Posted on 12/22/2014 7:21:19 AM PST by shepardspie33
... While the U.S. does not export crude oil, its increased production has curbed imports, resulting in excess supply. Although the fracking boom has helped to increase supply and steal market share from the Middle East, it is the Saudi response to the increased production from North American shale that has sent the price of oil tumbling.
In September 2014, in the face of falling oil prices, Saudi Arabia chose to increase oil production by half a percent. Days later on Oct. 1, they discounted oil exports to leading Asian customers. These actions set off a rapid decline in international oil prices.
On Nov. 27, when the Organization of Petroleum Exporting Countries (OPEC), which controls approximately 40 percent of the world’s oil, met to determine their future output of oil, many around the world expected they would cut production to stabilize oil prices. OPEC decided not to lower output, even as demand was slowing and prices had already fallen significantly. The de facto leader of OPEC, Saudi Arabia, pushed to continue production at 30 million barrels a day, a third of which they produce themselves.
Why would Saudi Arabia choose to flood the market with oil, stripping themselves of profits? There are two reasons: regional hegemony and as an attempt to drive North American frackers out of business, so they can reassert their dominance over the oil markets. For the purposes of this article I will focus on the latter.
For the last decade, oil prices have fluctuated around the $100 mark and allowed the oil dependent economy of Saudi Arabia to collect profits by the hundreds of billions. However, the technological advances in drilling techniques, specifically hydraulic fracturing, which allows for an increase in world oil output thus reducing prices, pose a huge threat to the Saudi Kingdom...
(Excerpt) Read more at reddirtreport.com ...
What about consumption being way down? Industry is way off in the US and other parts of the world.
The Stupid think it was Obama
What Dear Reader doesn't want to acknowledge, is that every extra barrel of oil in the world market benefits every consumer in the world market.
Could it be to ruin Putin? Nah. No one would do that.
Saudi Arabia is going to be shocked when Iran’s first nuke does not end up in Israel, but in Riyadh.
http://www.zerohedge.com/news/2014-05-30/us-gasoline-consumption-plummets-nearly-75
http://www.zerohedge.com/news/2014-07-13/what-power-consumption-telling-us-about-us-economy
http://www.zerohedge.com/news/guest-post-why-gasoline-consumption-tanking
U.S. Total Gasoline Retail Sales by Refiners
Refineries make very little RETAIL sales, compared to the total gasoline market. They sell mostly wholesale, and often they sell blending products for a wholesale terminal to mix to the correct government mandated recipe for that area.
Now compare the volume shown in those charts: 
25,000,000 gallons is about 600,000 barrels. To the total gasoline sales in the US, which isn't falling that way.
So you are talking about a 6% of the market share declining in volume, while it is being picked up and supplied by others.
What this information ought to tell you, is how worthless zerohedge is as a news source, and how they try to deceive you.
Someone’s way of getting the weak players to fold?
As the techniques of fracking and tar-sands extraction get better developed and applied, the cost per unit of oil extracted shall inevitably drop, forcing the Saudis (and the rest of OPEC as well), to shave their prices still more. This will put the localities with high cost of extraction into a sharp decline in the share of the market to which they may contribute, and probably result in the closing down of wide swathes of the industry in marginal countries like Venezuela and some of the other Persian Gulf states, particularly Iran. Non-OPEC countries, like the Russian Federation and Norway, which have relatively high costs of extraction, will be similarly affected, and that may be Saudi Arabia’s objective.
But even for Saudi Arabia, there has to be a breaking point they simply cannot go past.
China wins, for as long as they are net importers of oil.
“What this information ought to tell you, is how worthless zerohedge is as a news source, and how they try to deceive you. “
Oh please. Your info comes from the US Government; hardly a source of integrity. If you trust the gov’s numbers, inflation is low, unemployment is 7% (locally they say it is under 5%), and everything is looking up.
In reality, the only thing that has dropped in price is fuel and maybe homes in some areas (people are very gun shy). In my area, the number of garage sales, the amount of please come and take it all give aways, the empty commercial and industrial real estate (30%-75% in cities throughout the north bay area), the lack of jobs listings, lower enrollments in school, the rise in prices of everything other than fuel all suggest that government numbers are suspect, highly suspect. Nearly every economist admits to the methods of accounting for the figures the gov supplies.
Yes, Zerohedge has an agenda, I am suspect of them too, as I am of every source, but mores so of government sources who have the greatest number of reasons for painting a rosy picture, which if one looks at his surroundings can see that the reality does not match the claims by the numbers.
That is the same chart they are using, attributed to the same source, EIA.
Are you really trying to claim the US gasoline consumption is about 0.6 million barrels a day?
The brains behind the two advances: fracking and horizontal drilling were faced with soft oil prices for years.
They kept at it, because the majors like XOM BP and CHV more or less abandoned the lower 48, preferring to hunt elephants around the world. Plus the majors had relationships with oil producing countries they want to nurture, plus the corporate tax incentive to declare profits outside the US.
So the inventive shale guys will once again have the lower 48 to themselves. The latecomers will go under. The drilling plays will be fewer but more lucrative.
Consumers will start buying big RVs and boats and go on more airline trips. Especially China, many of whom never been on a plane. Consumption will go up.
We’re fracking and producing more oil, and the Saudis are keeping the price low to screw Iran (although teh fact that it’s messing with Russia probably doesn’t bother them either.)
This relates to Cuba. With oil prices in free fall, Russia and Venezuela are having major economic struggles. They’re Cuba’s sponsors. without their money, Cuba basically has no economy. Thus, this would be the ideal moment to collapse the Castro regime.
So what does Comrade Obama do? Of course — he rescues them.
I do not know what it is. I believe that consumption is down. State and local fuel sales are down, for a myriad of reasons, lower industrial and business activity, downsizing, fuel efficiency etc. Lower consumption, lower demand internationally, and no reduction in production all work to cause the lower prices. Lower priced fuel is not bad, but lower economic/industrial/commercial activity is cause for concern.
Talk to any business and things are not good. Even the casinos are off. Things are bad.
The Stupid think it was Obama
You are right! My lib cousin said low gas prices were due to “The Obama Economy”. Too bad ignorance isn’t painful!
From the first article you sent to me:
The other articles discussing the same chart include the data comes from EIA and some even provide links back to it.
Read the charts in the articles you sent me. Read the titles and read the numbers.
Do you believe that in a nation using nearly 20 million barrels a day of liquid fuels, only 0.6 million barrels a day represents our gasoline consumption?
state and local fuel sales are down
What state? National sales are not down in the last couple years. They did decline from 2006~7 when most of our total fuel consumption peaked. But in nearly every category they stopped declining about 2010~11 and have either held steady or slightly increased.
Talk to any business and things are not good.
Just talking to a business is not an indication of the total market. I'm in the Houston area of Texas, things have been growing pretty good including new housing, etc.
Well!You better know this It sure was’nt done with the foresight of Barack Obama.
If it were up to home we’d still be riding horses and mules and heating our homes with animal dung.
What a piece of human excrement he is.
He should be thanking the energy industry for keeping his wrecked economy going.
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