Posted on 12/19/2014 12:11:58 PM PST by C19fan
How low can it go — and how long will it last? The 50 percent slump in oil prices raises both those questions and while nobody can confidently answer the first question (I will try to in a moment), the second is pretty easy.
Low oil prices will last long enough for one of two events to happen. The first possibility, the one most traders and analysts seem to expect, is that Saudi Arabia will re-establish OPEC’s monopoly power once it achieves the true geopolitical or economic objectives that spurred it to trigger the slump. The second possibility, one I wrote about two weeks ago, is that the global oil market will move toward normal competitive conditions in which prices are set by the marginal production costs, rather than Saudi or OPEC monopoly power. This may seem like a far-fetched scenario, but it is more or less how the oil market worked for two decades from 1986 to 2004.
(Excerpt) Read more at blogs.reuters.com ...
>>> The oil market is a huge racket, that’s why. It’s as far from a free market as possible.
Are you referring to government taxes or international cartels? Because, except for those things, gasoline is one of the lowest profit-margin items on the market (only food is lower). In all the times that oil companies have been investigated for price fixing, they have *never* been found guilty.
Depends on when the groceries run out, as they import most all their food.
“Depends on when the groceries run out, as they import most all their food.”
True, but they pay for those groceries almost solely with money derived from the sale of oil. So when their income drops precipitously as it is currently doing, they go on a sand diet in short order. The only real hedge is whatever money they have in the bank, and their willingness to make further cuts in their oil’s unitary selling price to see if they can makeup their income shortfall on volume.
I was also told by responsible officials that at the time, they had a "Thousand years of reserves, even factoring in increased demand." That was the mid 90's. They were not counting new finds in the Empty Quarter that were since conservatively estimated to double known Saudi reserves.
I sometimes think the squalid truth of the matter is that without some sort of output constricting mechanism, the world would drown in cheap crude. Shortage? Reserves drying up? Could be from the same school of thought thast brought us Global Warming.
The biggest thing that actually is GW's fault? Not leaving behind an energy policy. After all, he was in the awl bidness hisself. For the next century and half at least, as much as the idiotic Greenies and Luddites will weep and knash their teeth, the world will run on hydrocarbons and nuclear power.
Sure, we'll switch to Hydrogen, fusion, solar, but that has to be a long-term coherent plan. Coal, Oil, Gas? They're cheap, abundant, and very clean when used with modern technology.
Can we not have some non-lawyer make that point while serving us in the government? One thing for sure about the awl bidness, somebody always lying. Maybe those Saudi officials were lying to me, but Muslims hardly ever lie when they've been drinking.
But buying reserves takes funds, same as drilling. That doesn’t change the point that cheap previous purchases or exploration are already past expenses. To stay in the business, you have to replace reserves and production declines eventually.
Too many places are crying poverty at the current prices. Even if most of them are lying some of them are telling the truth. If prices continue to drop they’ll go bankrupt, which will cause supplies to drop, which will drive up prices.
The key word is “eventually”.
History shows otherwise for companies with the financial wherewithal to take the downturns and to snap up reserves cheap via purchase rather than the drillbit.
My BD experience shows a pletHora of companies that utilize that strategy and it works.
If you are implying the downturn will never reverse, that is just flat wrong, as proven by history.
Your comments are most pertinent for some companies, but not all.
If you are implying the downturn will never reverse, that is just flat wrong, as proven by history.
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Oh heck no. I’m must be speaking poorly. I know the roller coaster ride will continue.
In vino veritas? In the KSA?...........
Nor are ....gasp ... bootleg spirits unknown to the lower ranking neighbors. Dates, raisins, etc. etc. etc. are distilled into a fiery brew called "siddiqui" which sort of means "my friend." Avoid it, unless you have a liver donor lined up.
BTW, Ole Mo hisself (May Peace Be Upon Him, of course) was known to hoist a few and is not the author of the ban on alcohol, which is very strictly enforced. If a foreign guest worker (Euro or American) is loaded under the wrong circumstances or in the wrong place, it can be immediate deportation. If it's an African, Filipino, Indian, or Pakistani, trust me, it's a lot more horrible than that.
What, you thought I was the only hypocrite on the planet?
Well, I knew that they ‘indulged’ when outside the KSA, but inside I thought everyone was ‘sober as a judge’............kinda like Baptists on a fishing trip............
Either your blushing innocence becomes you .... or you live in a part of Florida somewhat better represented on the bench than mine!
I know only two judges from our district (1st) and they are both very sober people. Can’t speak for the rest of them..............
I’ve read your question about a dozen times but still can’t make heads or tails of it.
Do you have any background in economics?
+1+1+1
The assets have a life of their own.
Yes actually.
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