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5 Reasons Oil Prices Are Dropping

Tyler Durden's picture




 

Submitted by Chris Pedersen via OilPrice.com,

As oil prices continue to fall, analysts and producers are trying to wrap their heads around the reasons and identify a floor price. Even though crude benchmarks like Brent and WTI keep dropping, the cost of finding oil continues to rise. What are some of the key drivers that have created this paradox?

1. The U.S. Oil Boom
America’s oil boom is well documented. Shale oil production has grown by roughly 4 million barrels per day (mbpd) since 2008. Imports from OPEC have been cut in half and for the first time in 30 years, the U.S. has stopped importing crude from Nigeria.

2. Libya is Back
Because of internal strife, analysts have until recently assumed that Libya’s output would hover around 150,000-250,000 thousand barrels per day. It turns out that Libya has sorted out their disruptions much quicker than anticipated, producing 810,000 barrels per day in September. Libyan officials told the Wall Street Journal last week that they expect to produce a million barrels per day by the end of the month and 1.2 million barrels a day by early next year.

3. OPEC Infighting
There have been numerous reports about the discord between OPEC members, leading many to believe that OPEC will not be able to reign in production like it has done so in the past. The Saudis and Kuwaitis have reportedly been in an oil price war, repeatedly lowering their prices in order to maintain their market share in Asia. John Kingston, the news director at Platts, believes that the Saudis will not be willing to give up market share like they have done during previous price drops.

4. Negative European Economic Outlook
European Central Bank president Mario Draghi has left investors concerned about the continent’s slow growth. Germany’s exports were down 5.8 percent in August, stoking the fears of anxious investors that the EU’s largest economy had double dipped into recession last quarter. Across the Eurozone, the IMF again lowered its growth forecast to 0.8 percent in 2014 and 1.3 percent in 2015.

5. Tepid Asian Demand
Beyond slow economic growth and currency depreciation, a number of Asian countries have begun cutting energy subsidies, resulting in higher fuel costs despite a drop in global oil prices. In 2012, Asia’s top spenders on energy subsidies, as a percentage of GDP included: Indonesia 3 percent; Thailand 2.6 percent; Vietnam 2.5 percent, Malaysia 2.3 percent, and India 2.3 percent. India is a primary example. Between 2008-2012, India’s diesel demand grew between 6 percent and 11 percent annually. In January 2013, the country started cutting the subsidies of diesel. Since then, diesel consumption has plateaued.

 

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Tue, 10/14/2014 - 10:19 | 5328459 1000yrdstare
1000yrdstare's picture

#6 Hurt Putin?

Tue, 10/14/2014 - 10:26 | 5328483 American Dreams
American Dreams's picture

#1 should have been, "part of the strategy to crash the Russian Economy" won't work of course but it sure is fun re-using old strategies.  LMAO

Crap articles like this are why the new ZH is on its last legs of legitimacy.

Know your enemy

AD

Tue, 10/14/2014 - 10:32 | 5328513 quasimodo
quasimodo's picture

Crap posters such as yourself are one of the primary reasons I wish ZH had an ignore feature.

Tue, 10/14/2014 - 10:39 | 5328548 American Dreams
American Dreams's picture

Alright Quasi, you and I have been around for about the same amount of time.  Tell me, would we have seen this low level crap just a couple years ago?  Seems to me this belongs on Market Watch or some other surface level site, not ZH.  Show me the value in this PLEASE.  And if you need to ignore, then don't read.  At least you took the time to type something rather than just clicking the down arrow. 

AD

 

Tue, 10/14/2014 - 11:06 | 5328689 BKbroiler
BKbroiler's picture

This was an entirely different place a few years ago.   I think the stories reflect the commenters instead of the other way around.  Gotta pay bills I guess.  Still beats most other sites.

Tue, 10/14/2014 - 11:20 | 5328747 Save_America1st
Save_America1st's picture

could another reason be that Al CIA-da/I-CIA-SIS has taken over a bunch of oil in Iraq and have been selling it for 60% under the market prices lately?  Not sure what the daily number of barrels are or if it's a enough of a significant amount to skew the market prices, but if certain countries are buying black market oil at 60% under normal costs you'd think that would leave a mark. 

Tue, 10/14/2014 - 11:27 | 5328774 duo
duo's picture

How about this:  cheap oil hurts sales of electric cars, slows investment in mass transportation and fuel efficiency, and generally stops the progress the US was making on energy efficiency.  Then a few years from now oil doubles or triples in price.

Chess instead of checkers.

Tue, 10/14/2014 - 11:36 | 5328820 eclectic syncretist
eclectic syncretist's picture

Maybe it's because scientific advancements could make oil obsolete.

http://www.extremetech.com/extreme/191754-cold-fusion-reactor-verified-b...

Tue, 10/14/2014 - 11:54 | 5328906 Bunghole
Bunghole's picture

Reasons #1 through 5 are Hurt Putin/Russia/BRICS and preserve the PetroDollar.

This OilPrice.com blog is a joke.  This sounds like the usual drivel from the FED.

 

Tue, 10/14/2014 - 12:56 | 5329175 sylviasays
sylviasays's picture

"How about this:  cheap oil hurts sales of electric cars, slows investment in mass transportation and fuel efficiency, and generally stops the progress the US was making on energy efficiency." 

Electric vehicles are seen by leftist governments as an important part of cutting emissions and reducing global warming. Some scientists are questioning their green credentials and their concerns are focused on two areas: (1)  How electic vehicles and their batteries are manufactured, and (2) how the electricity which powers them is generated. One recent study by scientists in EV-friendly Norway has found that in some circumstances electric cars can have a greater impact on global warming than conventional cars:

http://www.bbc.com/news/magazine-22001356

 

Tue, 10/14/2014 - 11:21 | 5328756 geno-econ
geno-econ's picture

Pheonix Capital still hawking on ZH.  Where is Reggie explaining financial meltdown ?

Tue, 10/14/2014 - 11:37 | 5328826 eclectic syncretist
eclectic syncretist's picture

My bet is rehab.

Tue, 10/14/2014 - 11:25 | 5328769 Bananamerican
Bananamerican's picture

i assumed stories like this were a result of the sheer output required to keep ZH "sticky"...

Maybe its just the inevitable "Saturday Night Live-ification" of ZH...("top 47 reasons why______" meh.)

but the Markit Lull™ seems to be ending & posts are getting more interesting again (present post excluded...of course the author left out one of the MAIN geo-political "reasons"...more frickin realpolitik hanky panky)

its been a long time since the "Tally Ho" days of '09

Tue, 10/14/2014 - 13:12 | 5329247 It's fine
It's fine's picture

BK, have you seen USA Watchdog? There you can find great interviews and even better comments.

Tue, 10/14/2014 - 13:41 | 5329393 Analog Kid
Analog Kid's picture

I believe this place was certainly different a few years ago. The collective IQ of the newer posters has gone down.

I find myself looking for the voices I trust (I don't post much because I don't have anything to say that moves the dialogue forward). The rest is static.

But DANG the charts have gotten cooler! I don't understand them at all but they are much cooler!

Tue, 10/14/2014 - 10:36 | 5328527 rwe2late
rwe2late's picture

American Dreams

Can you comprehend the possibility that some mainstream articles, Obama speeches, IMF analyses, etc.

are published at ZH for criticism and further analysis in the COMMENTS section,

and not because "ZH" has endorsed their statements?

The comments section at ZH is often superior to the articles published.

Tue, 10/14/2014 - 10:51 | 5328560 American Dreams
American Dreams's picture

Yes I can, but this does not seem to be one of those. Maybe I'm to quick to jump on the post for what it is rather than for its purpose.  But maybe not - agreed thogh onthe comments section, it really is the life blood around here and the main reason to keep coming back. 

AD

Tue, 10/14/2014 - 11:36 | 5328829 agent default
agent default's picture

ZH articles used to be insightful.  Criticizing the current state of affairs in in the economy and Obama's policy is something a ten year old can do.  ZH is becoming a rag, the investigative and insightful part are gone.

Tue, 10/14/2014 - 12:32 | 5329063 MillionDollarBogus_
MillionDollarBogus_'s picture

ZH seems to be morphing into a Drudge Report shock headline web site...

If it lines the pockets of the owners, so be it...

 

 

 

Tue, 10/14/2014 - 12:43 | 5329121 williambanzai7
williambanzai7's picture

"Noli equi dentes inspicere donati"

Tue, 10/14/2014 - 13:33 | 5329339 oklaboy
oklaboy's picture

vbox populi?

Tue, 10/14/2014 - 11:27 | 5328778 XAU XAG
XAU XAG's picture

PPT told to pull out of the oil market.

 

Deflation.

 

Low demand.

 

Longs have folded

 

 

Tue, 10/14/2014 - 15:46 | 5330285 mendolover
mendolover's picture

Agree with the first sentence.  Not so sure about the second sentence.

Tue, 10/14/2014 - 11:20 | 5328744 sampo
sampo's picture

What if the physical oil users are dropping their positions and strategies, while realizing there's going to be only an irrelevant dollar price for som crap derivatives next year, functioning markets @ other currencies?

Tue, 10/14/2014 - 12:14 | 5329003 MrBoompi
MrBoompi's picture

Hurt Putin should be at the top of the list, with payback for finally getting directly involved in Syria a close second.  All of the other reasons listed are complete bullshit, as supply and demand don't mean as much to the gasoline prices as this poster seems to think.

Tue, 10/14/2014 - 16:08 | 5330440 myshadow
myshadow's picture

That's 2 or 3

Tue, 10/14/2014 - 10:24 | 5328467 MykeTheVet
MykeTheVet's picture

#7 More access to industrial hemp/biogas?

Tue, 10/14/2014 - 10:35 | 5328526 101 years and c...
101 years and counting's picture

#1 - massively overlevered funds liquidating positions

Tue, 10/14/2014 - 10:56 | 5328641 USisCorrupt
USisCorrupt's picture

#8  People have no more FIAT trash, everyone maxed out.

Tue, 10/14/2014 - 10:22 | 5328470 q99x2
q99x2's picture

Rockefellers going underground for the commencement of the collapse

Tue, 10/14/2014 - 10:23 | 5328471 Dr. Engali
Dr. Engali's picture

Good luck with that shale boom with oil at these levels.

Tue, 10/14/2014 - 10:30 | 5328498 rejected
rejected's picture

Yea, I laughed at that too.

 

Also the Libya is back point really had me rolling on the floor. The place is a complete mess thanks to those freedom loving NATO boys and girls. 

Pretty much mainstream stuff...

Tue, 10/14/2014 - 11:58 | 5328919 TheMerryPrankster
TheMerryPrankster's picture

Welcome to Shale Hell. Breaking rocks to suck out the slender dredges. Akin to slurping out the last drops of a milkshake using a straw pulling more air than fluid.

Desperation becomes normal in the strange new world of controlled media and controlled thinking. All is well, all drones please return to your work stations, all is well. all is well........

Tue, 10/14/2014 - 12:38 | 5329096 rocker
rocker's picture

Shale is no worse than the idiots who dream of building a pipe line to send sand sludge to Texas for refining.

Tue, 10/14/2014 - 19:55 | 5331439 PoliticalRefuge...
PoliticalRefugeefromCalif.'s picture

@Dr.Engali  Saudi oil with it's lower production costs can play this kick out the supports game longer than Alberta or just about anyone else can.

I also think it's all in a back room deal to lower election year angst among other things.

.."may you live in interesting times"..

Tue, 10/14/2014 - 10:23 | 5328472 SelfGov
SelfGov's picture

#1 is bullshit. Yes the US is producing a lot of oil but it produced about as much last year and prices did not fall like they are now.

Demand is being destroyed by recession and the price is falling.

Tue, 10/14/2014 - 10:27 | 5328492 LawsofPhysics
LawsofPhysics's picture

the U.S. is still using close to 20 million barrels per day, and still importing ~60% of that.

 

But I certainly won't complain about cheaper diesel, fucking bring it!

Tue, 10/14/2014 - 19:59 | 5331452 PoliticalRefuge...
PoliticalRefugeefromCalif.'s picture

We now are exporting finished goods that get counted in that total..

..another day, another shell game.

Tue, 10/14/2014 - 11:38 | 5328833 agent default
agent default's picture

This is part of the war on Russia.  Demand is having an impact but Saudi Arabia and the manipulation of the futures market are the dominant factors.

Tue, 10/14/2014 - 10:23 | 5328474 The Phallic Crusader
The Phallic Crusader's picture

 

When states under embargo try to sell gas or oil on the international market, they do not succeed. But the Islamic Emirate does, despite resolutions 1373 (2001) and 2170 (2014) of the Security Council. Publicly notorious, it steals oil in Iraq and Syria, routing it by pipeline to the Turkish port of Ceyhan, from where it is transported to Israel by tankers of the Palmali Shipping & Agency JSC, the Turkish-Azeri company of billionaire Mubariz Gurbano?lu. At the port of Ashkelon, Israeli authorities provide false certificates of origin from Eilat, then they are exported to the European Union, which pretends to believe they’re Israeli.

 

-Behind the anti-terror alibi, the gas war in the Levant by Thierry Meyssan

Tue, 10/14/2014 - 10:32 | 5328511 Miketheterrible
Miketheterrible's picture

Wow! I had no idea. That is why I love this site, information that I cant seem to find for myself (my google fu is no good). Thanks man +1

Tue, 10/14/2014 - 10:44 | 5328573 MykeTheVet
MykeTheVet's picture

Honestly, Phallic: thank you. I would never have found that article if you wouldn't have posted it. 

Tue, 10/14/2014 - 10:50 | 5328610 Ensowatt
Ensowatt's picture

for some reason, the up arrow on this comment isn't working. Thanks for the intersting post on the work around...  UP!

Tue, 10/14/2014 - 11:33 | 5328809 forwardho
forwardho's picture

If a post is started with copied italics it cannot be up or down voted.

Tue, 10/14/2014 - 10:51 | 5328618 Ozy_mandias
Ozy_mandias's picture

Great read. Thanks 

Tue, 10/14/2014 - 12:10 | 5328982 emersonreturn
emersonreturn's picture

thanks, PC...this why i love ZH!

Tue, 10/14/2014 - 10:25 | 5328476 Bell's 2 hearted
Bell's 2 hearted's picture

The International Energy Agency (IEA) trimmed 2014 oil demand growth forecast to its slowest in five years on Tuesday.

In its monthly oil market report, the IEA cut its forecast for the amount of expected oil demand this year by 200,000 barrels per day to only 700,000 barrels per day.

 

http://www.icn.com/en/commodities/2014/10/14/oil-demand-growth-forecast-...

Tue, 10/14/2014 - 14:57 | 5329855 CEE
CEE's picture

incredible chart.. it is not only the state of economy, I think. The price has rather hit sensibility threshold somewhere in past. People changed their habits slowly as a response. a textbook example of delayed price sensitivity.

The questions remains wether it is reversble change. I rather would gueess no. Or it may take a while. Oil producers shot themselvees to their leg.

Tue, 10/14/2014 - 10:26 | 5328477 Spungo
Spungo's picture

" the U.S. has stopped importing crude from Nigeria."

RACIST!

Tue, 10/14/2014 - 10:26 | 5328478 rejected
rejected's picture

" What are some of the key drivers that have created this paradox?"

Maybe same reaon market mostly keeps going up.


Tue, 10/14/2014 - 10:26 | 5328481 LawsofPhysics
LawsofPhysics's picture

#8 - oil being traded in something other than dollars.

Tue, 10/14/2014 - 10:33 | 5328499 CrazyCooter
CrazyCooter's picture

THAT is an interesting thought experiment, but would think that would leave the same pool of dollars chasing a smaller pool of oil supply (i.e. price goes up). Unless, folks went off the dollar trade into the "other" currency trade (i.e. taking dollar demand and oil demand with them), so maybe that pencils out.

I think this is all a precursor to kinetic fighting ... too much shit is going on all a sudden.

Regards,

Cooter

Tue, 10/14/2014 - 12:07 | 5328964 LawsofPhysics
LawsofPhysics's picture

or, those who must buy their oil products in dollars, simply have less dollars...  (like the american middle class, less dollars to spend, less demand, period)

Tue, 10/14/2014 - 10:32 | 5328500 The Phallic Crusader
The Phallic Crusader's picture

This is an excellent point, actually.

 

Tue, 10/14/2014 - 10:41 | 5328549 boattrash
boattrash's picture

#6. Market Manipulation? Naw, couldn't be...everything is priced @ fair market value, as per free trade...

Tue, 10/14/2014 - 10:27 | 5328487 Spastica Rex
Spastica Rex's picture

The current falling oil price gnosticism reminds me so much of 2008.

Bullshit then, bullshit now.

Tue, 10/14/2014 - 11:40 | 5328845 eclectic syncretist
eclectic syncretist's picture

Seems like a last gasp attempt to tighten the thumbscrews on russia for pissing on the dollar.

Tue, 10/14/2014 - 10:27 | 5328491 Bell's 2 hearted
Bell's 2 hearted's picture

DXY ripping

 

above last wednesday when FOMC minutes came out ... and warned of USD strength.

 

King Dollar

Tue, 10/14/2014 - 10:31 | 5328501 quasimodo
quasimodo's picture

This is good news for me. I will soon expect gas to be $2 gallon just like the good old days, then watch the economy do a moon shot!

 

Tue, 10/14/2014 - 10:35 | 5328522 Bell's 2 hearted
Bell's 2 hearted's picture

gas in my hood dropped another 10 cents/gallon yesterday.  $2.89

 

Hasn't been that low in years

 

new (fuel efficient) vehicle sales no likey

 

coupled with subprime auto lending beginning toast

 

got popcorn?

Tue, 10/14/2014 - 10:32 | 5328503 steveharless
steveharless's picture

ELECTIONS are upon us in November.... I can hear it now...OIL PRICES ARE DOWN,,,and the economy is getting better...see,,,the democrats have everything under control..... ahem...bullshit

Tue, 10/14/2014 - 10:34 | 5328518 The Sculptor
The Sculptor's picture

Aww ya beat me steve.

By a whole minute too.

Tue, 10/14/2014 - 12:01 | 5328937 eclectic syncretist
eclectic syncretist's picture

Do you really fucking care about the Dempublicans/Republicrats bullshit?  Really?  Choosing between the lesser of two evils when both are vacuous, vapid, hollow, power obsessed narcissistic sociopaths is a fools game if there ever was one.  At this point I'd happily vote for Ventura for prez.  I'll just cast my "throw the bums out ballot in November, fuck both "parties".  Assholes.  Worse than worthless, they are, as far as I'm concerned.

Tue, 10/14/2014 - 12:51 | 5329154 The Sculptor
The Sculptor's picture

Whether I care or not isn't the issue, they care. It's their gravy train on the line not mine. I just get to keep paying for it.

I know we all talk about the 2 parties being different sides of the same coin but the demoncrats are totally unresponsive to the voter base.

They have the Obozo mandate and could give a fuck what you or I want.

The repugnicants have the tea party at their heels and are all running scared, so if the repugs side of the coin lands up this November, we still have a chance to reach them.

Think about that.

Tue, 10/14/2014 - 10:31 | 5328506 Nex
Nex's picture

Sanctions on russia oil sector
ISIS are every day closer to south Iraq.
Libya is volatile
Lower price cut shale productions
So, why oil price drop so much? What is fundamentally changed in 4 months for nearly $30 drop?-Midterm elections and pressure on Iran and Russia. But, what about if Russia, Iran, Venezuela, Kazakhstan and China create own cartel to manipulate price?

Tue, 10/14/2014 - 10:33 | 5328509 The Sculptor
The Sculptor's picture

There is only one reason: Mid term elections next month.

Tue, 10/14/2014 - 11:50 | 5328894 TalkToLind
TalkToLind's picture

+2.86 (and dropping).  Must reduce fuel prices at the pump so that sheep can get to the polls to vote away MOAR of their rights.

Tue, 10/14/2014 - 10:32 | 5328514 ghostzapper
ghostzapper's picture

#9 Obozo sending Sea Biscuit back to Saudis with tail between legs promising to hammer Syria and Saudis dumping crude into tepid demand market???  Nah, impossible!

Tue, 10/14/2014 - 10:34 | 5328519 jose.six.pack
jose.six.pack's picture

this article is shit

Tue, 10/14/2014 - 10:35 | 5328528 madcows
madcows's picture

what, no Ebola?

Tue, 10/14/2014 - 10:36 | 5328529 geekz_rule
geekz_rule's picture

this d00d is comical...

he actually imagines there is market forces involved? o really?

Tue, 10/14/2014 - 10:39 | 5328550 Bell's 2 hearted
Bell's 2 hearted's picture

well, SOMEONE has to take delivery when contract expires .... maybe all the (parked) supertankers are full?

Tue, 10/14/2014 - 11:19 | 5328753 The Sculptor
The Sculptor's picture

There are no market forces, only forced markets.

Tue, 10/14/2014 - 10:37 | 5328531 LULZBank
LULZBank's picture

 

As oil prices continue to fall, analysts and producers are trying to wrap their heads around the reasons and identify a floor price

the kingdom, OPEC’s largest producer, will accept oil prices below $90 per barrel, and perhaps down to $80, for as long as a year or two, according to people who have been briefed on the recent conversations.

 

I give up.

Tue, 10/14/2014 - 10:58 | 5328642 the grateful un...
the grateful unemployed's picture

back of the napkin, 8000 on the dow, 50 on oil. thats about a 50% drop in asset prices. gold should hold up better, all these things will be scarce, the oil companies are not going to sell gasoline at $2 a gallon, at least not much of it. you wont be able to find a gold coin. (its a tough call, buy now and watch the dollar value drop or wait till later and there is none) the wall street solution is to cancel the trades, zero volume. wait until they orphan your stocks, never mind your bonds

Tue, 10/14/2014 - 10:37 | 5328534 Orwell was right
Orwell was right's picture

Bullshit article.....ignores one of the most salient facts....Consumption per captia in the US has flattened.   Better fuel economy.   Huge chunk of the population no longer driving to work...because they HAVE NO JOB.     Consumption worldwide ...(except for military oil usage)....slows as the overall world economy slows.     Bankster fraud doesn't use gasoline, and that is most of what keeps the world economy pumping.

 

Tue, 10/14/2014 - 10:52 | 5328622 the grateful un...
the grateful unemployed's picture

our ME policy is to continue to denigrate populist movements such as the Muslim brotherhood in Egypt. the typical dictator uses his countries wealth to build a large army, and to keep a small class of very wealthy people in place. should a real peoples democracy arise in any of these countries, the leaders will start selling oil to feed the poor, build hospitals, and support the society at all levels. we're against that naturally because we need high oil prices to maintain wall street asset valuations. if oil isn't worth anything what is?

Tue, 10/14/2014 - 14:33 | 5329711 bid the soldier...
bid the soldiers shoot's picture

My personal favorite:

 analysts have until recently assumed that Libya’s output would hover around 150,000-250,000 thousand barrels per day. It turns out that Libya has sorted out their disruptions much quicker than anticipated, producing 810,000 barrels per day in September.

Yep.  

Libya's additional 600,000 bbls a day (added to the 90,000,000 bbls a day already in global production) was enough to turn the tide and send the prices tumbling down like the proverbial straw on the proverbial camel's back.

Tue, 10/14/2014 - 10:38 | 5328540 madcows
madcows's picture

Let's see, last time prices were this low, we were in a global recession, caused by Bush, right.

So, can we now say that we are in a world wide depression, caused by His Royal Anus, King Obola?

Tue, 10/14/2014 - 10:38 | 5328545 mantrid
mantrid's picture

i.e. "why we got oil price wrong again this time"

Tue, 10/14/2014 - 10:42 | 5328564 insanelysane
insanelysane's picture

The oil cartel realizes that their artificial high prices were forcing corporations to find alternatives to oil based products for heating and transportation.  In the 1970s, the sheeple wanted the alternatives but the technology and finding willing corporations to mass produce the alternatives was close to impossible.  Hybrids and modern home heating systems are starting to become mainstream.

Tue, 10/14/2014 - 10:44 | 5328575 alexcojones
alexcojones's picture

So should we soon be seeing MSM stories about collapse in Global Warming?

Doubt it. 

And sea ice will continue growing and polar vortex will arrive sooner this winter.

Tue, 10/14/2014 - 15:01 | 5329886 MeelionDollerBogus
MeelionDollerBogus's picture

CONTINUE?

It has to start before it can continue... and it isn't.

Tue, 10/14/2014 - 10:45 | 5328579 OC Sure
Tue, 10/14/2014 - 10:46 | 5328593 the grateful un...
the grateful unemployed's picture

this is the result not the cause. the asset bubble is crashing, oil, gold, housing, EQUITIES... arent low oil prices good for the economy? not the obama/bernanke economy. that economy is based on reinflation of 2008 valuations. still thinking lower oil prices are good for the economy. what happens when the big oil companies on wall street lose half their value. your pension fund goes into the tank, and your state has to make up the difference. your house is worth less, your gold is worth less, and there is nothing to buy. everyone is poorer. they have tried to keep juggling oil prices higher to keep your standard of living from collapsing, now they've dropped the ball. by reinflating the market in 2008 they have created a new class of permarich, many of them government retirees, these people won't let go of those fat checks they get every month, and 9% returns on the fund investments. they will vote for anybody who promises to get the balls juggling again (and write fat checks too) now you will be cursing them as well as wall street, but eventually there are more of us poor folks and all we have is pitchforks and our collective anger, that they are running an economy in which lower prices is not good for the economy.

Tue, 10/14/2014 - 10:46 | 5328596 Fix-ItSilly
Fix-ItSilly's picture

How could there not be the primary reason?  Oligarchian govts provide much of the world's oil.  They promised the people social programs and with lower oil prices must pump more to keep their people complacent.  This positive feedback loop will self destruct over the longer term.

Tue, 10/14/2014 - 10:52 | 5328620 TalkToLind
TalkToLind's picture

If oil continues to drop after Nov 4, 2014 I will eat my hat.

Tue, 10/14/2014 - 10:54 | 5328627 forwardho
forwardho's picture

#6

Number of people working has dropped to 30yr low.

People who don't work, don't drive.

Industries which have closed don't ship anything.

The Baltic Dry Index collapsed over a year ago and is flatlined.

Unlike the financial markets, raw energy use is a fixed reality.

Tue, 10/14/2014 - 11:29 | 5328791 forwardho
forwardho's picture

Thanks for link!

Tue, 10/14/2014 - 12:41 | 5329114 Atticus Finch
Atticus Finch's picture

Absolutely, Sometimes the most obvious is the most overlooked.

Also, the Saudis are being pressured to crush the petroleum price to make things difficult for the Russians.

Tue, 10/14/2014 - 10:54 | 5328632 TrustbutVerify
TrustbutVerify's picture

No mention of stronger dollar? 

Tue, 10/14/2014 - 14:57 | 5329864 MeelionDollerBogus
MeelionDollerBogus's picture

No need - it isn't stronger.

Tue, 10/14/2014 - 11:02 | 5328657 the grateful un...
the grateful unemployed's picture

this may be the right moment for NG. NG is at a discount to gasoline, in part because there is no uniform delivery system. but most public services are using it, buses, trash trucks, etc. its been a dirty little deal that government was given access to NG and consumers were not, to subsidize government energy needs. NG has a better floor under it, and more upside probably, but as long as government policy is to prevent consumers from having it, the price will remain controlled.

Tue, 10/14/2014 - 11:08 | 5328659 viedoklis_lv
viedoklis_lv's picture
Saudi Arabia's Oil Price 'Manipulation' Could Sink The Russian Economy Read more: http://www.businessinsider.com/russia-saudi-arabia-and-oil-prices-2014-10#ixzz3G8EEyvWZ http://www.youtube.com/watch?v=T9MT8xf8BQ8#t=137 Or this is even better .. that's for all our dear putin trolls here ;) http://www.youtube.com/watch?v=JwERsu7MQWo
Tue, 10/14/2014 - 11:07 | 5328694 Wahooo
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Hedge Funds

Tue, 10/14/2014 - 11:14 | 5328723 yogibear
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November election.

Tue, 10/14/2014 - 11:15 | 5328730 libtardhater
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Gas jumping from $2.55/gal to $3.25/gal today (area code 48838) go figure...

Tue, 10/14/2014 - 11:26 | 5328777 deKevelioc
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This crap is on Zerohedge?!

Tue, 10/14/2014 - 12:11 | 5328992 limacon
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The probability (95%+) is that the oil price will fluctuate between $36-$72 per barrel , with competition driving it to the lower levels ,

See http://andreswhy.blogspot.com/2012/06/fracking-and-oil-price.html

 

For the nitty-gritty , see

See http://andreswhy.blogspot.com/2008/07/optimal-markups.html 

Tue, 10/14/2014 - 12:22 | 5329029 Fuku Ben
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6. Prop up the economy so it doesn't crash ahead of a globalist time schedule for a crash

Tue, 10/14/2014 - 13:03 | 5329219 Duffy
Duffy's picture

oil prices kept articificially low to hide/prevent food price inflation ahead of the holidays and elections.

 

China benefits most of all, de-dollarization accelerates, Russian pipeline buildingin contrast to American debt-building.

 

http://www.gulf-times.com/Mobile/Eco.-Bus.%20News/256/details/412076/Rus...$25bn

 

Never confuse the short term with the long term, fellow babies.

 

 

Tue, 10/14/2014 - 23:48 | 5332254 bid the soldier...
bid the soldiers shoot's picture

 

"Never confuse the short term with the long term"


What's the name of your anti-anxiety medication, pal?

Tue, 10/14/2014 - 13:35 | 5329349 BeerMe
BeerMe's picture

Oil prices down isn't necessarily a good thing.  To me it is signalling that the economy is completely collapsing.  As it continues those boom towns in North Dakota will start looking like ghost towns.

Tue, 10/14/2014 - 14:50 | 5329812 bid the soldier...
bid the soldiers shoot's picture

 

"Oil prices down isn't necessarily a good thing.  To me it is signalling that the economy is completely collapsing." 

 

But the economy IS completely collapsing.

And low oil prices are suppose to UNCOLLAPSE IT.

Tue, 10/14/2014 - 15:13 | 5329780 bid the soldier...
bid the soldiers shoot's picture

 

analysts and producers are trying to wrap their heads around the reasons and identify a floor price

 

A jumbo supply side problem is so much more preferable than a puny demand side problem. 

N'cest pas?

Tue, 10/14/2014 - 14:47 | 5329796 MeelionDollerBogus
MeelionDollerBogus's picture

only ONE reason: rigging couldn't fight demand-drop so now the rigging will go the inverse direction to ensure profitability for the riggers, especially those who already hold real physical oil.

Tue, 10/14/2014 - 18:29 | 5331098 rgetty
rgetty's picture

I'm in Malaysia now and they cut the subsidy by 20 cents a liter, it doesn't sound like a lot but it adds up. Most don't make that much and now have to send 100 ringeget plus a month in higher gas prices. Then next year they will add a 6% GST. Anyone care to guess how the economy will react?

Tue, 10/14/2014 - 21:45 | 5331842 VangelV
VangelV's picture

"1. The U.S. Oil Boom

 
America’s oil boom is well documented. Shale oil production has grown by roughly 4 million barrels per day (mbpd) since 2008. Imports from OPEC have been cut in half and for the first time in 30 years, the U.S. has stopped importing crude from Nigeria."

 

Sorry but the only thing that I see is a huge bubble that is fueled by accounting tricks and access to easy money from lenders who don't seem to care if they ever get repaid.  The simple fact is that no primary shale producer is cash flow positive from shale operations.  The only reason why reported income looks acceptable has to do with the ability of company accountants to use depreciation schedules that are based on Estimated Ultimate Recovery rates instead of the Actual Ultimate Recovery rates that can be calculated from the production data.  It is easy to show a profit if you take out half the oil that will be produced by the well but only write off 25% of the cost of that well.  But that game can only last so long and given the fall in oil prices that we are seeing thanks to the Suadi attack on Russian market share it will be hard for the shale producers to keep playing for much longer.  

 

The trouble is that once the shale bubble bursts we can see the Saudis locked into long term contracts at low prices as their fields are being harmed by the high production rates even as global prices are moving much higher and they could have received far more revenue for their product.  And let us note that all Putin has to do is get one group to attack and damage a Saudi oil terminal and we could be up to $200 oil even in a broken economy.  I think that this may be the time to look to coal producers with clean balance sheets, uranium producers, and plain old tar sands players because after shale pops investors will be looking at viable producers that make sense.  

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