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STRAP IN: IT’S GOING TO GET BUMPY
Powerline ^ | MARCH 9, 2020 | STEVEN HAYWARD

Posted on 03/09/2020 8:40:09 AM PDT by Hojczyk

The big news over the weekend was not the coronavirus, contrary to what you might think from watching the news. The most consequential story of the weekend is the oil price war that has broken out between Saudi Arabia and Russia. Saudi Arabia has decided to increase its production and slash its price to punish Russia for not going along with OPEC quotas designed to prop up the price of oil, which has fallen by more than half over the last few months including today’s price collapse.

(Can’t help reminding that all the certified “smart people” like John Kerry and Al Gore were telling us 15 years ago that we had reached “peak oil,” and more specifically that Saudi Arabia had likely reached its production peak and would be unable to increase its production over 10 million barrels a day. Heh.)

On the surface this Saudi move will impose significant pain on Russia, which depends on high oil prices to prop up its economy, and will also increase pressure on Iran for the same reason. Likewise American consumers, and oil-consuming sectors like the airlines, can likely look forward to some lower prices

And while the story of the Saudi-Russia feud may be entirely true, keep in mind that a protracted period of low oil prices is going to devastate America’s oil production from fracking in Texas and elsewhere. A lot of the smaller and mid-sized independent producers who have been behind a lot of the increase in domestic oil production were already under a lot of pressure from falling oil prices.

If the price stays down around the $30 level it is near today, a lot of the highly leveraged firms will default on loans or head to bankruptcy. Production will start to fall in a few months.

(Excerpt) Read more at powerlineblog.com ...


TOPICS: Business/Economy; Politics/Elections; Russia
KEYWORDS: bloggers; covid19stockmarket; energy; oil; oilprice; oilprices; opec; powerlineblog; russia; saudiarabia; stockmarket; trumpputin
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To: Hojczyk

I think there is a chance that Russia and Saudi Arabia are in this together, and that their real target is burgeoning US production via fracking. Unfortunately for us, the production costs for fracking are higher than they are for the easily accessible reserves of Saudi and Russia. It would be to the benefit of BOTH of them if they could reduce the amount of oil production from the US.


61 posted on 03/09/2020 9:43:35 AM PDT by Pearls Before Swine
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To: Hojczyk

Brilliant move on the part of the Saudis, lower price ‘because’ of Russia and kill fracking oil in USA. A two win plan and the blame is on the Russians and not Saudi for targeting USA fracking.


62 posted on 03/09/2020 9:44:03 AM PDT by Lockbox
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To: I want the USA back

EXACTLY.


63 posted on 03/09/2020 9:44:44 AM PDT by Sequoyah101 (We are governed by the consent of the governed and we are fools for allowing it.)
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To: Lockbox

What happens to Iran?

This will collapse their economy, and this is on top of the virus there.


64 posted on 03/09/2020 9:44:55 AM PDT by dfwgator (Endut! Hoch Hech!)
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To: AdmSmith; AnonymousConservative; Arthur Wildfire! March; Berosus; Bockscar; cardinal4; ColdOne; ...
A short-term federal tax on petroleum imports ($10-$15 / bbl) would shut the mouths of all the Demwits, would raise money quickly, keep domestic production strong, and indirectly screw the daylights out of OPEC and Russia. As an offset, the federal retail excise on fuel should be suspended.

65 posted on 03/09/2020 9:46:38 AM PDT by SunkenCiv (Imagine an imaginary menagerie manager imagining managing an imaginary menagerie.)
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To: Pollard

State governments will take advantage of lower gasoline prices to raise at the pump taxes. They do it every time.


66 posted on 03/09/2020 9:47:37 AM PDT by KobraKai
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To: NELSON111

Déjà vu 1986.


67 posted on 03/09/2020 9:49:56 AM PDT by Rebelbase
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To: Vermont Lt
“It’s as if all of the “enemies” of the US were “taken out” at the same time.”

Yes. The silver lining is Iran with coronavirus and low oil prices. Their whole economy, already on the ropes, could collapse, which, hopefully, could lead to the overthrow of the ayatollahs.

68 posted on 03/09/2020 9:52:26 AM PDT by VanShuyten ("...that all the donkeys were dead. I know nothing as to the fate of the less valuable animals.")
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To: alloysteel

Read an article earlier that it’s $1.78/gallon in Raleigh, NC.


69 posted on 03/09/2020 9:52:57 AM PDT by Rebelbase
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To: Hojczyk
Rush spent the first hour explaining this. Saudi Arabia just put down a coup and is taking on Russia and Iran with this oil battle.

Personally I don't think Opec manipulate oil price exactly like DeBeers manipulates the price of diamonds and there is a shortage of niether.

70 posted on 03/09/2020 9:58:53 AM PDT by itsahoot (Welcome to the New USA where Islam is a religion of peace and Christianity is a mental disorder.)
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To: itsahoot

We need to support our domestic oil producers, it’s a matter of national security.

Energy Independence should be tops on our list.


71 posted on 03/09/2020 9:59:49 AM PDT by dfwgator (Endut! Hoch Hech!)
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To: DIRTYSECRET
It needs to be $60 or fracking disappears. What am I missing?

When we went through this is 2014/15, our domestic industry radicalized cost control. In the long term, we need pricing above $50 per barrel to continue exploration and development. But, in the short to mid-term, most of our wells have a "cash cost" in the mid-20's. That means, our producers are not hemorrhaging cash at these levels. The ones that are under, will be able to find support from the banks.

Keep an eye on the price level. If it drops much below $30, then the Saudis are coming after the US too. If it stays around $30-33, it's a coordinated effort to take down the Russia-Iran alliance.

72 posted on 03/09/2020 10:14:57 AM PDT by SomeCallMeTim ( The best minds are not in government. If any were, business would hire them!it)
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To: Old Yeller
Except the federal, state and local governments will increase their taxes on it. They aren't going to lose any revenues.

Most states tax on a per-gallon basis. So a change in price has no impact on the tax collected (except when prices are down, consumption usually goes up, and an increase in revenues is seen). There are several states that do base tax on price, and it varies within those states between fixed per-gallon tax plus a sales tax based on price, among other things.

73 posted on 03/09/2020 10:17:26 AM PDT by IYAS9YAS (There are two kinds of people: Those who can extrapolate from incomplete data.)
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To: semimojo

“So you’re going to force every American consumer to pay $20/bbl more in tariffs than the rest of the world. That difference goes to the producers whether you call it a transfer or not...And in the process you kill all the energy jobs related to exports.”

My Globalism instincts went out the door when it was found that 80% (at least) of our meds rely on China. I’m happy paying a bit more for gasoline, if it keeps our production from collapsing.


74 posted on 03/09/2020 10:30:43 AM PDT by BobL (If some people here don't want to prep for Coronavirus, they can explain it to their families)
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To: LouAvul
“ This is in effect predatory pricing and it’s highly illegal here in the states. Refresh my memory. It's how the ragheads shut down American oil production in the 70s and how the japs shut down American electronics in the 80s. How is it illegal here in the states?”

If these were domestic companies predatory pricing falls under the anti trust laws. Say a large company takes a loss and lowers their prices far below where the competition can stay afloat in order to drive them out of business only to raise their prices back up once their competitors have gone under. That would be predatory pricing. The larger company would be attempting to create a monopoly.

That in a nutshell is what SA is doing so that is the reason we need to hit them with import tariffs. Had we have done this decades ago we would not have spent all that time dependent on SA.

75 posted on 03/09/2020 10:36:50 AM PDT by precisionshootist
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To: dfwgator

Oil and gas paid $16 billion to Texans in tax revenues (local and state). $40 billion in loans are due this year - $400 billion in loans are due the next 4 years. If oil stays low - they can’t pay those loans back and that impacts the banks. That impacts everyone. Gas prices won’t plunge on extremely low oil - but everything else will. It’s all interconnected.


76 posted on 03/09/2020 10:52:03 AM PDT by NELSON111 (Congress: The Ralph Wolf and Sam Sheepdog s<how. Theater for sheep. My politics determines my "hero")
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To: semimojo
“ We would not be transferring anything to domestic producers we would be protecting them from being driven into bankruptcy... So you're going to force every American consumer to pay $20/bbl more in tariffs than the rest of the world. That difference goes to the producers whether you call it a transfer or not. And in the process you kill all the energy jobs related to exports. Not sure that's a good trade off. ”.

First we won’t be exporting much if the price is well below our production costs. Most importantly we will lose our energy independence and that’s what the President can’t allow to happen. SA could sell oil for $10 a barrel if they wanted to. Oil is practically on the ground over there. We cannot afford to let SA drive our domestic companies out with predatory pricing. Without Tariffs we will have low cost oil just long enough for American producers to hang it up then it will be $130 a barrel. It’s really that simple.

77 posted on 03/09/2020 10:55:34 AM PDT by precisionshootist
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To: Hojczyk

Kerry and Gore are idiots then. It is well known that Saudi Arabia has many more reserves under the ground untapped. They just chose not to develop those reserves for many reasons including security.


78 posted on 03/09/2020 10:55:38 AM PDT by Sam Gamgee
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To: DIRTYSECRET

This could be the death of the oil sands in Alberta.


79 posted on 03/09/2020 10:56:02 AM PDT by Sam Gamgee
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To: Hojczyk

Talk about poking the bear...we may soon find our what kind of new black technology Russia has in operation. I can’t imagine there won’t be some type of sudden and permanent disappearance/death of an important Saudi official.


80 posted on 03/09/2020 10:56:19 AM PDT by Sgt_Schultze (When your business model depends on slave labor, you're always going to need more slaves)
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