fall in commodities alongside nerves heading into the Federal Reserve meeting Tuesday pulled stocks lower to start the week. Crude oil prices were falling again after secretary general of OPEC, Abdallah Salem el-Badri, said the oil cartel had not set a fixed oil-price target. Separately, United Arab Emirates oil minister Suhail Al-Mazrouei said the group would stick to production levels even if oil falls to $40 a barrel.

Paul Krugman made the point recently that the only stock market forecasters who correctly predicted a market drop were those who always predicted falling markets. This is known as the ‘stopped watch’ approach to forecasting: constantly make one prediction and eventually the market will move in that direction. Especially for oil prices, which are highly variable, this works wonders to the point where the great Adam Sieminski often joked that you should predict the price or the date, but not both. This is reminiscent of Napoleon’s adage, that it’s better to have lucky generals than smart ones. He didn’t note...

The most important characteristic of the U.S. oil industry is inertia - or to put it another way, drilling and production respond sluggishly even to a large change in prices. Since 1974, there have been four episodes in which oil prices declined sharply over a relatively short time (ignoring the brief price spike and equally rapid reversal in 1990 associated with preparations for the first war between the United States and Iraq). These price slumps occurred between (1) December 1985 and July 1986; (2) January 1997 and December 1998; (3) November 2000 and December 2001; and (4) July 2008 and...

U.S. energy major Chevron plans to withdraw from a $10 billion shale gas deal with Kiev, a senior Ukrainian presidential official said on Monday. Ukraine signed a shale gas production-sharing agreement with Chevron amid great fanfare in November 2013, just months before mass protests in Kiev ousted former president Viktor Yanukovich, plunging the country into a major crisis with Russia. "There is information that they (Chevron) are planning this decision," Valeriy Chaliy told journalists, referring to a report by local media that Chevron had told the government it was pulling out of the deal. Chaliy declined to give further details....

The power plant in Luoyang, central Henan Province, is burning old and damaged banknotes instead of coal - the first time this has been done in China, the official Xinhua news agency reports. The plant says one tonne of notes can generate more than 600 kWh of electricity, and is better for the environment than burning coal. The country's central bank, the People's Bank of China, has given permission for the notes to be burned, and says it's an efficient way to make electricity. With the province's unused paper money the company "can help generate 1.32 million kWh of electricity...

During most times, the oil industry may operate in a dog-eat-dog world. Now it’s also in an ant-and-grasshopper world. You know the story of those two insects–they’re paired together in Aesop’s Fable of the same name. The ant toils hard to save and scrimp for a rainy day, while the grasshopper flits around, enjoying the moment with no thought for tomorrow. Then winter comes and the ant has stores of food to last him for months; the grasshopper dies. It’s hard to think, especially given the lavish times of several months back when Niagaras of oil revenues were pouring into...

TOKYO (Reuters) - Oil prices sank more than two percent to 5 1/2-year lows early on Monday on concerns about a supply glut and slower global growth, feeding fears for energy and commodities producers and exporters. Investors were nervous after U.S. shares posted their biggest weekly fall in 2 1/2-years last week on losses led by energy sector, and as they expect the U.S. Federal Reserve to hint this week it is getting closer to raising interest rates. U.S. crude futures fell more than 2.5 percent at one point to as low as $56.25 per barrel (CLc1) in quiet early...

Dozens of new oil projects in the North Sea and Europe could be shelved as falling prices force international oil companies to tear up their investment plans. Global energy consultancy Wood Mackenzie has said that 32 potential European oil field developments containing 4.9bn barrels of oil equivalent are waiting for approval on more than $87bn (£55bn) of funding. These could be at risk should oil prices fall below $60 per barrel. “Major projects and investment in the UK and across Continental and Mediterranean Europe could be at risk if prices stay below $80 per barrel, as over 70pc of the...

Germany’s plan to phase out nuclear energy and switch to renewables by 2022 is unrealistic as the country is doomed to remain dependent on fossil fuels like oil and gas for the next 70 years, energy expert Matthias Dornfeldt told RT. Renewables can’t replace fossil fuels overnight because there’s not enough infrastructure, said Dornfeldt in an interview with RT. He believes the 21st century will be the century of gas, as the 20th century was the century of oil. “We are going to be dependent on oil as well as on gas, as I see, for the next 50, 60,...

SALEM, N.H. — John York, who owns a small printing business here, nearly fell out of his chair the other day when he opened his electric bill. For October, he had paid $376. For November, with virtually no change in his volume of work and without having turned up the thermostat in his two-room shop, his bill came to $788, a staggering increase of 110 percent. “This is insane,” he said, shaking his head. “We can’t go on like this.” For months, utility companies across New England have been warning customers to expect sharp price increases, for which the companies...

The international price of oil has dropped by more than 40 percent in the past six months. To put it lightly, this presents a major challenge to oil-exporting nations. Many analysts agree that, of all oil rich countries, Venezuela is the most vulnerable. A combination of persistent fiscal deficits, out-of-control inflation, and plunging public support for President Nicolás Maduro threatens to make the nation of 30 million ungovernable. What can Maduro do to survive? In order to answer this question, we must differentiate between what Maduro can do, and what he most likely will (or, rather, will not) do.

We all know that the American energy revolution, led by the new technologies of hydraulic fracturing and horizontal drilling, has created a flood of new shale-oil and natural-gas production that has overwhelmed world markets and driven prices down by roughly 40 percent. End-of-week crude oil closed near $57 a barrel, and the national average gasoline price finished at $2.60. No matter what the naysayers are trying to sell, the new energy reality is unambiguously good for the U.S. and global economies. There may be some dislocations among countries, sectors, or companies, but the overwhelming impact is positive. In fact, the...