Posted on 05/22/2015 10:10:17 AM PDT by thackney
Full Title: Cheaper oil isn't such a benefit for US economy anymore as pullbacks in drilling cause damage
If there was one thing most economists agreed on at the start of the year, it was this: Plunging oil prices would boost the U.S. economy.
It hasn't worked out that way.
The economy is thought to have shrunk in the January-March quarter and may barely grow for the first half of 2015 — thanks in part to sharp cuts in energy drilling. And despite their savings at the gas pump, consumers have slowed rather than increased their spending....
So what did they get wrong?
It turns out that the economic effects of lower energy prices have evolved since the Great Recession. Corporate spending on drill rigs, steel piping for wells and railcars to transport oil has become an increasingly vital driver of economic growth. So when oil prices fall and energy companies retrench, the economy suffers....
(Excerpt) Read more at calgaryherald.com ...
Because the energy sector has been basically carrying the economy at large.
This adds cost. It also means there are a limited number of refineries who produce these formulas which reduces competition. It means gasoline can't be brought in from across state lines, except in emergencies with the governor's order. If you have a couple of refineries down due to problems, then the supply tightens quickly in ways that don't happen in other states.
Californians have decided its worth the cost and loss of flexibility, and obviously live with the consequences good and bad.
talking sense here.
The difference is when they set up and frack they are almost assured of getting more oil at a fraction of the cost of drilling a new well!!!
More expert analysis from a person who got a high grade when they took Keynesian Economics as an undergrad.
That is a reasonable consideration. Around Los Angeles is a series of mountains on the North that can trap air in the greater Los Angeles Basin. We’re talking 5 to 10 thousand feet in elevation.
The air and particulates build up there kind of cooking in a cauldron. It is a big problem.
Some of the other areas you speak about are on flat land and the air can blow the smog along helping to disburse it and clean the air.
Wouldn’t surprise me. What was your ceiling to compare it to?
I agree, but I also wonder how aggressively they really want that to happen.
I’m trying to give you the benefit of the doubt, but you’re still not grasping the issue.
I’m not comparing my price to any other state. Get that through your thick head.
I realize California has other issues. It has had those other issues for years. They didn’t suddenly happen to drive up the price now vs last year.
I’m addressing the price here and now to the prices a year or two ago when the price was the highest it has every been HERE IN CALIFORNIA.
As for the refineries here, they have been just like they are now for years. I will grant you one refinery did have problems, so that could be a part of the problem.
Others across the nation, are you seeing prices real low right now? Perhaps you are. I tend to doubt it.
Prices have risen after the dip earlier this year.
If I’m wrong and other places are still paying the lows seen in the Febrary/March range, it could indicate the refinery problem you mentioned (Thackney) makes more of an impact than I realized.
To an extent Californians have. We’ve had a Democrat Legislature for the 50-75 years, with one year or so exception.
Thus about 47% of the state’s citizens have no say in what takes place.
These refinery issues are something we’ve had for decades. Granted the one or two refineries with problems now, aren’t something that has been traditional 100% of the time.
The cost of hydraulic fracturing a well, significantly exceeds the cost of drilling a well. That has been the issue in the Shale Plays and other tight formations.
You can have your insults, and the information you receive with them.
You want to know what the problem is and refuse to take in the information explaining it.
Thackney, special formulations being consistent in California for decades, don’t you think that consideration is meaningless as a factor for price fluctuations in the last 1-2 years? I do.
Taxes in California being higher than in other states for decades, don’t you think that consideration is meaningless as a factor for price fluctuations in the last 1-2 years? I do.
These are not factors in this issue right now. I tried to explain that to you, and you just continued to repeat them as a cause. Do you think I’m unreasoned for calling you on it?
I agreed that the new Global Warming tax had impact. I agree that a problem with a refinery or two could also have an impact.
Advocate for the oil industry position if you like, but it bothers me when you toss in non-contributing factors as a basis for that advocacy.
And as far as I am concerned, the oil companies have every bit as much right to try and explain issues from their point of view. Why shouldn’t they? It just bothers me when it looks like someone is trying to game me on the issue.
2 issues he omits:
The price of food has gone up 2%- it should have fallen 5% (approximate) with the 50% drop in oil products’ prices.
So there WOULD have been an increase of 7% in food prices without the drop.
The price of medical care has increased 6.7%.
http://www.bls.gov/news.release/cpi.nr0.htm
Something that struck me from the article: “... led companies like U.S. Steel to temporarily close factories that make the steel pipe used in oil wells”.
Man there just isn’t any growth in our economy. And won’t be with the fiscal drag of the government debt.
“All this talk about dropping oil prices, and I’m paying just shy of $4.00 per gallon of gas at the pump.
Someone care to explain that to me.”
just to name a few:
1. Gasoline Taxes are in the +40 cents per gallon national average. http://www.api.org/oil-and-natural-gas-overview/industry-economics/fuel-taxes/gasoline-tax
2. Environmental regulations are enormous and growing. These are not just federal but states like California cause huge costs which are passed along to consumer when up to 16 different gasoline formulations are mandated for seasonable blends.
3. The imposition on mostly federal rules such as no Keystone pipeline(which raises cost of transportation of gasoline) and keeping lucrative areas off limits from drilling(Artic, Eastern and Western seaboards, Western federal lands).
4. Renewable mandates. right now, most all gasoline is 10% ethanol which is not petroleum and hugely more expensive than petroleum gasoline. There are mandated requirements for these standards in spite it is much, much more expensive.
Just a few, there are more.
Really?
Economists were wrong?
Hoodathunkit?
(Actually, some of us have been saying this domino effect would happen since the price started dropping.)
“The difference is when they set up and frack they are almost assured of getting more oil at a fraction of the cost of drilling a new well!!! “
the trends on the newer plays like the Eagleford and Bakken are really the opposite:
The cost to complete and frac the well exceeds the cost to drill the well to TD.
It did not used to be that way, but much better wells can be made and it has been proven to be economically worthwhile.
Do you know what fraccing is?
Geography plays a role, too. We don’t have smog problems in North Dakota, despite flaring oil wells, because there is constant airflow (wind), and few terrain features to trap air in case of a thermal inversion. If the wind ever quit blowing here, people would fall over because they wouldn’t know which way to lean...
That's just crazy.... fact is that US companies have scaled back their drilling programs because of the price of oil and NG. To ignore that is just dumb.
And yes... it's equally dumb to believe that hurting one of our countries largest industries is somehow going to help the economy. Some of us have been saying that all along... despite what liberal economists may have been saying.
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