Fuel Prices.

[muted]

I don't get it. US Shale projects will stay profitable if the price is $42-80/barrel. (Only 4% will be affected if it's $80.) And most will still operate anyways, and just wait it out (can't they hold on to it until prices rise?). So unless everyone thinks it will drop wayyyyy wayyyyyy down, right now the countries being affected drastically is Russia, Iran and all OPEC countries except two, and soon to be just one.

So why is the story about smaller American plays? Why would OPEC screw themselves over some small-time US rednecks?

[LightRanger]

My understanding is that a lot of them (smaller US players) will go belly up if prices stay around $60 for a decent length of time. Believe I had a petro economist interviewed on NPR about it, and that's where I got the notion.

Any links to the contrary?

[Tuckerman]

So why is the story about smaller American plays? Why would OPEC screw themselves over some small-time US rednecks?

I guess 15% is not small time?

In its latest weekly report, EIA said the country imported around 7.4 million barrels of oil for the week ending Oct. 10, down 7.4 percent from the same week in 2013.

In his latest economic address to the nation, President Barack Obama said the country is producing more than it imports for the first time in nearly two decades. He set a goal in 2012 to cut imports by half by 2020, but expects to meet that goal six years ahead of schedule.

An increase in U.S. oil production from shale has led to a corresponding decrease in imports of oil sourced from foreign countries.

Canada is the No. 1 oil exporter to the United States. Exports from Canada are down 9 percent for the first seven months of 2014 compared with 2012.



Read more: http://www.upi.com/Business_News/Ene...#ixzz3LQS1jTfQ

Hmm looks like hydraulic fracturing is working pretty well.

[muted]

My understanding is that a lot of them (smaller US players) will go belly up if prices stay around $60 for a decent length of time.

I gathered that, but so what? The other countries are not meeting their yearly budgets because of this and possibly going into a recession. All this for some small time players in the US?

[muted]

I guess 15% is not small time?

15% of what? Shale US production? Overall US production? Worldwide production? I don't think it's going to be a big deal here compared to what damage OPEC is doing worldwide, not even close. or what am I missing?

[Adolf Allerbush]

I gathered that, but so what? The other countries are not meeting their yearly budgets because of this and possibly going into a recession. All this for some small time players in the US?

What would constitute a "decent length of time"? Seems like it would need to be in excess of 4 years to really destroy the NG companies in the US...well at least those of any size.

more importantly, in this thought experiment, why does OPEC only care about the US market? Seems like the countries that will always need to import oil and gas (e.g., China, India, Japan, EU, etc.) are still going to need to regardless of US fracking. On top of that US can't export NG fast enough to really have an effect yet IMO. There just isn't enough capacity for NG exporting...there are a lot of companies trying to change that by building or expanding existing export terminals, but those projects are years out at best before fully operational...so the low prices would need to be sustained literally for years before the US NG companies go belly up.

[LightRanger]

My understanding is that the Saudis are worried about losing market share to the NA producers and others. In one of the past volatility periods (can't remember which, sorry), they apparently cut back on production to shore up prices and really just ended up losing market share. Here's some reading material I just googled: On the Economics of Saudi moves A bit more here On the anti-Iran angle

Big picture: OPEC has lost a LOT of its power due to NA shale oil and other plays. Going to be interesting to see how it plays out.

[Adolf Allerbush]

I guess 15% is not small time?



Hmm looks like hydraulic fracturing is working pretty well.

The only way this turns out well for the US is if we ultimately transition away from fossil fuel energy production.

[Tuckerman]

15% of what? Shale US production? Overall US production? Worldwide production? I don't think it's going to be a big deal here compared to what damage OPEC is doing worldwide, not even close. or what am I missing?

Crude oil imports to the us.

[LightRanger]

What would constitute a "decent length of time"? Seems like it would need to be in excess of 4 years to really destroy the NG companies in the US...well at least those of any size.

more importantly, in this thought experiment, why does OPEC only care about the US market? Seems like the countries that will always need to import oil and gas (e.g., China, India, Japan, EU, etc.) are still going to need to regardless of US fracking. On top of that US can't export NG fast enough to really have an effect yet IMO. There just isn't enough capacity for NG exporting...there are a lot of companies trying to change that by building or expanding existing export terminals, but those projects are years out at best before fully operational...so the low prices would need to be sustained literally for years before the US NG companies go belly up.

Who was talking about NG? They're fracking for crude in the Bakken and Eagle Ford too...

[Adolf Allerbush]

Who was talking about NG? They're fracking for crude in the Bakken and Eagle Ford too...

I'm talking about NG because oil and NG are intertwined: http://www.cnbc.com/id/102249889#

[MontuckyFried]

I'm honestly a bit surprised that neither Russia or Iran have tried to have this little problem "taken care of." They both have their ways. They could easily get prices to go back up with a few strategic "incidents."

[Bromontana]

$2.44/gal @ costco in SLC last night.

So permits for US fracking related oil extraction are down around half for 2015, but actual production is estimated to be around 9mm bbl/day coming from US. That's about where production has been recently, so it's more a levelling off and then gradual reduction over the next few years - unless prices go up and new permits starts up again.

Seems like a bit of a yawner, maybe a weaker OPEC nation or three defaults.

[detrusor]

Hey bromont, where did you fill up?


Killing it with the 3-5 year old crowd!

[LightRanger]

I'm talking about NG because oil and NG are intertwined: http://www.cnbc.com/id/102249889#

Sure. But crude exports and NG exports raise totally different issues. As do their refining and their transportation. Rendering their economics somewhat related, but still quite distinct.

[creaky fossil]

gosh, once again Wendell trying to out-do everyone on the internet, and doing it smugly.

what a refreshing change

you need a new PR person, Wendell

[alfajores]

$2.89 at the value gas places in Oakland, $3.09 in the city of Oakland downtown, and $4.09 at the most expensive place I saw in SF.

[gravitylover]

Saw $3.09 for 93/premium in Danbury CT this afternoon.

Yup I'm one of those geniuses looking for a gas guzzler Not gonna spend too much so it won't hurt to dump it when I'm done with it but I have small and mid size so want something stupid for a change. It's been a long time since I had a wasteful rig and I'm 'murican deep inside so I'm feeling the need to prove it

Seems to me that some of the domestic producers are already scaling back ops for 2015 and conserving cash. Good play methinks. The infrastructure is in place to bump it up when the price stabilizes or goes back up so that's good right? I don't think they will cut back production much if at all because cash flow is still gonna be important so refiners and pipeline operators should be solid. It's exploratory and drillers that will slow down for a bit because they don't need to keep raising production in a slumping market. Might even be a good time to buy into the retail gas side of things while gas is cheap and their sales should be strong/rising for a while.

[Bromontana]

Hey bromont, where did you fill up?

Costco (by the hospital 5300 S)

[LightRanger]

gosh, once again Wendell trying to out-do everyone on the internet, and doing it smugly.

what a refreshing change

you need a new PR person, Wendell

I fail to see the smugness. Or trying to out-do everyone. Just discussing things. I'm not a petro-economist, nor am I trying to play one on the internet. Just relating what my understanding is and what I can read.

But carry on with the shit-slinging interjections while not contributing to the underlying discussion.

Edit: Incidentally, the Holmes comparison is flattering. I wish I had half the intelligence of that dude.

[Adolf Allerbush]

I fail to see the smugness. Or trying to out-do everyone. Just discussing things. I'm not a petro-economist, nor am I trying to play one on the internet. Just relating what my understanding is and what I can read.

But carry on with the shit-slinging interjections while not contributing to the underlying discussion.

Edit: Incidentally, the Holmes comparison is flattering. I wish I had have the intelligence of that dude.

There's some thinking that as oil increases in price and as CAFE standards become more stringent that the availability of vehicles that run on CNG/LNG/NG will increase. Beyond that, many power plants are being built or retrofitted to run on fuel oil or NG, so I think the inclusion of NG in this discussion isn't completely off base. With the glut of NG in the US it might be nice to have a choice in the matter at the pump...I think Cali is pushing for more CNG vehicles to curtail air emissions.

anyhow, point is, if the Saudis decide to maintain relatively high output to lower the price of oil, the appeal of NG in general will be effected be it for power plants or vehicles or maybe even heating one's home. although I'm not aware of many people going the heating oil route these days.

[LightRanger]

There's some thinking that as oil increases in price and as CAFE standards become more stringent that the availability of vehicles that run on CNG/LNG/NG will increase. Beyond that, many power plants are being built or retrofitted to run on fuel oil or NG, so I think the inclusion of NG in this discussion isn't completely off base. With the glut of NG in the US it might be nice to have a choice in the matter at the pump...I think Cali is pushing for more CNG vehicles to curtail air emissions.

anyhow, point is, if the Saudis decide to maintain relatively high output to lower the price of oil, the appeal of NG in general will be effected be it for power plants or vehicles or maybe even heating one's home. although I'm not aware of many people going the heating oil route these days.

I gotcha. That makes sense. Things that I'd read about but didn't think of in this context--particularly because the timescales seem to be different. (E.g. NG terminals are mostly still being approved/built, whereas we can export crude now.)

It's also not as elastic as focusing on crude on its own, so hard to quantify. (I mean, of course crude it's perfectly elastic either, but it's easier to quantify.)

Latter point makes certainly makes sense in the vehicle context. Wasn't aware of the impact on PPs because I understood that oil-fired PPs had a very small share of domestic PP output.

[gravitylover]

Maybe not new heating oil installs but where I live it's that or electric. There are NG pipes running across my hill but that's all it does, run past us. No NG service within two miles

[Adolf Allerbush]

Latter point makes certainly makes sense in the vehicle context. Wasn't aware of the impact on PPs because I understood that oil-fired PPs had a very small share of domestic PP output.

For sure, oil fired PPs are a very small fraction of the domestic electricity supply. I guess for me personally we do a lot of work for US island territories and Hawaii, where oil fired PPs are pretty much the way they go. Puerto Rico is talking about installing a big NG import terminal, same with Hawaii, Guam, and then there is talk of similar efforts in the Caribbean and elsewhere. Like you say, several years out, so I agree, probably not the right place to talk about this sort of thing. Ooops!

[sb]

$2.15 and 2.10 this week in Va.