The End of the Era of High-Priced Energy?

[Regionnus Rattis]

Very interesting article attached. Is current decline in oil prices just one more occurrence to the historic boom and bust cycles the oil industry has seen ever since Spindletop? Not according to this author. Sorry if this is the wrong area to post but it does have political consequences involved...Happy New Year!!
View attachment MetroDeskEndofYear2014-Weissman.pdf

 

[jwh20]

Much has been made of the recent free-fall of oil prices and even Mr. Obama has taken credit for that. While I'm not complaining it's a short term prospect driven by two main factors:

1) The OPEC nations and in particular the Saudis (who are still able to flood the market) are doing just that in order to drive competitors out of the market. Specifically the US fracking and secondary/tertiary producers who are very price sensitive. At $75 or so they are unable to cover their costs and will eventually stop producing. Guess what will happen to the price of oil once the competitors are out of the market? It takes time, years actually, for these US-based producers to start back up. In the meantime, the Saudis reap the profits!

2) The overall world economy still sucks! Again Pres. Obama has taken credit for a "recovery" but I call this the "minimum wage" recovery. It's not a real recovery the way the Reagan recovery was in the early 80's. (Yes, I am old enough to have lived and worked in that.) Obama's recovery is very shallow and will crumble at the slightest turbulence. Reagan's recovery lasted, IMHO, until 2008 when the years of Clinton's neglect of sound economics finally brought the house down. But what's going on in China? A major recession, perhaps even depression. What about Japan? Continuing in their stagnation. What about Europe? Slow to no growth. The "Obama Recovery" is the recovery that really isn't. Once there is a real recovery look out, as oil demand goes up again the price will also.

Bottom line for me is that while I appreciate sub-$2.00 gas, the reasons for it are all bad!

 

[Leadeye]

Soon we will move into the era of High Taxed energy. Americans are being greased up for this.

 

[BigBoxaJunk]

We're using something of finite supply at a logarithmically increasing rate. Our entire culture is dependent on it.

I'm sure nothing can possibly go wrong

 

[mrortega]

Supply and demand will set the price. At lower prices it gets too expensive to produce for the small guy as stated above. As some of them drop out the prices will rise because supply will fall. Once the prices get higher the little guys can explore, drill and bring to market again. And those who have simply turned the pumps off will flip them on again when the prices come up. Who wants to pull oil out of an existing well when the market is just bringing $50/barrel? Let is sit a month then pump the same oil out at $75/barrel.

Obama is responsible for the fall in energy prices that same way he's responsible for increased gun and ammunition sales.

 

[ModernGunner]

I hate the 'finite supply' argument. Those who 'argue' that point forget that creation of oil is a constant, though I doubt anyone is actually calculating what that rate is. Raw oil is being created right now, as this forum is operating. Just the same way as it has been for millions or billions of years on this planet. So, while some is being used, more is being created. And it's HIGHLY doubtful that the largest oil deposits have even yet been discovered.

The article also mentions that refiners won't likely be making investments in upgrading and / or building new refineries. Absolutely false, as I just watched and participated in a $15 billion upgrade of a refinery, and more is still ahead. Well more. Refiners are moving forward with these plans, despite such silly 'speculation' by those who simply like to 'speculate' on the basis of... nothing. THIS 'negative speculation' probably does more harm than good, as 'fear-mongering' typically produces nothing of positive value.

How 'bout we try a different approach, and 'panic' when there's actually something to 'panic' about? Instead of speculating on fear for the next 5 years, maybe we should look and see what's already in the works for the next 1 or decades?
Where did this idea come from that these are 'last minute decisions'? NWO conspiracy types?

 

[jwh20]

Soon we will move into the era of High Taxed energy. Americans are being greased up for this.

When did they start using grease? That would be appreciated.

 

[2ADMNLOVER]

Much has been made of the recent free-fall of oil prices and even Mr. Obama has taken credit for that. While I'm not complaining it's a short term prospect driven by two main factors:

1) The OPEC nations and in particular the Saudis (who are still able to flood the market) are doing just that in order to drive competitors out of the market. Specifically the US fracking and secondary/tertiary producers who are very price sensitive. At $75 or so they are unable to cover their costs and will eventually stop producing. Guess what will happen to the price of oil once the competitors are out of the market? It takes time, years actually, for these US-based producers to start back up. In the meantime, the Saudis reap the profits!

2) The overall world economy still sucks! Again Pres. Obama has taken credit for a "recovery" but I call this the "minimum wage" recovery. It's not a real recovery the way the Reagan recovery was in the early 80's. (Yes, I am old enough to have lived and worked in that.) Obama's recovery is very shallow and will crumble at the slightest turbulence. Reagan's recovery lasted, IMHO, until 2008 when the years of Clinton's neglect of sound economics finally brought the house down. But what's going on in China? A major recession, perhaps even depression. What about Japan? Continuing in their stagnation. What about Europe? Slow to no growth. The "Obama Recovery" is the recovery that really isn't. Once there is a real recovery look out, as oil demand goes up again the price will also.

Bottom line for me is that while I appreciate sub-$2.00 gas, the reasons for it are all bad!

So where does flooding the market with cheap petroleum products in order to put the screws to Putin come in ?

 

[Ericpwp]

Right, it has been done before. Oil like diamonds are price controled by a cartel. Businesses and countries will feel the pain.

IMO this is a win for BO. He looks like he is doing something to Putin. But the real feather in his cap is the assault on the GOP campaign donations from the businesses out west that can't afford to run.

 

[Kutnupe14]

I hate the 'finite supply' argument. Those who 'argue' that point forget that creation of oil is a constant, though I doubt anyone is actually calculating what that rate is. Raw oil is being created right now, as this forum is operating. Just the same way as it has been for millions or billions of years on this planet. So, while some is being used, more is being created. And it's HIGHLY doubtful that the largest oil deposits have even yet been discovered.

The article also mentions that refiners won't likely be making investments in upgrading and / or building new refineries. Absolutely false, as I just watched and participated in a $15 billion upgrade of a refinery, and more is still ahead. Well more. Refiners are moving forward with these plans, despite such silly 'speculation' by those who simply like to 'speculate' on the basis of... nothing. THIS 'negative speculation' probably does more harm than good, as 'fear-mongering' typically produces nothing of positive value.

How 'bout we try a different approach, and 'panic' when there's actually something to 'panic' about? Instead of speculating on fear for the next 5 years, maybe we should look and see what's already in the works for the next 1 or decades?
Where did this idea come from that these are 'last minute decisions'? NWO conspiracy types?

The problem with this is consumption. We have consumed VAST amounts of oil in a relatively, in terms of fast it can be replaced, short time. At the rate we consume it, it most certainly is finite. Not as "finite" as being a major problem, as it is still relatively cheap, but limited none the less.

 

[CathyInBlue]

We actually have no idea how many metric butt-tons of decayed living matter there are buried deep within the Earth, nor of how deeply. There was a well in the gulf that was following its predicted production curve for decades (ever downward), and was slated to be capped off and the rig relocated to more productive fields when it suddenly and inexplicably started up an increasing production curve and has been producing steadily every since, and petrogeologists have no concrete idea why. It isn't siphonning off oil from adjacent fields. It can only be coming from deeper than the well is actually drilled to, i.e., more oil coming up from below the field it had supposedly sucked dry. It's entirely possible there are geochemical processes taking place deep in the crust that are producing crude oil out of feed stock other than dead dinos.

 

[seedubs1]

So.....Any of you buying ETF's (or other commodity fund types) in oil or oil products? Price seems low right now. Buy low and sell high and all...

I threw some fun money into UGA and USO. Will be interesting to see when/if it bounces back.

 

[Ericpwp]

If this is an economic war, the damage is not great enough yet.

 

[BIGKAT9]

This is an economic war ,Russia depends on 39 %of its exports on oil ,Irans economy is based on oil at 140 dollars a barrel Venezuelas economy depends on oil for 80 %of export revenue..Saudi Arabia oil only cost 5 to 6 dollars a barrel to produce so by flooding the market they get to punish Iran an also Russia who were yielding more power in the middle east an it also slows down competition in the US who need 70 dollars a barrel to be profitable .My guess is the US an Saudis are hoping for regime change in Russia,Iran an Venezuela

 

[zippy23]

energy might be down, for the moment. But dont worry, gov't will wreck that and the prices will be sky high again. Low prices are bad for gov't business.

 

[hoosierdoc]

Where are all the horror stories of the oil producing companies going bankrupt because their price just dropped 60%?

why do we have to bail out banks and not oil companies? I guarantee oil companies are bigger and are harder to replace...

 

[Ericpwp]

1 or 2 have so far that I have seen. Big oil will survive, its the smaller start-ups of the boom that will be hurting.

 

[CathyInBlue]

Nebraska court tosses suit over Keystone route, in victory for pipeline supporters | Fox News

Just to get my conspiracy theory on, what if the Saudis agreed with Obama to flood the market with cheap oil, provided he can prevent the Keystone XL pipeline from being built? Right now, it looks like there are the votes in the Republican Congress to get the project approved, Obama will veto it, and the Congressional Democrats will obstruct an attempt to override, but what if the Dems come up short and the veto is overridden and the pipeline starts construction in earnest? If that should happen, I'd watch the Saudis like a hawk.

 

[olhorseman]

If the XL gets built and sand and shale oil companies stop producing because of low oil prices, someone will step in and convert the pipeline to the world's longest water slide.

 

[miguel]

If the XL gets built and sand and shale oil companies stop producing because of low oil prices, someone will step in and convert the pipeline to the world's longest water slide.

Canadians can pump water to the SW or Mexico using it.