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Crude Crashing: Brent Is Most. Oversold. EVER
Yesterday we lamented the ridiculously oversold levels in West Texas Intermediate, which as BofA calculated, has hit "oversold" levels for only the third time in six years. We assumed that this could be the basis for a short-term rebound. We were wrong, because we clearly had no idea just how determined the Saudis are to crush Putin into the ground courtesy of plunging oil prices.
As of moments ago, WTI has tumbled nearly $4, some 5%, to just over $81...
... which just goes to show how idiotic any reliance on charts is in a centrally-planned world, in which commodities are nothing but political weapons. Bottom line: based on its weekly RSI chart, WTI has just hit the most oversold levels since Lehman.
But to our rather great dismay, what is gong on with Brent turned out to be far worse, and as the weekly RSI indicator shows the selloff in Brent is now the worst, well, ever!
In other news: Andrew Hall, our condolences.
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"still paying 2 USD per liter for fuel in Germany..."
Mainly because of taxes, not the price of crude.
Yeah this is all the Saudis LOL.... They are more likely to have a revolution due to crashing oil prices than is Russia. Looks more like a paper drive by shooting we see in Silver or Gold.
Actually it is the opposite.
Saudis are maybe the only ones who can handle cheap oil to harm competition
Bullshit. I already posted the article from a couple years ago that they need 100 dollar oil in order to have enough cash flow to pay their disaffected masses not to revolt. Hell, how many billions have they wasted in Syria?
http://www.washingtonpost.com/blogs/wonkblog/post/why-the-saudis-want-oi...
Again.. This is a classic paper dump. Are we to believe the Saudis did this? Oil crashing 5 bucks in the blink of an eye. With other commodities generally being in the toilet I'd be alot more apt to think that someone in the federal reserve / us govt wants to put a deflation scare out there in order to provide cloud cover for a new round of QE.
The saudis can't hack this for long.
Wrong.
When prices fall, costs fall also
Prices are falling due to draining of USD thus a margin call
Canadian oil will still make a profit at $60
Complete bullshit. Just because the "price" in dollars went down, this does not make the oil any "easier" to get out of the ground in terms of the energy (calories) that will have to be invested in order to do so.
Humanity will stop using fossil fuel with plenty in the ground because other technology will become more viable/competitive... ...eventually. There are a few billion unfunded liabilities that have to be dealt with first.
Hedge accordingly.
The logic that only sell price goes down but costs do not go down makes no sense.
If the quantity of money shrinks, then everything goes down
Difference between "real" and "nominal" terms. The quantity of money being in decline doesn't mean the real costs are in decline.
Things won't be amazingly cheap in real terms in the event of a deflationary collapse. It's just that they will be priced cheaply by historical nominal standards and that nominal wages will be lower than ever also. It's all relative.
The one TRUE indicator of how "expensive" something actually should be to produce, is physical work, or how much energy it costs to do said job. You can do that through human labor, or through automated production lines. But the one constant in all endevors (be it R&D, academia, programming, building bridges) is that energy needs to be invested to obtain the productive output.
so you're saying wages will be docked because energy input costs are declining on a real and not nominal basis?
But the one constant in all endevors (be it R&D, academia, programming, building bridges) is that energy needs to be invested to obtain the productive output.
i agree, so if the input costs of labor hold steady (and there's no reason to think they won't) and the input cost of hydrocarbons declines -- relative to CPI, wages, etc. -- how is this possibly some apocalyptic scenario for consumers or the overall economy? it would be if the primary driver of our economy were energy production (not megawatts but oil barrels) and we didn't have the world's reserve currency. i mean, sure, this is bad for venezeula and russia. but amorica? not buying it.
economics seems to be the dark-art of saying two mutually exclusive things at the same time and then reconciling their incompatability with a bunch of nebulous and ill-conceived models premised on flawed theory undergired by economic 'laws'.
economics can be likened unto psychology and frenology.
leaving economic policy to economists has been suicidal.
janus
so you're saying wages will be docked because energy input costs are declining on a real and not nominal basis?
No I am pointing out that in a Great Depression style downturn (extremely deflationary event), nominal prices might fall across the board. So a house in Central London might drop in nominal terms from 500,000 GBP to 50,000 GBP in order to appeal to a prospective buyer, HOWEVER, the average wage might decrease in a similar order, ie:, I make 100,000 GBP in 2014 as an annual salary, but due to deflation if I happen to be fortunate enough to keep my job, I might only make 10,000 GBP in the same period. In both instances the cost of a house in London would remain the same in relative terms (and yes I know that this is highly unlikely to occur in the real world, if not impossible in probabilistic terms, but I use this to distinguish between inflation/deflation and the real economy.)
REAL energy costs can continue to rise, regardless of inflation, or deflation in the long-run. It really depends on what the real requirements are to extract that energy, namely the market cost of one unit of work. That energy cost will most likely be carried out by a combination of skilled labor and machinery.
Addressing the rest, and please bear in mind that I am not talking about recent price falls, but rather a longer term trend.
so if the input costs of labor hold steady (and there's no reason to think they won't)
There is every reason to think they won't in the long term. Energy production is a function of energy cost as mentioned above. In fact, by your own admission "i agree", every good is a function of energy cost. That means that food and water (the basic necessities for human life) are also heavily dependent on energy costs to harvest in a mechanized world, and also require energy to transport. If energy prices, namely oil, do rise in real terms it becomes more labor intensive to produce said food and more costly (irrespective of inflation/deflation in the nominal economy) to maintain supply lines. That means lower populations which in turn will lead to EITHER a flat unit labor cost (as you mentioned in the best case scenario) OR price increases in unit labor as the supply of labor becomes restricted.
and the input cost of hydrocarbons declines -- relative to CPI, wages, etc. -- how is this possibly some apocalyptic scenario for consumers or the overall economy?
How would the input cost of hydrocarbons decline in the long-run without massive technological advances in the sector? Extraction is becoming harder and more risky. It used to be that people could drill a few hundred meters in a desert and oil and gas would be readily abundant. Now Russia has to go explore beneath Artic ice sheets and drill further and further offshore. The energy requirements to extract reserves are becoming increasingly steep.
it would be if the primary driver of our economy were energy production (not megawatts but oil barrels) and we didn't have the world's reserve currency. i mean, sure, this is bad for venezeula and russia. but amorica? not buying it.
I never made any claims about America. Nor am I arguing that this change in the price is bad for them in the short-run. It still doesn't change the longer term picture. You won't get me to budge on that. As for Megawatts according to the US govt. the breakdown is as follows*:
- Coal 39%
- Natural Gas 27%
- Nuclear 19%
- Hydropower 7%
- Other Renewable 6%
- Petroleum 1%
- Other Gases < 1%
You're right that petroleum is low on the Megawatt generation list. Mainly because it is far more useful in other places such as a means of transporting goods, or people and running motors. However, in the event that oil became disproportionately expensive relative to the other fossil fuels it would be foolish to assume that (once again excluding technological shift) that they would not also become more expensive as substitutes for oil. Yes they might be poor substitutes, but they would be substitutes nevertheless. Also, note the implication of a rising oil price on the costs of labor once again.
economics seems to be the dark-art of saying two mutually exclusive things at the same time and then reconciling their incompatability with a bunch of nebulous and ill-conceived models premised on flawed theory undergired by economic 'laws'.
Mainly because the field of economics has been a satellite for political discourse for many decades now. The economists who seem to gravitate to the top in public policy are the ones who are either bought and have an agenda, lack any kind of moral obligation to the citizens, or are ignorant to the mechanics of the job where they are positioned. Many of the best economists of this age have gone unappreciated, or simply operate quietly within the private sector (and no, not just banking).
leaving economic policy to economists has been suicidal.
I think you are blending economics and politics, but I do not blame you because the field has been so thoroughly blended and polluted in many schools that they might as well be one and the same. Having said that, economic models, just like mathematical models, don't really make any "evil" claims. It is up to the character of the person who (mis)applies them to make a decision. Do you blame all physicists for the creation of the atom bombs that were dropped on Hiroshima and Nagasaki? Do you blame all mathematicians for the copulas which contributed to the financial crisis?
I personally have a large dislike for the law profession, given its propensity to produce people in high ranking political office and also the way the legal system can be used to take advantage of people. I am sure there are lots of lawyers with a sense of decency that work in relatively noble job occupations.
Finally, I would also point out that various destructive public policy "tools" have been around for a long time before the economics profession even existed. Coins were debased in the Roman times, for instance, under Diocletian. That is an early example of seniorage. The bond market was around in Renaissance Italy. Banking was also around in Renaissance Italy. Economics and Finance might give you a "foot up" in terms of knowledge, but the rules of the game have been in place for centuries.
*Taken from: http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3
Now.. on the article above. It seems obvious, even at a cursory glance that at least part of this price plunge in oil is due to legitimate demand shocks.
That means the price decline is irrespective of the "smoke and mirrors" money supply game. It is a demand shock in the real economy which is probably sparked by entry into a global recession. Governments stockpiling prior to economic sanctions on oil producers and alternative sources for reserves such as fracking.
Having said that, I do think that this is a fantastic opportunity to enter the market in some way once evidence that the bottom has been hit is in place. Really. If you are highly reliant on gasoline, now is the time to stockpile. This trend might continue for a year, but I think it will be short lived. I would be seriously surprised if it lasted longer than 18 months.
It definitely benefits the US though. No questions there.
i don't know if i'll get to all of this, but i'll give it a go...
i understand deflation, and i understand the principal of a general depression. i don't, however, see how the declining price of oil is necessarily associated with a depressionary deflation. you're speaking as if they're one in the same. oil declining on a real (and not nominal) basis is primarily good for an economy that consumes so much of it (and consumes so much in general) leaving more money for other goods & service, whose prices will decline (over the long term, assuming the relative stability of other factors).
let me get to an aspect of your thought that i think is crucial to this whole argument. petrol represents so large a percentage of consumer spending that it's crimping everything discretionary. so often economics and governmental policy are confused as to their influences. and when we speak of things like cost of extraction relative to the easy days of yesteryear, how do we know what's valid and what's not? there is SO much propoganda out there to justify price spikes...whether it's the exotic extraction points, the myths of saudi running dry (and i've come to discover that they are in fact myths...that, or i don't know what to believe anymore), bat-shit crazy stuff with volcanic leaks in the gulf of mexico...etc., etc., etc. my point is, independent all of the deliberate manipulation, how do we know that the cost of extraction has gone up substantialy over time? we certainly know that the technology has advanced to an astonishing extent, and this should've driven CPUperBTU way down. and even though the market can always deliver in excess of whatever the world economy demands, the price has balloned over the last decade or so....outpacing even healthcare cost increases. is that an indication of inflation, structural cost increases, international turmoil or deliberate manipulation...i believe it's mostly the latter (often by contriving elements of the former three), insofar as the supply is always more than there -- and of course they're gonna claim every untapped well in times of record prices; but that doesn't mean we're running out elsewhere.
and so to assume that the decline of price for petroleum, which is both easy to manipulate in terms of price and control its distribution, AND which has such a disproportionate impact on discretionary spending, is a cause of 'depressionary deflation' is not logical, especially if the decrease in price is in real terms...let me cut to the chase, lower prices is not necessarily deflation, at least not in a depressionary sense. if we were to talk about deflationary forces in an economy that were related to declining wages or economic output, yes, that's a bad deflation...because the lack of discretionary spending money is what's driving the prices down. which is to say, not all 'deflations' are equal. in fact, they are quite opposite. but no nobel prizes are ever awarded for this sort of clear thinking...standard oil has a very big interest in promoting alternatives.
returning again to the conflation of governmental policy and price structures, imagine if we just stopped picking on coal with the regulatory madness...this would do more than anything to satisfy whatever other diversions there are of petrol...especially since it's often oil that fires the emergency generating facilities...and they have to be fired because they're only allowed to turn so many tons of coal into megawatts...and they're supposed to continue doing that long into the future.
and that's not to even address all the policy-based diversions of petrol connected with the ethanol boondogle. not only is ethanol a net btu loser in production, when you consider that farming itself is petro-product based, it's a double-wammy diverter (triple when you consider the diversion of farm land itself, and the excess required to satify the market for food corn).
and so to sum up this part i'll say that the price is so manipulated that it's hard to fully trust the increased cost part of the argument...especially when governmental policy is articulated to deliberately exacerbate the problems in artifiicially inflated pricing...and just because some governments based their budgets on an arbitrary number (hopium injected into the most volitile of commodity markets), that does not in any way reflect the 'costs' of extraction and delivery. and as far as 'deflation' and price decreases go, what are we talking about here? aggregate purchasing power based on productive enterprises (what you can buy with the rewards from what you do/make), or the nominal measurements associated with inflation-based economic modeling and debt-based currencies that result in the dramatic cyclical shifts?
this is all part of the theorizing that assumes a weak dollar and ceaselessly inflated prices are necessarily good things...i don't think they are.
{that's funny, i'm replying as i read and i just got to the part where you accused me of blending politics and economics...what, you trying to corner every angle of the argument? cummon, play fair, you don't get to hog all the toys ;)}
ah, now we're shifting into a more philosophical field in the latter part of your reply...i do believe i could say that 'ecomomics' per-se is 'evil' inasmuch as anything incorrect is consequently 'evil'. you've confused your principals with the physics reference...the science of the physics could never be 'evil' in that its factual, but, sure, when science is used for mass slaughter, that's a sentient and moral form of evil...the 'evil' i'm ascribing to economics is the same i'd freight on organized religion; in that it's a contortion of some universally accepted 'truths' relative to our existence, which are then extended and utilized to control...in the same way economics takes some universally accepted truths of human experience, contorts them and then utilizes them for control. in other words, economics ain't science...it's observational assessments of human behavior. i could sooner call my novel 'science' than admit economics as such.
and then when you consider how many among TPTB have rationalized and even moralized every bit of lying to justify higher petrol prices because CO2 will give gaia asthma...in their minds, anything that puts the price of petrol out of reach is great for 'folks' like janus, 'folks' who need to be manipulated and coerced into doing their part to satisfy the sacraments of this blasted new religion.
but, if you are an economist, please don't take offense...it's obviously attracted some rather equsite minds -- minds that tend to get carried away with themselves (i know the type very well...i spend an inordinate amount of time with just such a person...in fact, you could say we're inseperable).
and with respect to any field that traffics in hyper-complex and convoluted theorizing to 'prove' that what's evidently and obviously true is false...well, my experience has always been that such fields should be treated suspiciously.
after reading your entire reply, i'd guess we agree on far more than we disagree...but all the arguments i've investigated that favor higher oil prices fit that hyper-complex and convoluted description to a tee. perhaps we'll get a chance to see if lower oil and stronger dollars are catastrophic...but i'd still be cautious about assiging causality.
and who knows in the end...i'm of the opinion that all can't be manipulated forever -- and it's difficult to even have these debates within the smog of all this manipulation; how can you discern truth when everything is premised on falsity? -- but they've impressed me so far; i'm amazed how long they've sustained this blatant/in-your-face manipulation. you have to give the devils their due.
janus
EKM:
Now I know why you get down arrowed . . .
If I lower my price, my COGS doesn't decline because my price dropped.
You're obviously a student of The Screw Loose School of Economics.
-30-
Oil prices took off in 2003 when Fed "allowed" primary dealers in total secrecy to own oil and commodities.
Any dollar above $60 is just extortion fee for bank lobby
It was Reuters which revealed the scheme only in 2012 from a leak.
http://www.reuters.com/article/2013/07/19/us-federalreserve-commodities-...
post hoc logic
Oil production is up less than 6% since 2003 while the world population is up over 12%.
So make margins 100%. If you buy it, you must possess it.
Stop overthinking this ekm1, there are now 7.4 billion people on this rock all competing for a higher standard of living and all the resources and energy(calories) that make that possible.
There is plenty of demand for consumable calories and oil remains the most dense potable source, period.
well said
you're taking an unpopular position here, ekm1; but i agree with almost everything you've written. just because we have an oil-based currency does not mean that the commodity itself can be factored as the medium of exchange.
also, kuwait and quatar will be fine at much lower prices as well. i think the 100 line is real for the russian economy, but it would have to go as low as 30 or so to really affect SA. energy producers that engage in the TSY recycling scheme won't be adversely (at least not to the degree being threatened) affected.
LawofPhysics makes a lot of good points, but many are assuming that, in relation to the petro-dollar, everything is relative except for petro itself.
janus
Thx Janus
Anything will be done to preserve USD as world currency along with Saudi-Pentagon alliance, in my view
Fed is or will drain dollars from the system soon, to preserve USD. That is the deal Pentagon has with Saudis.
They provide oil in USD hence they control USD in exchange for protection from Pentagon
King Abdullah is ultimately the real chairman of federal reserve
The bottom line is that some people wll have access to energy that can be consumed/transported etc. and some will not, period.
I have no doubt that how we pay for those calories is going to change, so talking about "prices" really becomes a mute point.
Any dollar above $60 per barrel is extortion to bank lobby
http://www.reuters.com/article/2013/07/19/us-federalreserve-commodities-...
Literally secretly in 2003 Fed "allowed" primary dealers to own oil and commodities, which they used it as collateral on derivatives
Discovered by Reuters in 2012 from a leak.
I'd say the leak came from Pentagon
Please, see my post above.
As far as "extortion" goes, I have my own plans for these paper-pushers.
LoP,
i follow what you're saying, but bear with me for a minute here...i'm just trying to thresh this out with logic.
i don't think the element of 'price' can ever be moot or discounted. if the entire premise is calorie in calorie out, the underlying 'price' of the calorie input/output is still fundamental to the dynamic...as i was saying, we can't treat the commodity as if it were the medium of exchange itself...i'll certainly concede that there are correlations, but the one is not the exclusive driver of the other.
and that's not even considering the benefits that lower 'prices' will have on the equipment used (cheaper because it is contingent on the 'price' of total caloric input), various other resources utilitzed in the extraction (and i'm not saying foreign wages won't decline relative to a strong dollar...they will...no doubt).
i guess, for my part, i've always been unequivocal: janus is an american-firster. and as long as i stay, that will be my guiding principal. i am NOT (and am aggressively opposed to) some one-worlder. i believe there are certain nations/cultures with which we can cement trust-based relationships; nevertheless, if there is in such arrangements mutual benefit, i'm happy for it...so long as america wins too.
i truly despise these people in charge, but i love my country. i'm sympathetic to russia because, and my american-firsting notwithstanding, i will never demonize a leader who supports policies that are clearly in his nation's interest. i just wish we had some in this country. basically, i respect patriots the world over...it's just that, sometimes our interests collide, and things skew to more zero-sum type thinking.
that being said, i'm testing out various patriotic attitudes for some canditates for my expatriation...cause if i go, i'm gone for good. and i will at that point be just as passionately patriotic for x-nation...probably moreso, in that i'll have picked it rather than being born into it.
sorry for the jingonistic tangent...but i do believe it's germane to the discussion at hand.
janus
Janus,
You might want to peruse this article I posted for LOP above. Verrrry interestttting......
http://www.extremetech.com/extreme/191754-cold-fusion-reactor-verified-b...
The researchers really try to work out how the E-Cat produces so much darn energy — and they conclude that fusion is the only answer — but then they reel it all back in by adding: “The reaction speculation above should only be considered as an example of reasoning and not a serious conjecture.”
It must to tough to see the amount of energy produced and even observe the nickle turn to copper yet still not be able to say the word...
F U S I O N
If it's for-real that is... :)
on instinct i'm leery of this kinda stuff -- the ole too good to be true thing holds up far too often. i remember there being a scandal about this back in the early ninties.
reading all the way through it, it seems somewhat reasonable...but i can't ignore the taint associated with the field. as for the science, i suppose i can see the possibilities. but, bear in mind, chemistry was my weakest science. all the same, i sorta get what they're describing. almost like a magical battery. so you've got 'hydrogen-charged' nickle NI58 & 59 if i remember correctly, and that's like 30 electrons wortha isotope, and then lithium with the lowest electrons of all the metals, some kinda charged catalyst for a reaction they don't fully understand that yeilds copper at its stable isotope. it sounds somewhat plausable. and, really, for janus, the fact that they can't fully explain it does not negate it. some of the first scientific discoveries and many of the more recent ones can't be fully explained nor understood, they used to call it alchemy and now they call it quantum physics.
i'll say this much, if there's any validity or integrity to the audit, whatever's going on there is producing an amazing amount of energy for its size.
here's the thing, though: are these guys scientists or businessmen? this is what makes it most suspicious. if they were scientists, their motivation would be to release everything for the sake of falsifiability...if they were businessmen, they'd have every incentive to keep as much proprietary as possible. mixed motives makes me suspicous.
either way, at this point it's apparantly got enough attention that if it's viable and replicatable, it'll proliferate. i hope it does. i'd just set up a steam generator in my back yard and power the neighborhood.
i'll be the montgomery burns of buzzard's bay...montogomery janus.
janus
yes we pay for it with the most expensive army in the world, a lot of geopolitical bullshit, mass murder and ever increasing enemies. So what's the real US price of oil?
Where is the "quantity of money" shrinking?
DXY going higher, hence Fed is draining dollars
USD can only be 'drained' by commercial bank debt being repaid, or if the Fed (or its agents) are selling off assets in exchange for USD.
Or if people are burning multiple tonnes of US banknotes. Otherwise, no, USD money supply is not shrinking.
No. When a loan is paid off with reserves(currency), debt disappears but reserves do not.
That is what people forget to remember.
Hence fed has to mop up excess reserves
Commercial banks' loans into the economy (ie, the quantity of money in circulation) aren't paid off with reserves; loans are paid off with other loans circulating in the economy as money.
The reserves themselves don't circulate as money in the economy, they're held within the banking system and used as collateral for the creation of new debt (money)... or used to buy assets from banks via QE.
Which comes back to my original point - UNLESS loans are being repaid, or USD banknotes are being destroyed, or the Fed is selling off assets in return for money... the quantity of USD is not shrinking; i.e., your explanation for why USD is currently strong is wrong.
Fed creates only excess reserves. The whole balance sheet of Fed represents the quantity of excess reserves it has created, not created by economic output
Banks create 95-97% of reserves.
Reserves move from account to account and get created as economy expands.
A paycheck is paid with reserves.
Except for in the form of paper cash, reserves never leave the system
There are a minimum of $60 trillion USD reserves sloshing around the world, too much
A loan is paid off only with reserves or defaulted on.
Banks cannot extinguish reserves
Only Fed or US Gov can.
Sorry for the late reply.
You're conflating deposits with reserves.
Loans and reserves are created simultaneously at a corner street bank branch
It is wrong to talk only about Loan Creation without talking about the simultaneous Reserve Creation
EKM I like your posts because its different. I like the underdogs. But I have to ask this with your logic. If everything goes down in prices, Do we consumers really expect corporations to pass the savings to us and allow us more for our money? I just don't see that.
For example, my wife like's these vegetable egg rolls. Well they were 5 egg rolls just last month for $1.50 to $2.50. Now they recently changed the packaging selling 2 egg rolls for $1.25. So lets say prices come down to $1 for 2 egg rolls. So if we buy 5 egg rolls we still would be paying the regular $2.50 before prices would have moved down. Consumers still getting fucked and no savings were passed to us. Corporations keep the savings for themseleves allowing them less buy backs making a rainy day fund again to have the circle jerk all over again. You know the drill.
Yes.
Fed will call margin on buybacks via debt, hence corporations will be forced to reduce prices in order to obtain reserves via output expansion, not buybacks financed by debt due to zirp
If the Fed initiates margin calls then I can see your point of view and would agree. Thanks EKM for the clarification as I did not look at it that way. +1
Absolutely agree. Also would point out that it doesn't help to trade energy supply for other necessities (such as water.) The energy input required to purify much of the world's fresh water is simply too high.
Fracking is a circus. It trades one problem for another.
Edit: For some reason this looks like I am responding to my own post. But this is RE: LawsofPhysics.
it's a really bad trade with more problems than gains. toxicity, water depletion but probably the biggest price is conning the system to delay adapting to new ones.
Most canadian oil trades at a discount already so time will tell how this all shakes out. I work for a pipelne company and we have lots of work in central alberta, kindersley sask and estevan sask - all unconventional of course. Unless this lasts I don't think we'll be seeing too many companies pull their horns in unless they go on buying sprees in the stead of drilling.
When the price of oil falls, your cost base doesn't necessarily fall, certainly not immediately. If you think a multi million dollar horizontal well goes on sale when oil crashed you're nuts. To the case of the saudis they have throngs of disaffected masses who rely on social spending to pacify them. Without that, you'll have a REAL arab spring.
As for the Saudi cost base, I don't know how that is going to somehow collapse with the collapse of crude. It won't. It's pretty simple over there. Pump as much water as you can in, pump as much oil out, and lie about your reserves.
On edit - in Alberta I know of 3 wells drilled recently that went to shit. They didn't get as long of a horizontal leg drilled, and several of the multi stage fracks failed. You're getting tighter formations with less oil and that is a nightmare for economics.
Not to mention the cost of shipping by rail, since there is no pipeline in the foreseeable future.
I have never been to Saudi Arabia but I have worked with an Afgan scientist who did his pilgrimage. He was very adamant that no one screws around or even speaks out while in Saudi Arabia because everyone in that region knows that the Kingdom keeps a very firm grip on the country. Think Sadam Hussein X 2.
The people may be unhappy but without some form of extraordinary external support they likely lack the gumption or the ability to do anything. And I seriously doubt if the CIA or any other 'entities' have a foothold there.
Kings can be much more terrible than Dictators.
i agree with your first paragraph and disagree with your second.
we've sold so much advanced weaponry to the house of saud. you bet they are at least dependent on a continued relationship for more high tech weaponry.
the oil needs buyers though, and we need that oil denominated in our dollars. its a quid pro quo that unfortunately has our country pursuing saudi strategic goals in service of that machiavellian arrangement.
if saudi arabia was to think about switching sides to russia or china, do you think that russia or china would be able to guarantee it's security from the united states and europe? extremely doubtful. i have a feeling it would be syria-ized, libya-ized, iraqi-ized, egypt-ized, or iran-ized in rather short order. take your pick, they are all rather interesting case studies of modern foreign intervention (neo-colonialistic), whose outcomes exhibit varying degrees of outwardly-visible political capture.
it's definitely a sad day for the western world when you and such morally repugnant actors as the house of saud have to get each others' backs.
this reliance is 50 years strong=petro dolla=fractures and an end run of price devalue to hold control=fucking fracking=petro dolla more important than jobs for mericians=fascism=politicians that should be tried for treason...
Why would they care what the price of oil costs Uncle Ben and now Auntie Yellen's got it..
May have been true 30 years ago, not today.
I hope a McDonalds hamburger goes back to .19 cents...
I pick up Pennies
BS. Their breakeven is $90 a barrel to meet social spending and their wells are depeleted. They want Syria badly for a gas pipeline.
No.
the price of goods depends on how much currency is sloshing around claiming thouse goods
If US gov drains dollars and they are, then prices drop everywhere for everything
"the price of goods depends on how much currency is sloshing around claiming thouse goods" --- and if the parties are willing to actually sell those goods to you. Not to mention availabiliy.
Not to mention the issue of the death of a currency. If no one wants that paper, the amount of it is completely irrelevant.
Correct
By removing excess dollars, dollar becomes valuable to hold
The flaw in your logic is that everyone is acting rationally. They are not.
This reminds me of a friend that was getting clocked at a poker table because one old man was not "playing the odds". He was going for broke. And he was winning.
What you think is the right behavior does not mean all parties think the same.
I heard that rule is VERY TRUE. The markets can stay irrational far longer than your money can last.
Bush ‘lost’ pallets of cash and nobody said a word.
Why can’t the Sauds ‘sell’ oil for $50.00 a barrel all the while Apache helicopters deliver pallets of cash on moonless nights to their sand. It’s for ‘national security’ so we will never know.
GT Advanced Technologies just ‘went away’.
Correct.
Pentagon - Saudi alliance.
Gas is still $3.20 here. By my math it should be around $2.80 instead. WTF is going on with that disconnect...
Gasoline has remained stubbornly high in Canada and it is aggravating as all hell.
Paid 2.92 yesterday in Minneapolis.
Bullets and feathers my man. They will ream your asshole a bit longer before adjusting the pump price.
I guess I bitch because it affects prices of everything. I have a company credit card for fuel purchases and I expres smy indignation by buying 2 bags of choula flavored beef jerky with every fill up.
I'm at $3.20 in New Hampshire. A little jealous of $2.80 in Tennessee...
I'm paying $ 4.20 in LA
LA is such a complete, total, absolute, FO.
Why do you people stay there? You're running out of water, while your air-for-brains gov is opening the flood gates to every disease-ridden illegal he can find - isn't that a clue that your state is shortly going to die a horrible death from illness and dehydraton? (And your illegals express themselves in 21 different Central American dialects that even the Spanish professors can't understand . . . not to mention the high proportion of them which are "bush people" unknowing of what a bathroom is and what it is used for. What a zoo.)
Yeah, they're "dreamers" all right - dreaming about taking everything that you've got.
-30-
I see you've been reading the Horoscopes again.
Here's a sneak peek at tomorrow's edition:
MARSINSCORPIO visits Los Angeles for the First Time. He receives a Bitch Slap from an Illegal"
Write your loving politician tell the cocksucker if you don't get your obligatory cheap gas at election time that's it that fuckers down the road...
Real supply manipulated by keeping it off market (tankers, underground depots), just like DeBeers diamonds. Manipulation to fuck and back again in the paper futures markets. Deals done outside of the "markets"......why should it be any different than the precious metals?
Only different thing with gold is that it has been manipulated down first.
Now oil is following
no one saw this coming :)
If oil gets below $40 they'll shut down at least 30% of the wells in the world because they can't get it out of the ground for cheaper than $40. The Bakken oil field has a breakeven of $58, so take that offline, and what happens to oil prices? $20 isn't happening.
No, they won't.
They've hedged it
It won't stay there for long, just long enough to wipe out sacrificial lambs
You don't "shut in" a well once it is completed unless it isn't producing efficiently anymore. They might stop drilling under $60 but once that well is running the only way you shut it in is if you believe prices will sharply rebound and you can afford to stop the cash flow for that believed time period.
Uncle Ben and Auntie Yellen can! They have money wands and they can just waive them and poof it's all good again..
Gartman Called It ! I give credit where credit is due.
a young bull and an old bull are grazing at the top of the hill, overlooking a field of cows... the young bull turns to the old bull and says, "hey! let's run down there and fuck some of those cows!"... the old bull, chewing and nodding thoughtfully, replied "I have a better idea... let's walk down there and fuck all of them"
the old bull must have finally shown up in the field, because it sounds like all the cows are making noise today...
What in the actual fuck are you talking about?
look, there's one now :)
The best one I heard which was actually a true story is two large bulls and a junior bull where all let go to field the herd up.
The two large bulls started snorting and ramming each other and fighting to hold territory, and since neither would budge this went of forever. The young bull meanwhile was all over the herd nailing all the cows.
EKM1, is your 50-60 price assuming lower demand? I thought the true cost of a barrel at the margin of current demand was 85.
Value of something depends on the quantity of currency around.
If Fed drains dollars, then prices of everything drops.
EKM:
Where in the hell did you come up with this insane economic price theory of yours?
If the FED cuts the number of dollars in circulation in half, my COGS doesn't decline, and I can't lower my sales price.
What happens is that demand collapses. People don't have money to buy products - BECAUSE THEY DON'T HAVE ANY MONEY!!!!
Sound familiar? Sound like the sucking sound of oligarches sucking the middle class dry? For all practical purposes, the money supply is being cut by the hoarding of cash (through assets) by the .001%. That's why Main Street is broke - the number of dollars available to it is down, way, way, down.
Please stop posting - your ignorance is sickening.
-30-
Please get a life.
You have better things to do than reading what I write
The counter to that is the oil stops being traded for $ and is traded for Yuan or rubles. That is the current reality and if the Fed is draining $ it's because they know the supply of oil traded for $ is dropping which without draining $ would mean oil at $150 sooner than later. However, draining $ means lower stock prices too and it could mean more bad loans, so what is a fed to do?
that is the fear, that's why they are draining dollars
Exactly! +1. A currency increasing in strength, then all else equal, price of shit as measured by said currency must necessarily fall. End of story. A flight to perceived safety in the $USD only exacerbates the declining price as a result of a shitty economy. Oh I know I'm gonna get down arrowed.
It will be cold this winter. Abnormally cold. Frigid cold. Ice Box Man! Nuts ascending cold!
Wake me when its at $40! Yes im serious!
Wake me when its at $40! Yes im serious!
Isis sells its oil for 42 dollars a barrel
It'll begin to surge the day after the election. This is the Dem Protection Team at work.
Elsewhere: is Hillary going after the pothead vote? http://tinyurl.com/m3k2oqp
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...
www.job-reports.com
Pretty amazing really. Without oil, there wouldn't be stocks or computers to type on. Oh well, we shall see how low it can go, $20, I don't think so.
Finally after a year my double short WTI is paying off. About time.
I would say Crashing is the right word here.
Carshing sounds more like it aka GLP.
Unpossible. Get Yellen to buy a few million barrels ........on credit of course.
Don't mind the US def contractors shot in Riyadh. Moving along...
"contractors"
Get it below $40/bbl and keep it there if you want an '80s or '90s economic boom.
Correct.
Simple pure physics
Right now we have liquidations of sacrificial lambs due to margin calls.
It is only the beginning
Margin calls and liquidations are always so much fun to watch.
The '80s and '90s are simply asking that we pay the bill and leave an adequate tip.
The 80s and 90s cheap credit is over. Now it's time for the bill.
Just the tip
... see how it feels ;0)
Perhaps a reversion to the historical means? I remember reading some conspiracy theory that oil was plentiful and that the original reason behind the first Iraq invasion is that Sadam was going to tank the petro dollar by no longer withholding oil (per the OPEC/US manadate) and was going to instead flood the market with the plentiful oil available. The US attacked in order to control production and price.
Conspiracy, like I said. I just remember that looking at oil reverting to it's historical means. Free energy for everyone!!!! WEEEEEEE!!!!!!!!
It isn't the "elites."
It isn't the Saudi government.
It isn't a conspiracy.
It is limits to growth.
All of the above and more
Good. The unavoidable collapse is the best reality show ever.
That's okay, gasoline won't go down. At all.
I don't know about that. We are about to see sub-$3 a gallon gas here in NE Ohio.
Yeah, I agree. I'm finally starting to see some flow-through to the price of gas at the pump. Low-low 3s in the Philly/Wilmington burbs.
I feel sorry for OPEC- Their beautiful cartel collapsing before their eyes. (No I don't.) I want to see $30/bbl oil right up until they pump the last drop out of the ground.
I remember, back in my younger years, I would look at the gas station sign during the summer and wonder if that was the temperature outside or if it was the gas price. The good old days of cheap oil, high savings and interest rates, and jobs, jobs, jobs. Smoking cigs at the office, drinking for lunch, and hitting on the secrtary was all fair game. Bring back those days for sure.
My 'younger years' have memories of $0.19 Gas Wars
Mom remembered gasoline at a nickel a gallon at the Texaco station.
And they pumped it for you, cleaned the windshield, and asked if they could check your oil. No extra charge. Smokes were 30 cents in the vending machine.
Indeed; the Good Old Days ... gone and only forgotten when the oldest folk die. That's why no one knows squat about the Federal Reserve System today -
BOHICA
I remember thinking as a teen I was gonna quit buying gas the first time it hit 59 cents a gallon. Said the same thing at 79 cents, then 99 cents for sure!!! No way was I gonna pay over a buck for a gallon of gas.
Needless to say, I learned economics in a hurry.
$2.95 in San Antonio now
Eagle Ford people already crying about too low to pump.
What the Frack?
National Gas Price Map
http://www.gasbuddy.com/gb_gastemperaturemap.aspx
Cost to get that stuff out of the ground is around $70/bbl. Add in financing cost for all the extra production equipment (these Fracin' companies are running on credit, like the rest of the world), and they are losing money selling oil today.
Enjoy the oil glut, people!
Craig
2.89 here in Dallas today.
The price at the pump probably won't, much.
I'm in Georgia. Three years ago we had the second lowest gasoline prices in the country (South Carolina). They've taxed it so much at the state, county, and local levels that gas is cheaper in every neighboring state than here. Fuck the bastards.
US gasoline consumption has already declined by over 50% since 2007 - and that's with QE1, QE2, QE3, Q#4 ....
Now that the Fed is ready to pull the plug on the economy - i would expect another 50% drop at very least.
http://priuschat.com/threads/gasoline-sales-discussion.125394/#axzz3G9FR...
Thought it was a gold chart for a minute there. I guess with all of the economic growth, we just don't need oil anymore.
Oversold? Priced in what?
So how does the price go down so much? Demand is effectively the same.
So is Saudi maxing out their production capacity and thus damaging their wells? Or are they releasing strategic reserves? Either way, woulnd't those be limited in their ability? And when that ability is over, doesn't oil rebound to even higher prices - ie $150?
Hopefully someone can explain this to me.... especially in the context of Peak Oil....
I first heard the term "Peak Oil" some hundred or so new oil field/ reserve discoveries ago. Been a while.
I am not being sarcastic.
The problem is you are trying to use fundamentals and logic to figure this out.
Stop.
Breathe.
This is politics and war on the terminal you are watching.
Financial warfare. Who do we want to squeeze? Who is using gains from selling oil to fund their operations?
Who the fuck would flex like this, like some entitled, conceited Adonis?
Fundamentals don't matter. Supply is irrelevant for the short run. Don't think they can sustain it. But they sure can bluff. Who can do this??
USA just passed Saudi Arbia in oil production. The USA imports the most oil from Canada...who have 150 BILLION BARRELS...known. The USA is approaching being a net exporter. We no longer really import from Mexico...who have a lot of oil...if they weren't so corrupt. Oil is going down....they are trying to juice nat gas...but so far no good. Without wall street oil would be $30!
If oil is at $30, gold is at $400.
A quote from one Marcus Samuel " The production of oil is almost its least value and its least interesting state. Markets have to be found."
And those markets have to pay dollars these days.
Much the same could be said about gold, if it wasn't consumed at the high rate of oil.
Manipulate away!
Not anymore ! The entire fracking industry is, well... kind of totally fucked at these prices.
These prices are manageable but less than $75 is bad.
This:
So how does the price go down so much? Demand is effectively the same
No, demand is down to like 1980's levels, but yet the prices are still really high, so the real question is why oil prices were so high to begin with. Combination of Weak dollar + QE and some upwards manulipation to get us serfs to buy GM Hybrids I think personally.
Actually since 2004 the production of oil has increased less than 6% whereas world population has increased by 12% and demand for oil is inelastic. I think that has more to do with the price increases than anything else.
"No, demand is down to like 1980's levels..."
Really? This info is, like, not that hard to find, you know.
year consumption change 1980 59,928.84 NA 1981 58,013.31 -3.20 % 1982 56,722.96 -2.22 % 1983 56,002.25 -1.27 % 1984 57,064.08 1.90 % 1985 57,382.49 0.56 % 1986 58,996.11 2.81 % 1987 60,385.75 2.36 % 1988 62,269.80 3.12 % 1989 63,497.39 1.97 % 1990 63,875.13 0.59 % 1991 66,970.88 4.85 % 1992 67,136.27 0.25 % 1993 67,587.53 0.67 % 1994 68,927.09 1.98 % 1995 70,130.20 1.75 % 1996 71,712.41 2.26 % 1997 73,459.28 2.44 % 1998 74,109.43 0.89 % 1999 75,872.74 2.38 % 2000 76,779.14 1.19 % 2001 77,468.54 0.90 % 2002 78,163.60 0.90 % 2003 79,708.27 1.98 % 2004 82,564.87 3.58 % 2005 84,067.14 1.82 % 2006 85,132.05 1.27 % 2007 85,901.96 0.90 % 2008 84,463.22 -1.67 % 2009 84,756.56 0.35 % 2010 87,371.34 3.09 % 2011 87,356.29 -0.02 %Thanks for the correction!
I was going from memory and got confused between gas / oil pricing and such.
This was what I was thinking when I mentioned the 1980's demand:
http://www.zerohedge.com/news/guest-post-why-gasoline-consumption-tanking
Recession brought on by high oil price is destroying demand for oil.
Paper oil farquing with the black stuff. What is a price but paper, anyway?
Cheap gold, cheap silver and now cheap oil. Does life get any better?
So long as one can take delivery, no. Life would be good. I will never complain about lower diesel prices, now let's actually see them.
Yes it does.... a healthy dose of Festering Ebola foreveryone
collapse is comming .... the 4 Hosemen of the Apocolizpse
Ok... i'll resume staring into the Either for answers
Aether
gold is too expensive if oil keeps going down.
Gold miners all had a boner today! Bets are that the FED will print more than ever.
Warn Warn....something is wrong somewhere!
Guess it will go to $50 when ISIS take Baghdad in the next few weeks?
ISIS in Baghdad is bearish for oil. ISIS gives biggeer discounts on oil than anybody else.
Some guys are losing their heads over this. Literally.
Crude is crashing. Why are prices at the pump not moving at all?
They are moving but certainly nowhere near in lockstep as quickly as if crude were rising. Funny how that works. No, not really funny at all...
You have to burn all that expensive old gas before you get to the cheaper new gas. Drive to 7-11 and pick up a quart of milk.