Fuel Prices.

[abraham]

Because Canadian oil is so environmentally friendly....

[Tippster]

Low gas price made it more sensible for me to go to the Thule warehouse today to pick up a new rack rather than having it shipped to me. ~$10 worth of gas and two hours of my life rather than $40 for UPS. Win?

Your life is only worth $15/hr?

[Tye 1on]

There may be an association between gas prices and fatalities, but it is not causation. A big difference. There is a third variable/s going on. People drive more and drive faster. Those combined naturally increase the chances of fatalities.

The same type of relationship exists between ice cream and fatal drownings. Should ice cream sales be banned? NO. What actually happens is that when it is hot out people buy more ice cream. When it is hot more people go swimming. When more people go swimming more are going to drown.

um, that's not a great comparison. Eating ice cream doesn't lead to more swimming and drowning. The argument is more driving/speeding does indeed lead to more wrecks and deaths. By a pretty stunning degree....


with your logic lower gas prices leads to cheaper plastics/more kayaks purchased, but doesn't relate to auto fatalities...

[IVplay]

Because Canadian oil is so environmentally friendly....

Not my point at all?

[Plainview]

... I am fine with it hurting large american oil. ...

Rock on Saudi's!!

Not my point at all?

so you're fine with it hurting large Canadian oil too, and for the same reasons?

[LightRanger]

Yup. Shankar Vedantam does some interesting stuff

He definitely does. Been really enjoying his prices. Marketplace is one of my favorite shows (and I'm not a business-type), and he adds quite a bit. Their York and Fig series that's running right now is pretty solid too, but maybe that's my local bias.

The argument is more driving/speeding does indeed lead to more wrecks and deaths. By a pretty stunning degree...

What I thought was interesting was that it wasn't only more driving in terms of miles driven, but also the way people drive (leadfooted) when gas is cheap. AND that the most dangerous age group (16-whatever year-olds, the IVplay dipshits of the world) is the most price-sensitive, which compounds the whole phenomenon.

[Crampedon]

Maui $2.60 at costco, $3.69 or more at gas stations.

[Gcooker]

^^^ Shit, it was 4.50 in November. Good thing I was shit faced for two weeks and drove approximately 13 miles.

[IVplay]

so you're fine with it hurting large Canadian oil too, and for the same reasons?

Absolutely fine, to the extent of their damage done. I, unlike some of my American counterparts, feel no adulation for big oil. They have done a disservice to humans over the long-term by promoting and inserting their dirty energy into our culture. But primarily, for their destruction of alternatives rather than face the price of competition- which benefits the consumer-, such as the electric car; and for the lack of reparation from them following that. Since as far as I know Canadian big oil played a lesser extent in that catastrophe, I am more likely to feel empathy for them, and not support the Saudis.

[The AD]

Maui $2.60 at costco, $3.69 or more at gas stations.

Why would anyone NOT be a Costco member with that kind of price differential on gas? Christ, you're saving $15 a fill up! The basic Costco membership is $55 a year. But I guess on Maui there's exactly one Costco.

[EaglesPDX]

I've thought about it all day and have come full circle and I am fine with it hurting large american oil. Considering the enviromental atrocities they have commited and continue to commit, as well as their focused degradation of the renewable energy industry (death of electric car great movie) it's about time they got their due. "

Saudi's oil war is going to kill the American electric car, the Tesla, and kill most positive environmental industries. A bombing run by the Saudi's that matches US bombing of the Ruhr and Saar valleys to take out Germany's industry.

Saudi's are out to kill US fracking industry but the solar energy industry, wind energy industry, electric car mfgs, efficient US made gas cars, HVAC, appliance, any US industry that wants to compete worldwide with energy efficient products. All will be strafed and bombed equally by the Saudi's war on fracking. Oil companies will not be hurt at all but the energy efficiency industries will set back 10 years.

Saudi's want to prevent US from becoming independent of Middle East oil by oil production of our own and energy efficiency and they've gone to war.

[Bromontana]

Saudi's oil war is going to kill the American electric car, the Tesla, and kill most positive environmental industries.

Not likely. Common overreaction though.

A bombing run by the Saudi's that matches US bombing of the Ruhr and Saar valleys to take out Germany's industry.

Saudi's are out to kill US fracking industry but the solar energy industry, wind energy industry, electric car mfgs, efficient US made gas cars, HVAC, appliance, any US industry that wants to compete worldwide with energy efficient products. All will be strafed and bombed equally by the Saudi's war on fracking. Oil companies will not be hurt at all but the energy efficiency industries will set back 10 years.

Ok.. The Saudis want to keep market share, like every other country that relies heavily on oil revenue. Speculators have driven the price down, not Saudi Arabia. Market efficiency is an absentee dad at times, this is one of them.

Oil companies will be hurt by this. Many are cutting investment in future production to a degree that will sharply impact production. Some highly leveraged oil firms will go under or be acquired. Equity investors will be hurt even more so than today. Bond holders, empoloyees as well. Oil development jobs have accounted for the vast majority of the 09-15 recovery, their departure will sting the oil industry and the economy as a whole.

Alternative energy companies are part of a healthy, long term trend in Western Europe & the US towards renewables and away from fossil fuels. That trend won't change quickly and if the oil plunge is short lived the trend will likely continue. Meanwhile, the shale fockers are going to be bankrupt or going through layoffs after divesting everything.

Saudi's want to prevent US from becoming independent of Middle East oil by oil production of our own and energy efficiency and they've gone to war.

No, the Saudis just want to defend their economy by forcing higher cost producers to reduce production during a period of over supply. Remember, the US is increasing production right now while the Saudis stay pat. Who's the 'aggressor' in this situation, the guy who ramped up production by 5 million barrels per day or the one who has remained relatively constant? Heeeeeeeee-omer

[The AD]

When has the price of gas ever stayed low for long? I see no reason to expect it will this time, either.

[GeezerSteve]

Long enough for the Saudis to really fuck up Russia and the Bakken plays?

[gravitylover]

Are we increasing production on purpose or because all of the new fields that have been developed are finally coming online at their actual capacity?

[Bromontana]

Are we increasing production on purpose or because all of the new fields that have been developed are finally coming online at their actual capacity?

Supply chain lag between the pump and spending the money on new production. Production will continue to go up but eventually fade to what's currently an unknown decrease in production. If the non-traditional producers in the US stopped tomorrow the market would flip to a 3 million barrels/day shortage. There's around three months supply of oil worldwide, so that would immediately be tapped. Another thing is that shale wells tend to run out within 12-24 months so the development cycle is much faster than conventional production. So the reduction in supply won't lag for 5 years, which is the best argument for a long term (5yr) period of suppressed prices.

[Cruiser]

$1.89 for rug in Littleton today.

[EaglesPDX]

Speculators have driven the price down, not Saudi Arabia.

Ah the magical "speculators".

A bit simpler and more real world, supply and demand. Saudis are flooding the market with oil, per the OPEC meeting at which they stated they would do so to drive prices down. Saudi's are producing, prices are dropping. Occam's razor vs. the conspiracy theory.

Saudi's are losing money on the deal but it's economic war for survival. Estimates are they have enough cash reserves to keep it up three years, more than enough to time to kill off expensive US fracking and marginal older wells which were producing and moving US to energy self sufficiency.

Question is will Russia and Iran allow them to do it since they are hurt the most. US is ambivalent. Oil companies will make money high or low, US defense contractors will make money if US has to keep forces in Middle East to secure the oil as we have done the last 30 years at a cost of $17T in current oil war debt. So US industrial political lobbyists will be more on the side of the Saudi's than on the side of US fracking and energy efficiency industries. Plus it fits better with GOP/TeaParty ideology vs. global warming science so the money and ideology are in synch.

[Bromontana]

Ah the magical "speculators".

A bit simpler and more real world, supply and demand. Saudis are flooding the market with oil, per the OPEC meeting at which they stated they would do so to drive prices down. Occam's razor vs. the conspiracy theory.

Please explain this position in light of the market data shown below. They don't seem to be in alignment.

[ArmadaBC]

Long enough for the Saudis to really fuck up Russia and the Bakken plays?

That's the million dollar question isn't it......don't think so. Some Bakken players have announced reductions in capital expenditures which won't effect production in the short term but in say two or three years. There break even is assumed to be anywhere from 65 to 90 depending on the specific geography of the play, will they actually realize these reductions it's hard to say.

So long story short after the big market crash, there were a lack of investment vehicles, frackers were the new hotness and needed cash. Investors were happy to provide it and thus many years later most of the frackers are very highly leveraged out. If you remember a little while back NG prices had dropped to crazy low levels and part of the problem there was to a large extent the PA shale players have to continue producing which is a problem if you don't have the buyers. Now oil is infinitely more easy to move around than NG but the concept is the same. Lower prices will put lots of pressure on very highly leveraged firms and some may drop out.

That's pretty speculative but here's what we know is happening, domestic US production has increased pretty dramatically, US use of refined products and oil in general has fallen, Euro use has fallen, OPEC did not cut levels at the last meeting and I think this is the part some people miss, long term investors are not all that confident in the direction the global economy is going. 10 year T-notes this week hit sub 2%, people are dying to essentially have us take their money and give it back to them in 10 years having made essentially nothing. The last part is what fuels alot of the speculators and at least in oil they almost always overshoot their targets on both ends and speculators are a big big part of OG markets.

In 2008 they ran the price up to over $130, that's obviously a problem so they start to go the other way but again overshoot their target and end up around $30. The oil market has alot of inertia, once it starts going in a general direction it can be very difficult to stop and generally they overshoot their target. OPEC with the exception of SA did not want oil this low, what they did want is momentary dip into the 60's. SA wanted to run some of the more heavily levered frackers and see how fast and how many folded. SA has extensive foreign reserves so they can play this game to some extent alot longer than the other members. Venezuela already had a shitty economy that is unbelievably dependent on oil revenue, they in a political sense particularly cannot play this game at all.

My guess is there will be almost no change in US domestic fracking production, investors know that in all likelihood OPEC can't go very long and will be willing to float them until the price comes back around. Additionally NG frackers are alot more susceptible to this in general than the oil guys some of which have extensive pockets. Venezuela will put tremendous pressure on SA and production will be cut at the latest end of year.

There isn't actually all that much excess supply around, OPEC said maybe 300k. There is alot of oil around but not alot of 50$ oil around, eventually OPEC could do nothing and the price would rise due to the fall in capital budgets. Capital expenditure for oil plays is high, outside of EagleFord in TX your not seeing drops in production costs thus while you may have alot out there it isn't 50-60$ barrel oil. So you have cheap oil which heats up the economy and drives consumption up, at the same time the producers are making shit which means they won't invest as much in growing capacity, obviously then in year 2 the market is alot more inelastic and prices rise without anyone doing shit. The question, the real question is were the global economy will be in 10 years and nobody knows that.

CAPEX was supposed to be 700b globally but now it's supposedly 550b........interesting because if realized three years from now your talking 150$

[BCMtnHound]

Why would anyone NOT be a Costco member with that kind of price differential on gas? Christ, you're saving $15 a fill up! The basic Costco membership is $55 a year. But I guess on Maui there's exactly one Costco.

When we arrived, we did the Costco shop for the condo. We thought, heh, cheap gas so cruised over to the gas bar. Wait time was +30min to get to a pump, everyone idling their car/SUV/PU. We decided the $3.70 at the other station wasn't so terrible.

[Bromontana]

“Oil prices will stay under pressure in 2015,” he wrote. “However, current prices are not sustainable in the longer term. The interplay between extreme weakness in the short term and the potential for supply shortfalls in the medium term should create attractive trading opportunities over the course of the coming 12 months.”

Saudi Arabia and its allies are seeking to drive high-cost producers from the market, Hall said in his letter. While many have assumed this is U.S. shale drillers, the majority can operate at lower prices, he wrote. The most vulnerable operate in Canada’s oil sands and deep-water production, said Hall.

Cuts in spending this year will set the stage for an eventual supply shortfall, said Hall, who has long held that oil will become more expensive. Once prices begin a sustained increase, companies won’t be able to count on as much new crude from projects. The low prices also increase the risk of geopolitical instability, another factor that could boost oil if a major producer is unable to make exports, Hall said.

Strategists at Goldman Sachs group Inc. that advise the bank’s wealthy individual clients said yesterday that U.S. producers have “aggressively” cut back, which will lead to rising prices.

“U.S. producers have started to respond, and quite aggressively,” Brett Nelson, head of tactical asset allocation in Goldman Sachs Private Wealth Management’s Investment Strategy Group, said yesterday at a presentation in New York. “This in combination with general stabilization in growth in the broader global context will allow oil prices to settle into a $60 to $80 range in the second half of the year.”

http://www.bloomberg.com/news/2015-0...ce-floor-.html

[EaglesPDX]

Please explain this position in light of the market data shown below. They don't seem to be in alignment.

They align perfectly. US oil production from expensive new fracking methods started because oil was at $100 a barrel. The fracking sent US oil production ballistic. US would soon be oil independent and not inclined to care what happens in Saudi Arabia. At $50 a barrel, the fracking doesn't pay so Saudis are driving the price down to close down the fracking wells, keep US dependent so US provides a military shield for the Saudis.

This isn't a mystery, Saudis said they were going to do exactly this at the last OPEC meeting.

It's really hurting Iran and Russia and that should be a little disconcerting to Saudi's. The fracking business has been big economic boost so there are strong economic interests in the US in red states that feel the Saudi's are waging war on them so less likely to bug GOP Congress to save the Saudis. So Iran backed by Russia surgically takes out Saudi oil port facilities and the price zips back to $100 (more likely $200) and happy days are here again. Russia, Putin and Russian military are dependent on the oil revenue and based on Russian willingness to use military in the Ukraine, easy to see Russians taking out the Saudi oil ports, or more likely tell the Saudi's that is the consequence if they don't put oil back to $100.

[Bromontana]

Your continued "Saudis flooding the market" "Saudis driving down the price" argument kind of falls apart when you realize that Saudi production has been stable while US production has been parabolic, going up 5 (five) million barrels per day. That's ~6% of worldwide demand generated in a short 3 years time. Maybe the fracking industry should work together as an organized production region. Doing so could have prevented this decline. It's a boom bust cycle that the Saudis refuse to subsidize with market share.

[Bromontana]

$1.78 at Costco in Murray