Posted on 02/08/2016 10:41:41 PM PST by george76
Gas prices in Chicago are still falling, but the price at the pump is having a negative impact on the economy.
...
as the cost to fill up your tank goes down, could this also be a sign -- the economy is tanking? Commodities trader Scott Shellady thinks so.
"It's bad for everybody. We are going to lose one-fifth of the jobs we created in 2008," said Shellady.
And he doesn't expect a market rebound anytime soon. So if you were hoping to cash in your 401K or IRA and retire in the next year, Shellady says, rethink your plans.
"The stock market is going to take a long time to recover. We need something new to boost the economy," Shellady said.
(Excerpt) Read more at abc7chicago.com ...
Each drilling rig stacked out represents roughly $100,000,000 dollars in drilling and completion costs which will not be spent.
In this State alone, that's $1.5 billion, and that money went all over the country as paychecks, as durable good orders, and for supplies and consumables, it didn't all stay here.
Production is a much more narrow profile when it comes to economic activity, with the revenues ending up in far fewer hands.
Inventory is for mid-stream and downstream folks. We're on the upstream end, E & P.
Really. With that $2 gas, they can afford to drive to that $10/hour job that replaces the well-paying job which no longer exists.
Problem is the idiots you refer to are often the economic gurus who should know better.
It is called a deflationary cycle. At first us common people cheer the relief in prices, but that relief comes with a hidden price. Ideally, the excess dollars you would save at the pump would be spent elsewhere, but given the severe recession and stagnate economy it gets put either into savings or debt repayment. Essentially, the currency goes out of circulation.
As demand decreases employers cut hours or layoff workers, no new work is created, and production of any kind grinds to a halt. Banks then are faced with people who thought they would save, now depleting funds, interest rates drop(to where from here?), lending stops, and you thought the crash of 2008 was bad? This is a much, much worse scenario.
Why is it worse? Because we had a faux recovery. Obama’s administration was too afraid to allow the natural economic deflationary cycle to happen in 2009/10 and instead pumped all that money into the system. That money needs to leave the system somehow as it is fake.
Do a google search for Why is Deflation Bad. The only disagreement I have with most of the articles is that people will hoard money, right now that isn’t the case as nobody experienced a recovery and have been living on credit cards or the government. Any excess cash will be put towards personal debt. It is that giant sucking sound we all keep hearing about....
Fair enough. I completely support the industry, but care little for the speculators driving the prices at the pump.
The idea that the consumer is obliged to support artificial pricing is absurd. The fine balance of regulations, tariffs, and speculation has not served the consumer. To the contrary, it’s exploited the consumer. There is no direct relationship between supply and demand. In between lies the egregious factor of manipulation.
Gee, since you put it like that,I feel so guilty paying less than $4 a gallon for gasoline. Your little economic “sob” story can be applied to any business...what monetary ramifications are the direct result of tech workers training their replacements from a direct result of H-1B visa’s?...thats a created problem not a result of over supply and price manipulation from a commodity that has been and always will be abundant....
It’s not that you should feel guilty, but there’s an economic price to pay now domestically for cheap gas. In the eighties, it didn’t matter nearly so much. Now, it appears that the oil patch was one of the few areas driving the private sector and so it’s not good that they’re suffering.
While I have been enjoying the increase of extra money in my pocket book the underlying cause and effect makes me nervous. I have been trying to understand this whole thing so let me throw these observations out there to those of you that understand this better than I.
It’s always been obvious to me that Obama and the wizard behind the curtain that you never hear anything about, Valerie Jarrett, have a very suspicious relationship with Iran. All this oil production on Iran’s part seems to me to have gotten ramped up with the lifting of sanctions against Iran that Obama orchestrated. Iran is Shia and would love to take out Sunni Saudis Arabia and the royal family. I don’t think there is any love lost between Obama and the royal family either.
Obama’s hatred and desire to destroy America and our economy could be helped along via causing the fracking and oil industries in America to collapse therefore getting a twofer.
I don’t know. I’m just respectfully asking those of you that are more informed on the matter, if this could be a possibility.
I don’t care. Keep dropping. I think it is actually better for everyone to save some money driving for a change. Gas prices were very high fro 7 years and some made a ton of money over it. Use that savings to keep yourself going while gas is low. Plus it is still around 1.70 a gallon so we aren’t even near the 90 cents a gallon of the 90’s. So we have a way to go I hope.
The fracking/gas etc.. are a piece of our economy but if you go even deeper into it ...the money lent from the bank’s to the outfit’s was pretty much from the quantative easing anyway. Any economic activity and slow down could be applied to your post. Factory closing’s for example the domino effect is the same as it is for any industry no longer functioning in our country. With your posting it seems as though if we paid 3.50 - 4.00 dollars a gallon everything would be fine in the sliver of our economy the oil/fracking take up and the world “glut” would not be a factor ....their is oil everywhere...hell Venezuala just took a shipment of U.S. oil and they have the 2nd biggest proven reserve’s...go figure? Their oil industry collapsed far before the the price “CORRECTION” as in being closer to the actual value.
“You will save $100 a month. I am happy for you.”
I’m saving a damn site more than that! Heating oil is down to $1.30 per gallon!
” Like many who worked ourselves out of a job, I hope you spend your newfound wealth wisely, all $1200/year of it. Please don’t spend it on foreign made crap.”
You know, for the past 40 years we’ve been hearing Texans etc telling us to “Freeze in the dark, Yankees!” I personally couldn’t care less if you lost your jobs. The high cost of energy which funded your areas devastated mine. Now you get just a taste of what your people did to mine! So don’t worry, I’ll be spending my “’newfound’ wealth” right here at home!
What I am trying to do is indicate the effect on the overall economy. In this State $1.5 billion dollars is fairly significant, considering there are fewer than a million people in the state. But that unspent money doesn't circulate through the myriad other industries it would have had it been used to drill and complete wells. Just a fact.
what monetary ramifications are the direct result of tech workers training their replacements from a direct result of H-1B visa’s?..
The jobs still exist, only at a reduced pay rate. The money will still be spent, only some of it may go abroad instead of into the local economy.
While the former employees will feel the pain (I can sympathize), the jobs won't go away.
thats a created problem not a result of over supply and price manipulation from a commodity that has been and always will be abundant....
We raised the production of oil in this state (ND) alone about a million barrels of oil a day in less than 10 years, from a pair of rock formations previously only producible in isolated cases, and did it with a new wave of technology and innovation.
There was no over supply until we (and others in other parts of the oil patch) raised the supply enough and Obama crashed the economy enough for the curves to cross. Foreign policy factors apply as well (ISIS, Iran oil production).
There wasn't such a surplus until we made one.
But I have to ask this. Why, if the cheap gasoline is so good for the economy, is the economy tanking? Where is the bonus? Where is the recovery? Gasoline prices have been dropping steadily for a year, and the great revival isn't appearing, instead all the indicators are that is going the other way.
The high cost of energy which funded your areas devastated mine. Now you get just a taste of what your people did to mine! So don’t worry, I’ll be spending my “’newfound’ wealth†right here at home!
Well I'm glad you'll be spending it at home.
We didn't devastate anyone's economy. We don't set the price of oil, that's done on bid. We buy petroleum products, too, and it isn't any cheaper here, likely more expensive.
What we did do is find a hell of a lot more of it.
I've been doing that for 36 years, so I doubt it hurt you one way or another for me to make a decent living.
If you are using heating oil, you are probably in the Northeast, maybe even New York where hydraulic fracturing is outlawed. Who hurts what, there?
The price will spike again, because of stupid policy. Not because we're devastating anything, but because traders in New York bid it up. We're the ones who found enough supply to alleviate the crunch, you stupid ingrate.
Partly right - they also go down because the artificially high prices due to so many betting on and investing in high energy prices has come home to roost.
“Of course the economy is tanking. But try to explain this to the idiots who brag about saving $2 on a tank of gas.”
The same idiots that have their savings in 401Ks that are invested in energy stocks, which are ‘tanking’ now.
Opinion Commentary
Low Gas Prices Have Politicians Pumped to Raise Taxes
Obama $10a barrel fee wont go anywhere, but states too are eager to try to make drivers pay more.
http://www.wsj.com/articles/low-gas-prices-have-politicians-pumped-to-raise-taxes-1454715709
Well where to start?...500 billion in NEW taxes for Obamacare....businesses forced to pay for insurance now for having 50-99 employee’s...American’s forced off of decent insurance to now have to “purchase” an inferior product that covers less and the deductible is absurd. 90 million plus OUT of the workforce, what really bothers me is your outlook about H-1B visa job takeovers, “the jobs are still there” They were given to ‘FOREIGN ‘ workers while Americans ...just like those that worked on the oil rigs are cast aside like fodder...there is no difference the economic damage is actually even more hideous because of our own (supposedly) government legally allowing this to happen as opposed to world market supplies. So again would 3.50-4.00 a gallon gasoline keep the rigs running and all the people employed?...what about the all the price ‘s that are high for products that use oil in any way? Tires ...shingles ...pavement ...when oil is falsely high in price the trickle down cost to the common consumer is painful to say the least. Also note that since all the prices of good’s went up to cover “FUEL” cost’s ...none have backed off since the reduction of “FUEL” cost’s...so gee maybe along with those simple points and illegal aliens working in a country they should not be in...while milking the welfare system ...maybe that accounts for “non-bounce” in our economic performance.
“If you are using heating oil, you are probably in the Northeast, maybe even New York where hydraulic fracturing is outlawed. Who hurts what, there?”
Nope, much further north. In our first house, to avoid using oil (because we couldn’t afford it) in the mid ‘70s and early ‘80s we cut, split, stacked and burned ten cords of wood a winter. Our friends did the same. When we moved to the family house, we went to oil. In the winter of 2007-2008 we burned 2300 gallons of oil and we were cold. That spring we switched to local wood pellets and last winter burned 11 tons of them. I unloaded every single bag from my old F150 into the cellar and lugged every bag up the cellar stairs and through the house to the pellet stove, in the dead of winter, five bags a day. And we were pretty warm, providing work for our forest products industry up here but it wasn’t easy for any of us. I’ll be 65 years old this year and have lived here in Maine my whole life and for every winter as long as I can remember back, two or more people, almost always old people, have frozen to death.
We survived without your oil; the cost of oil killed people up here while you guys got rich. It killed much of our industry. It drove up the price of electricity and put more employers out of business. But if the price goes up again, we’ll survive again. No sympathy at all up here for you guys...no more than the oil industry ever showed us!
If the bread earner in a family loses their job, the family will appreciate the lower gas prices, however they still have thousands of dollars in rent / mortgage payments, utilities, insurance, food, and other monthly bills.
More existing businesses are closing now than new ones opening. A first.
About 95 percent of US counties are in worse shape financially now than in 2007.
Put the crack pipe down, willya?
I work in the exploration and production end of the industry. We find places to drill, drill wells, and produce crude oil.
I am a consulting Geologist, and my job these last 35 years has been to identify oil bearing strata and indicate where oil may be produced from.
Now, to sort some things out.
First, it isn't MY oil.
I found a lot of it, to be sure, but I don't own it.
The people who own most of it are farmers and ranchers, ordinary landowners who have the mineral rights to their land. Some is under Federal Land, and the royalties paid for that oil go to the Government, who owns those mineral rights.
Second, the owners don't set the price of crude oil. The oil produced is purchased in commodity trading on bid. The buyers set the price, not the sellers.
So, on my end of things, we're not freezing anyone out. While I got paid pretty well over the last five years of 12-14 hour days with very few days off, (average 6 days per week, every week), I'm not rich by any standard.
What I have is modest, but paid for. It is because it is modest that it is paid for. We live within our means.
I have heated through winter here (one of the most brutal of the last century) with wood. I know full well getting up and filling the firebox on the stove every two to three hours. At the time, I had no running water, and an outhouse was the 'facility', with temperatures reaching past fifty below zero (not counting wind chill).
Considering we don't have a forest products industry here, we were thankful people elsewhere had sent that hardwood up in strips between layers of casing and drill pipe--that scrap was what we burned.
During that time period, one friend froze to death on her doorstep. She was found sitting there in the morning, in town, by a neighbor.
It was in a warmer year a friend froze on his way to his ranch when he slid his vehicle into the ditch and got out to check if he could get it out (guessing, we really don't know). What we do know, is that the wind likely blew the door shut and the automatic door locks killed him by locking him out, miles from help (before cell phones, not that there was any signal out there).
I guess people here are better at surviving in winter, because we don't lose so many people here. That isn't because oil is cheap, it isn't because we are rich. People here in North Dakota take winter very seriously.
I'm not sure how the price of crude oil killed your industry, and yes, when crude prices went up, it made ours. We drilled enough wells in 10 years in the Bakken and Three Forks formations to increase production from 100,000 BOPD to 1,100,000 BOPD. I won't go into the paroxysms small towns go into when they triple or more in size in a couple of years, but they are considerable, and only eclipsed by the inevitable contraction when the boom is over.
I'm not complaining, just explaining.
Since you would not have burned crude oil (which wasn't mine, anyway), I am sure you survived without it. Refined oil? Take that up with the refiners and the distributors and local marketers who all get a profit. Shame on them for making a living.
But to vent your little hissy fit on those of us who busted our asses so there was enough supply that the price of crude oil came down and wish us ill is way out of line. I don't know anyone who worked the hours in the conditions we did, anywhere, with the exception of combat troops and commercial fishermen in the Bering Sea who have it worse, but we did this for years on end.
We got paid well for that, but there were damned few who could keep up.
We didn't cause anyone to freeze, we busted our asses to increase supplies for ungrateful wretches who ever bitch if we do well, and then thumb their noses at us when things go downhill.
As for the price of electricity, there are bloody few places where there are oil fired power plants.
Maybe you should google the war on coal for information on that, but it sounds to me like the real greedy people are the ones selling electricity and refined products to you all, and they are your neighbors, not those of us on drilling locations.
If they were given to someone with a H1-B visa, those people were physically here. They will spend that money in the community, what they don't send back to their country of origin.
The payroll still gets into the local economy, distributed by different people.
When a job ends, when it no longer exists, when there is no payroll, businesses which depended on income from those formerly employed people do not make that revenue, and don't get to spend it.
In even small towns, a dollar may change hands a dozen times before it leaves town, no matter who spends it. In bigger cities, even more.
If the dollar just isn't there, the whole economy suffers.
I agree, the Government should not grant visas to unnecessary workers from elsewhere, Keep American jobs for Americans. However, if the job still exists in the area, the paycheck will still be spent in the area, and the overall economy does not suffer as much as it would if the job was eliminated.
Yes, higher crude oil prices lead to higher fuel (and other petroleum product dependent) prices. As for motor fuels, look at a few other things which raise the price and keep it up, now that low crude prices expose them for what they are.
First, the oxygenated fuel mandate (AKA Renewable fuels standard, ethanol mandate) which increases fuel prices by requiring the addition of ethanol to fuel. That ethanol is hygroscopic and that means it has to be shipped separately from the base fuel it is blended with and mixed near the distribution point. That's expensive, and raises the price of fuel and anything which would have eaten that corn.
Second, the taxes imposed by your particular jurisdiction on the fuel as a motor fuel, and some places, the taxes on those taxes (sales tax). In some parts of the country, that can be as much as 75 cents per gallon.
Third, 'boutique blends' required by some areas for emissions control. There are a half dozen flavors of gasoline out there.
Fourth, moving target sulfur emissions standards which have increased the cost of diesel fuel considerably. It is diesel fuel which powers most rail freight and truck transport, and that fuel cost translates to higher prices on everything.
Crude prices are down, but fuel and other prices aren't and (moving target) emissions standards at refineries affect those prices, too. That's the EPA at work, and that is the agency which has done the heavy lifting in the war on coal, (and coal fired electrical generation) too.
Of course, the government likes pointing the finger at "evil BIG oil", along with the Watermelons (green on the outside, red on the inside), because they are the real forces behind a higher fixed floor in your costs.
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