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Who’s Ready For $30 Oil?
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
How low can and will oil prices go, and what will the effects of those prices be? I bet you’ll have a hard time finding even just two people who have the same opinion on that. Not that it’s merely a matter of opinion, mind you, there are a great number of real life factors that come into play. It’s not an easy game.
OPEC gets together next week, and it’s a cartel divided. Many if not most of its members are suffering some kind of losses at present prices, and the obvious choice seems to be to cut output in order to raise prices again. But that’s not easy either, because at lower prices they need more output, not less, to minimize the damage. Besides, is non-OPEC producers don’t cut their output, OPWC cuts may do very little to lift prices.
After the recent plunge in prices, WTI is in the $75 per barrel range, and Brent around $80, the playing field has already been altered significantly. Some producers are fine with oil at $60, others need $120. Many Middle East governments need high prices to keep domestic unrest at bay, even if they can produce relatively cheaply. Some, like Venezuela, are already very close to what looks like a collapse.
There doesn’t seem to be much doubt that Saudi Arabia’s decision to cut its prices has played a major role in bringing down prices. The reason why it’s done that, however, is not so clear. Weakening the economic and political power of Russia, Venezuela and ISIS is a very obvious underlying reason. That the House of Fahd would engage in some sort of battle with US shale seems less likely; the Saudi rulers don’t fight the US that has protected them militarily for decades in the volatile region they’re in.
These geopolitical reasons behind the price drop are interesting, but perhaps the purely economic background plays a far greater role than we tend to think. We know that most large economies are not doing well at all, and we also know that their leaders and central bankers do whatever they can to make us think that pig was born with lipstick on. But perhaps we lose something in the translation, perhaps things are worse than we realize.
An article at MarketWatch by ‘investment specialist’ Ivan Martchev suggests that the impact on the price of oil of the economic slowdown in China could be far greater, in the recent past as well as going forward, than most wish to acknowledge. Since a lot of demand growth comes from China, as Europeans and Americans drive less miles per capita, a significant slowing of that growth demand could be a major factor in where oil prices go in 2015. Martchev:
Cheap Oil May Be A Sign Of Bigger Problems
One thing that strikes me about this oil-price decline is how persistent and methodical it has been. Commodities trend much differently than stocks as strong trends sometimes seem almost linear in nature with very shallow countertrend moves. I have used the analogy that the zigs and zags of stocks are typically much better defined than those for key commodities in strong trends.
The other asset class that tends to show such “zagless” strong trends at times is currencies. This can easily be seen in the Japanese yen’s USD/JPY [..] The euro is also showing a weakening trend [..] Strong declines in commodity prices signify a supply-demand imbalance. You can’t quickly shut off supply, as there are many already-spent budgets and projects that need to be completed, so weakening demand can carry the oil price much further.
I think this oil situation has little to do with the U.S. and much more to do with Europe and China, much the same way in which commodity-price weakness in 1997-1998 was due to the Asian Crisis and not U.S. demand.
How low can the oil price go? [..] we know that the cash cost of shale oil is about $60 per barrel, varying among different producers, and that historically, commodity producers have been known to produce their respective commodities at a loss to keep personnel and equipment going, as well a service debts that have financed their recent expansion.
In that regard, it would be interesting to note that energy junk bonds comprise 16% of the junk-bond market, and their issuance is up 148% to $211 billion according to Fitch. So, yes, I think the oil price can decline below $60.
As to how low the oil prices can go, that depends on how much China will slow down as the number-one consumer of oil. China’s financial system is operating on record leverage at the moment. Record leverage in the financial system and a sharply weakening real-estate market suggest that their economic slowdown has the potential to carry far below Beijing’s GDP growth target of 7%.
Yes, China has had three real-estate downturns in the past seven years, but the latest one is coming at a time of debt-driven boom, which means the consequences this time can be quite different. I used to think that China was a classic savings-and-investment economic-growth model, and it was, but that was 10 years ago.
I no longer think that, since GDP growth in the past five years has come from ever-increasing leverage ratios in the banking system. No debt-driven boom is permanent by definition, so the decline in the Chinese real-estate market has the potential to create a domino effect there in 2015. If China does decelerate well below 7% in 2015, an oil price target in the $30 to $40 range is completely realistic.
I have to agree wit that conclusion. And I think China is doing far worse than it lets on. Even if official Beijing numbers fail to reflect this, the amount of oil imported should reflect it. recently, China, has stockpiled large quantities, but it has no limitless storage facilities. One would presume its demand on global oil markets may diminish quite a bit soon.
It’s interesting to see Martchev note that both the China economy and the US shale industry are extremely leveraged, i.e. both are in dangerously deep debt positions. The kind that a slowdown can hurt badly, if not murder outright.
Back in July, Wolf Richter pointed to the Ponzi that US shale has turned into:
[..] the Energy Department’s EIA has checked into it and after crunching some numbers found:
Based on data compiled from quarterly reports, for the year ending March 31, 2014, cash from operations for 127 major oil and natural gas companies totaled $568 billion, and major uses of cash totaled $677 billion, a difference of almost $110 billion.
To fill this $110 billion hole that they’d dug in just one year, these 127 oil and gas companies went out and increased their net debt by $106 billion. But that wasn’t enough. To raise more cash, they also sold $73 billion in assets. It left them with more cash (borrowed cash, that is) on the balance sheet than before, which pleased analysts, and it left them with a pile of additional debt and fewer assets to generate revenues with in order to service this debt.
It has been going on for years. During each of the last three years, the gap was over $100 billion.
If oil prices sink further on the lack of Chinese demand, perhaps even to $30-$40, what will be left of US shale? And I’m not even talking about the 75% or so output decline rates per well, which makes shale a questionable undertaking in the first place. I’ve said repeatedly that US shale is about money, not energy, that it’s a land speculation wager and not much else.
And even at $75 per barrel, that industry is already in big trouble. Not long ago, we saw indications that shale companies would keep drilling and producing full blast with their profit margins being strangled, out of fear that investors would walk away if they showed any sign of weakness. Now, that is no longer their biggest worry:
Drilling Slowdown on Sub-$80 Oil Creeps Into Biggest US Fields
The slowdown in the U.S. oil-drilling boom spread to two of the nation’s largest fields this week. The Permian Basin of Texas and New Mexico, the country’s biggest oil play, lost four rigs targeting crude, dropping to 558, Baker Hughes aid on its website today. Those in North Dakota’s Williston Basin, the third-largest and home to the Bakken shale formation, slid to the lowest level since August, according to the Houston-based field services company’s website.
It was the first time in four weeks that oil rigs dropped in the Williston. “We’ll start to see really big drops early next year if oil prices stay the same,” James Williams, president of WTRG Economics in London, Arkansas, said. Nineteen shale regions in the U.S. are no longer profitable with oil at $75 a barrel, data compiled by Bloomberg show.
Those areas, including parts of the Eaglebine and Eagle Ford in Texas, pumped about 413,000 barrels a day, according to the latest data available from Drillinginfo and company presentations. Domestic oil output slipped 59,000 barrels a day in the week ended Nov. 14 [..] Hess said in a conference call Nov. 10 that it’ll cut its rig count to 14 next year in response to the lower oil prices. Apache, with headquarters in Houston, will reduce spending in North America by 25% next year, a company statement issued yesterday shows.
And that’s just a Bloomberg account. You need salt with that. What is clear is that even at $75, angst is setting in, if not yet panic. If China demand falls substantially in 2015, and prices move south of $70, $60 etc., that panic will be there. In US shale, in Venezuela, in Russia, and all across producing nations. Even if OPEC on November 27 decides on an output cut, there’s no guarantee members will stick to it. Let alone non-members.
And sure, yes, eventually production will sink so much that prices stop falling. But with all major economies in the doldrums, it may not hit a bottom until $40 or even lower. Oil was last- and briefly – at $40 exactly 6 years ago, but today is a very different situation.
All the stimulus, all $50 trillion or so globally, has been thrown into the fire, and look at where we are. There’s nothing left, and there won’t be another $50 trillion. Sure, stock markets set records. But who cares with oil at $40?
Calling for more QE, from Japan and/or Europe or even grandma Yellen, is either entirely useless or will work only to prop up stock markets for a very short time. Diminishing returns.
The one word that comes to mind here is bloodbath. Well, unless China miraculously recovers. But who believes in that?
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Sub-prime Hummer Loans, Baby!
(And that's not just going under Italy's hookers-and-blow GDP line this time!)
When I see this article I call BOTTOM IN OIL!
We are entering the era of abundance.
Where there is abudance, the illusion of scarcity is quick to be presented.
Smash the energy market, buy up assets at fire sale prices, consolidate power. Same as it ever was, debt slavery.
Fed has a ton of powder left to send us over the edge. They only have 4 of the 17 Trillion issued. Nother round of QE around the corner.
So if oil goes to $30 then the Arabs, Russians, Venezuelans, oil companies and Wall street all get hurt?
Bring it on....
Meanwhile the shit is getting REAL in China.
https://uk.news.yahoo.com/exploding-excrement-topples-building-china-15-...
When currencies crash, oil does not go down in price.
My neighbor moved to Houston for one of those prestigious O&G jobs and a nice salary hike with a small up-and-coming earl company 2-3 years ago. Also tied lead weights aorund his ankles buying a new house in one of those fancy 3.2% property tax rate areas.
Too bad.
He cried on the phone to me last night saying they'll begin layoffs the week before Christmas. The low prices are killing them. I'm not sure what's causing the low oil prices or who is behind it but fronm what I hear there's going to be lots of serious pain real soon as it decimates what's left of the educated Middle Class workers -- engineers, O&G researchers, rig designers, drillers, etc.
Tapering takes it's toll.
oil has always been cheap out of the ground--it's the comodity and the trade for future use of it using cheap (free with QE) money that raised copper, gold, oil, farmland, housing, corn, --you name it-- the price (in USD) that you see is a price discovery sans the "big printing" in China and the US---IMHO
edit---price discovery in China and US sans the "big printing" -----had to clear that up abit.
What really pisses me off is that no matter how cheap stuff gets, I'm still never in a position to take advantage of the bargains.
But little Billy wants the G.I. Joe with the kung-fu grip.... Can't let things fall apart before X-mas!!!
See see see
All the electric cars conservation measures are working!
wishing Al Gore would publicly stand up and say that... but I wouldn't be listening anyhow, so it'd be like a tree shitting in the woods. no one would smell it
EV's are here to stay.
Infrastructure is fast becoming ubiquitous.
Nissan and others have 150-165 mile range 2015.
Every year technology refines/evolves and becomes competitive with margins regarding 'Battery Technology'.
"Cobalt?" There's Africa again and untouchd resources...
http://www.mapsofworld.com/minerals/world-cobalt-producers.html
Ps. The Arabs pulled the same shit back when America started an 'Energy Program' for moar fuel efficient vehicles/ alternates some quarter century ago. The Arabs countered with dirt cheap oil until the braindead muppets forgot that oil is finite! The BIG`OIL propagana MSM machine quickly scurried their little minds into thinking once again that fossil-fuel was as plentiful as the salt-'n`oceanwater-- rather than buy efficiency... they bought gashogs! SUV's in droves...
Yes, the Arab's want to end the shale industry, and buy it up for pennies on the dollar.
The Saudi's are the only country in the world that can get away with this? They stopped purchasing US Treasuries sometime in the 80's and cashed-out! Ironically, they are not a petro$$$ economy. Butt, with a humongous diversified sovereign fund worth $Trillions$. http://en.wikipedia.org/wiki/Golden_gimmick
No other country in OPEC has their savvy. The others produce, but blow it on weapons and armies, whereas SA just Pumps and Dumps!!! The Rockefeller family keeps them close to the vest, so to say, as the enemy of my enemy is my friend?
jmo
A number of fracking player put spread options on the price and are still making money. Some of the west texas fields make money at $60/b. I wonder how OPEC will make it work for their masses when they start printing money too. All that old growth forest being used up for all that printing. World wide socialism is coming to a concentration camp near you soon.
"bloodbath"....perhaps in another 2 years as Obummer is packing his shit
"...as Obummer is packing his shit."
I think Reggie Love takes care of that for him.
Reggie does the shit packing in the Obummer
blood bath, or is that blood in the streets? bloody fucking right, blood on the throne i say...
$100 per barrel oil in an abundant world would have set global oil production soaring.
That isn't what happened. In fact global production of crude stayed mostly flat since the price increase.
http://crudeoilpeak.info/wp-content/uploads/2011/02/Incremental_crude_wo...
Em...probably will see a slight repreieve for a while. But it kinda broke down out of a decade long triangle. So we aren't exactly at bottom yet.
http://i.imgur.com/iUVppVG.png
Nice chart.
wtfbbq a linear trend on a log plot is an exponential. gibberish
PS this article is CRAP. if china's GDP growth was NEGATIVE 7% i would expect oil demand to decline. but china's oil demand is growing exponentially. byebye japan and europe you guys are focked
What exactly are you prattling on about? That exponential gains or losses are irrelevant?
Particularly in a 20 YEAR time scale?
Trendlines on arithmetic charts are not worthless as they do provide an insight into blowoff tops better than log-scale charts. But log-scale charts certainly aren't worthless either.
Not yet there's a MASSIVE slowdown in industrial production here in Europe that will show up in the Q4 numbers.
It's not just bad, we're talking about -26% here!
And it has it's effects on everything else in the economy.
Countries are now preparing austeritiess in the background to counter the drop in tax revenue and that will set in a second slump when the government services will get severe cuts.
It's bad, it's even worse now than in 2007 and it's been going on since the summer
When finally the media will report on these things, people will go in chock.
End of year sales are watched with big eyes but we all know it's going to be a bummer.
@sudden
In Ireland at least more cars are chasing scarce money then anytime since 2008.
Spain - a colony similar to Ireland is showing big increases in car sales for 2014.
From what I remember sudden debt resides somewhere in Belgie (Belgium).
So uh...if things are slowing down in the country where Europa's headquarters is...that's honestly not good at all. At least for people who are currently working.
Yout don 't get what I m saying.
More activity in capital and labour goods dumping grounds is very negative for the resident population.
Growth is extractive as it is measured in the increased activity of chasing scarce money.
We are seeing increased reductions of purchasing power because of this growth , capital is burned before it can be used for the person - the purpose of this activity must therefore only be about maintaining wealth concentration even if this means the wholesale destruction of wealth.
Yout don 't get what I m saying.
More activity in capital and labour goods dumping grounds is very negative for the resident population.
Growth is extractive as it is measured in the increased activity of chasing scarce money.
We are seeing increased reductions of purchasing power because of this growth , capital
Cork,
Most of us get what you're saying; and agree with you.
I just would like to add the post below. It gives a fresh spin to the problem we’ll be facing.
By Leo Smith: I think the real revelation – if such is the word – has been that the PTB either do not know WTF is going on, or they are supremely indifferent to it, as long as their narrow elitist clique survives.
The move today is not about solving mankinds problems… It is in fact about moving the paper ownership of every single asset from personal ownership to corporate government and bank ownership.
The mechanism for that is simply taxation to reduce net wealth of the citizen, and printing money to lend to him, to enable him to survive.
The final result is that by a sleight of hand, banks and governments end up owning everything, and the citizen is indebted to them lifelong. It is in essence an indentured serfdom. Neo Feudalism.
In this context renewable energy are not facts and solutions, they are simply convenient lies – emotional narratives to justify a course of action that has as its real purpose something entirely different.
And that is total control of the energy market by those who understand that he who has energy, can rule the world. And its far too important to give to citizens.
Whether the vaunting ambitions of these power brokers, and their willing puppets contain the seeds of their own destruction is moot. One suspects they are the sort of people who want to be big fish, even if the pond dries up completely.
http://ourfiniteworld.com/2014/11/18/eight-pitfalls-in-evaluating-green-energy-solutions/#comment-47781
Sudden Debt
-26%?
Ouch!
You're right; people will go in shock... And they won't recover.
oil is and will always be a 35 dollar per barrel proposition.
Barry and Mr Yellin will make sure Saudi is kept warm under the covers
It is if the dual citizens want Putin gone and they want their blood stained hands on Russia.
I remember all the hype about $200 oil from Goldman before it went to $40.
http://www.youtube.com/watch?v=kUclbHGhByk
.
Women if your lucky Captain Kirk will save you and beam you to fortune and fame
go Siluria!
You know, one unintended consequence might be - China really can dump its US treasuries, and focus even more on the BRICS and SE Asia.
Of course, they have that whole ultra-nationalist, absurd interpretation of "chinese waters" and so keep shitting in the tub, but there's more to be gained by working that stuff out, and they are smart enough to know it.
European car sales have not crashed yet which is a bit strange.....
The great question of our time is will Russia sustain its cash flow and thus increase its domestic energy consumption- most likely at the expense of the euro entrepot.
I think the great question of our time is..WHO HAS THE GOLD?.
Cheap oil is a sign of their economic war against Russia and Iran.
Oil will go back up when that fails.
An American, not US subject.
Bingo.
Oil will be back up if/when the geopolitical games have been concluded, or when there is big money to be made on the other side.
Exactly. And Opec will do what it is told by its masters.
CNBC has an article about "$60 Oil after OPEC meeting is not possible" is a clear indication this bitch is trying to suck buyers in at $75 dollar area because its about to drop even further. Eventually US and company will have to give this little game up as it will destroy themselves. Maybe that is the plan. Destroy the whole damn thing. its working if that is the case.
i'll just add that all the time the barrel is under 80$, when us missions will be complete, to get back lost money, you can expect barrel to go WAY ABOVE 110$ for MONTHS to get balance back.
for sure - but if China can buy and stockpile all this cheap oil - and I'm asking - don't you think that makes it easier for China and Russia [and India?] to really dump treasuries and actually fuck the dollar up Sugar Ray style if not Mike Tyson style?
To fuck up the dollar Russia and China need to issue more paper denominated in CNY and RUB, their UST hodings are irrelvant and can be absorbed by the FED. What they need to do is grow market share in Clearing & Settlement, which requires more paper products (debt, equity and derivative). The US FED cleared over 1 quadrillion US dollars of transactions in 2013. How much did PBoC and CBR clear in 2013? There's a reason the G10's most exclusive club is called the Bank for International Settlements.
You mean beat the devil by being more immoral than him? That's sure gonna work.
They are governments, not choirboys, and they are sick of being fucked up the ass by the Uncle Sam. As bad as the USD is, they need to offer an attractive alternative to the global community- so one of two things has to happen before they become a viable, much less attractive, alternative- either they get much bigger, or the USA gets much smaller. When the flow dwarfs the stock you get Switzerland in 2011, 30% movement in six months against the broad spectrum of crosses and domestic destabilization.
Who besides a true believing "liberal" (in the American sense) would think a government inherently does good or primarily serves it own people, much less other nations' people these days anyway? (Since I'm naturally inclined towards smaller necessary evils that are so close I can reach out and smack them up side the head if need be.)
Cheap oil benefits everyone and since most countries are either hesitant allies or outright enemies of the US, it can't be a sign of an economic war. Cheap oil hurts Russia and Iran, huh? Well, it benefits everyone who buys oil from them and they're typically the kind of people that dislike US and Saudis (which is exactly the reason why they trade with our opponents instead of allies). Is helping those people a part of our retaliation? By letting China get more oil, are we hurting opposition?
What about Iranian sanctions that have been lifted just a day ago? How does that tie into the oil manipulation masterplan?
What about all the times when oil was expensive. When it shot to $147 a barrel, did we do that to help out Russia and Iran? Is the price of oil a reflection of our economic ties with their countries, or is it a bit more complex than that?
You're giving US too much credit. You assume what it wants is still relevant. Well, get ready for surprise. It no longer is.
Me thinks it is to hurt the ruskies and iranastanians from making all the side deals away from the petrodollar.
It's all about money and saving money. They made the side deals, at 85 bucks, which were good 6 months ago and now the buyers will want to renegoiate or renig on the deals. This might force many back into the system and then prices will go back up when the sellers are back in control.
China will make out no matter what. They will always get the best deal on the block. The biggest client is always right. Or your face will get bashed in with a baseball bat.
The US can fire a missile in any direction and hit somebody who hates them. Which may be why so many people hate them in the first place.
The Russian's and Iranians have been through so much shit over the past 20 years due to the West's Meddling, they have learned to adapt to almost anything. When the boomerang comes back and hits the WEST, it will be a Mike tyson KO
An American, not a US subject
Automatic Earth(always wrong) quoting Marketwatch(always wrong), yuck.
Ivan Martchev was calling for $150 oil 2 years ago.
I am ready for $30. FUCK ALL OIL AND COMMODITIES TO HELL!
Wow, must be coming out of the ground with no effort...
by I digress, I certainly will not complain about cheap diesel.
Tar sands are toast at $30. No way they can make money at that level.
And yet, gasoline is still $4.80 a gallon in BC, Canada.
That's because the Canadian government has an energy policy.
Bay of Pigs
$30 or $100 dollars? Who cares.
But, could you please tell us how will the Canadians burn that sand, into oil, at the next decade?
"I think this oil situation has little to do with the U.S. and much more to do with Europe and China,"
i'll buy that ... for now
but in 2015 put me down for US will join the low demand crowd
trade under $60? ... book it
under $50 wouldn't surprise me
Gasoline demand has been falling in the USA since 2005. It is a long term trend that is going to continue.
I have one, err, two words.............click bait.
"To fill this $110 billion hole that they’d dug in just one year, these 127 oil and gas companies went out and increased their net debt by $106 billion. But that wasn’t enough. To raise more cash, they also sold $73 billion in assets"
carnage coming ... heh heh
Back in 2009 euro car sales imploded , still no sign of this according to the acea.
All major markets have improved in 2014 with the exception of France which remains weak..
Hey, wait a minute! What happened to the Peak Oil craze? Funny as it seemed to have petered out about the same time gold was tanking (hit its peak) while it was being pumped at Kingworldnews.com and by Jim Sinclair.
You aren't very bright are you?
Hey, everybody, it's Jim Sinclair!!! (Or Eric King!!!)
LOL! I upvoted you brah, because here at Fight Club it's all about pissing in the campfires!
Oil, like all commodities (except physical gold), is priced at the margins. We could be down to our last well and if demand is not there it will still be cheap.
It is always a surprise at how fast the end comes to exponentially growning systems.
What we are seeing is not incompatible with peak oil.
Back when oil was at $147 a barrel, and credit was free flowing, more people could afford to fill up (and had a reason to) than today.
Peak oil is already behind us. If you don't think not in terms of money, but in how many barrels it takes to pump the next barrel out of the ground, we have certainly passed it in it mid 2000's.
Forget money. Measure energy input vs. output. Measure calories, joules, watts whatever. Forget paper.
Oil gets cheaper in dollar terms not because of new discoveries, but due to collapse in demand. At some point demand will normalize. However, it will still not make oil easier to extract unless there is a massive new discovery or a technological breakthrough relating to retrieval methods.
According to the traffic I see demand for oil is still pretty high.
Agstacker
So, how can you explain this to us?
US gasoline 2007
Produced: 3.3 billion barrels
Imported: 173 million barrels
Exported: 1.5 million barrels
US gasoline 2013
Produced: 3.2 billion barrels
Imported: 16.1 million barrels
Exported: 4.4 million barrels
Motorhead
Once at it, what happened to Peak Stupidity?
Most everyone around me in this area NWLA are oilfield or freeshitarmy, looks like fsa will be the last ones standing...
the guys talking last week said $40 was about as low as they can go and still make some profit ... but at the same time the Chinese that have bought leases would snap up more...
Gold Capitulated. There is a renewed appetite for a long bias but it may stay measured rather than manic at this stage.
Treasuries lack any Clarity. Energy remains profiled for some degree of “Capitulation” at any time. Meanwhile the strong Dollar is showing some signs of weakening.
OIH looks like it's consolidating within a bearish triangle--most likely next push lower-could cause a larger bounce.
http://www.sentimenttiming.com/free/
mpath
First ask 'who buys paper gold promises' and the falling gold price will become clear. Those who use it as a hedge may still find it useful, those who need the metal will still demand physical.
As the price continues to fall due to the ability to produce unlimited paper gold we will see fewer and fewer buyers of this delightful product. The metal purchasers will continue on regardless of price.
OT but newsworthy: The grand jury has reached a decision. This has taken about as long as it took Franco to die.
All it will take will be one event that will fundamentally be the catalyst to rock the market, like Israel attacking or going to war with Iran. Instead of talking about $30 oil we will be seeing $130 oil.
Holy shit puppets Randy did ya hear that? $30 a barrel.
Speaking of randy....
Gas is still $3.29 a gallon in Chicago. LOL
2.50ish here. It's warm too. Have a great winter!
$2.40 in Louisiana. Fuck Chicago. And fuck New York. And fuck Los Angeles, and fuck San Francisco.
Hey Bridget ... thats funny
Thats because Rahm needs more revenue to build more redlight cameras to save children. Who will save the children otherwise!!!!!!!!!!!!!
It is only about $2.76 in Detroit. Go figure.
Chicago blows. Illinois is best seen in your rearview mirror.
I fled Chicago about 10 years ago. Best decision I ever made. What a shithole. Those Critical Mass assholes were stopping traffic and the police wouldn't do anything about it.
I can find it for $2.33/gal here.
The price of oil is secondary to possible conflict with Russia and President Putin. Oil is a bar line news item in the standoff with Putin over Ukraine and nothing much more than that. The price of oil always goes up just like housing prices and bond yields don't ya know. Further, the energy sector can afford to play games with Russia for many years.
Fuck it. I am. Now I can buy that Hummer I've always wanted.
they said that it wont stay low price indefinivly. do you fucking listen !?
there is more left...till every last digital tree is dead..they are going to print....japan printed like 18 quintillion!
Timber!
Can we get some charts of Chinese oil demand instead of BS articles. How about some charts of world demand country by country?? I doubt demand all of a sudden fell enough to justify a 30% decline in price. I'm not saying $30 oil is not possible but what percentage of holes in the ground are profitable even at $60. If it hit 30, my guess would be shorts in the futures market put it there, not supply and demand.
In the short term, supply is quite inelastic, though Shale has changed the horizon. At this point, these are value destroying because it is really about trying to bully uneconomic outcomes rather than the free market functioning. All that will happen in domestic production/drilling will slow and we'll be more dependent upon imports again when the global economy starts to recover and/or the developing world disintermediates USD for trade...
The $USD is pegged to the price of oil.If oil goes down the $USD goes up,no matter what the economic stateIn Australia I have seen a booming economy get slaughted in exchange rates just by a drop in the oil price.I think it is that simple
Wrong.
When the oil price drops, international demand for USD drops. Fewer USDs get recycled into US government bonds. Yields rise.
If the price stays down we'll see more QE.
If Oil goes to 30 then Dow goes to 5000.
Normally soft oil prices should boost Dow, But as all assets are boosted on speculative trades linked into derivative mountains, we can't afford to have a recession; CB liquidity pump then collapses to boost real growth; no lift. And its back to the 1930s.
This a damned both ways situation
As the oil and gas prices have soared the tax is percentage based, so therefore the Gov's total in taxes has also soared, so what did they do with the money, what else piss it away, none went on the national debt, why because they don't care, they know they will default at some point. he who defaults first loses!
All of the gas taxes I know of are actually currency-denominated as in X per gallon rather than % per gallon.
But I do agree that they have squandered the money on that thing that Obama swears he never does.
Dang, this is gonna kill investment in oil alternatives........
Yeah right. Bombs will rain down on certain cities long before we get there.
Nominations are now open...
I always wondered why there wasn't an OPIC -- Organization of Petroleum Importing Countries -- which would get together and agree on a maximum price at which they would be willing to buy oil.
After all, it's the OPICs which have the money, the guns, and the food. It's not like OPEC could wage an Opium War on their better-armed customers.
Yeah, I know I'm dreaming.
Raul: You know better than that... How long will shale take to deplete if new weels are not drilled? And globally, how much new drilling will take place with falling prices? In the VERY short term, the supply curve is quite inelastic, so these games can work and move the price of oil meaningfully. But, they do not change the fact that EROEI is decreasing, nor that the shape of the supply curve is changing due to unit economics. All an article like this does is encourage short term thinking.
Surprising how many people just don't peel back enough layers of the onion sometimes:
http://www.boilingfrogspost.com/2014/10/24/the-secret-stupid-saudi-us-de...
Dropping the price of oil is actually a stimulus. Or a weapon.
Pick your poison.
Texas will be going for dimes when the dust lifts after the reset.
Canada will be sitting in a RE bubble to make the Toronto mayor lose all his fat.
In Europe being fit means having one meal a day.
In Russia they will be eating rats and in Egypt they will be digging up the pharoah's tombs like mad.
One good thing climate change will take a back seat.
And those boat people will head for Australia land of tomorrow.
Geronimo will be declared posthumous king in land of yesterday.
China will invent the one rice grain a day keeps the doctor away motto.
From hyper we will go to hypo consumerism.
Ballad of a man whose life was a trip going back into time to its origins.
Noblesse Oblige.
I am hoping it will forward back to the 1600’s.
But extinction is more likely.
and more pleasant
Who is ready for $10 oil?
The Grim Reaper, that's who.
Well the Fed could just start buying oil futures and selling gold futures.... just work the paper markets .... these feckin neo Bolsheviks are trying to set the price for everything.
God I hope that oil gets to $40 again. I will max out every line of credit I have and store the shit in my swimming pool if I have to!
Well, when it's a state owned company pumping and selling the oil, as long as there are reserves, it can weather the storm. Nations with large reserves are best suited towards this type of strategic warfare. Saudi and Russia dropping prices doesn't matter much, their lines are long established. When it's private and profit-motivated however, they are fucked pretty fast. Smaller nations without the capacity to weather the storm are also rather fucked, especially if they are reliant on imports that are funded primarily by oil sales. Saudi has cash out the ass, they do not care. Russia is more or less in a state of autarky, so they also do not care. The US... in the midst of this unsustainable oil boom funded by ponzi scams... oh, they be fucked. It would be tantamount to Saudi tomorrow opening the flood gates with zero controls on who can pump and how much they can pump in the interest of instant cash versus long term assets. The US has been allowed to overextend itself and get comfy with that shale oil, LNG ports are going online with the notion of trying to export (which is the only way shale gas is not a net loss)... crash those prices after the investments though, and it all just implodes, allowing the long established players to come out much stronger and be seen as more reliable partners.
If oil is $30 a barrel because of an abundant supply, then Yippie.
If oil is $30 a barrel because of a dearth of demand, then you can kiss your keister dasvidaniya.
http://www.comstockfunds.com/default.aspx?act=Newsletter.aspx&category=MarketCommentary&newsletterid=1790&menugroup=Home
We, at Comstock, were shocked at the praise given to the Fed when we don’t believe the Fed rescued the U.S. from the ravages of a “liquidity trap” at all, but even more shocking to us was the response of the interviewers. We are sure that there were not many people watching on TV that understood the definition of a “liquidity trap”. Yet the economist was never asked to explain it. Hopefully, in this comment we will explain what a “liquidity trap” is, and why we don’t think the Fed avoided the “trap”. We will also explain why we think the Fed painted themselves into a corner and will have to keep rates very low, continue increasing their balance sheet, and maybe even resort to QE 4. We are skeptical that going back to the same old fashioned government subsidies used by the Fed over the past six years will work any better than they did for the past six years.
A “liquidity trap” as defined by BusinessDirectory.com, is a situation when bank cash holdings are rising and banks cannot find a sufficient number of qualified borrowers even at incredibly low rates of interest. It usually arises where people are not buying and firms are not borrowing (for inventory or plant and equipment) because economic prospects look dim, investors are not investing because expected returns from investments are low. People and businesses hold on to their cash and thus get trapped in a self-fulfilling prophecy. Wikipedia agrees that a liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Thus, if an economy enters a “liquidity trap”, further increases in the money stock will fail to lower interest rates and, therefore, fail to stimulate.
We believe that this country and many other countries across the globe are intertwined in this “liquidity trap” presently. It is clear that the Fed has tried to pump as much money as possible into the U.S., but for the past 50 years M1, M2, and M3 have grown at around 7.5% and this past year the Ms grew at 1.5%. According to the Federal Reserve figures and Moebs Service the average checking account balances have averaged about $2,000 for most of the post WW II period, but now they have grown to $3,700 in 2011, $4,400 in 2012, $5,000 in 2013, and $5,800 now.
We are clearly in the same “liquidity trap” that Japan has suffered from for the past 24 years. This is the main reason that this economic recovery from the “great recession” is so weak. We understand that the 3rd quarter GDP came in at 3.5%, but the U. S. has been growing at around 2.2% over the past 6 years. The average recovery from recessions since WWII has been closer to 5%. That is just about double the recovery rate we are experiencing today following the worst recession since the “great depression”.
There was a lot of trepidation in the U.S. stock market as investors were concerned about QE 3 ending. Many investors were worried about the ending being similar to the 12% and 14% declines that followed QE 1 and QE 2. Instead, the markets handled that fairly well, which surprised us.
Then the news came out of Japan! The Bank of Japan (BOJ), the Ministry of Finance (MOF), and the Government Pension & Insurance Fund (GPIF) decided to do even more than our Fed. The BOJ raised its goal for the monetary base to 80 tn. yen from 65 tn. yen. The central bank’s governor, Haruhiko Kuroda, stated that this was aimed at “ending Japan’s deflationary mind-set.”
This past September, the GPIF was supposed to invest in more Japanese equities (going from 12.5% to 25%), but postponed the move until year end. They surprised most global investors last Thursday by not waiting until December. They announced that they would double their positions in Japanese equities to 25%. But, they were so concerned about deflation they also raised their positions in international equities exposure from 12.5% to 25%. They raised the cash to make these investments by trimming their domestic bonds from 60% to 35%. This announcement drove up all international markets significantly this past Friday (including a 7% upward move in the Nikkei).
We suspect strongly that this outrageous surprise move will not help the Japanese market over the long term and be just as ineffective as all the other moves the Japanese made over the past 24 years. Remember, they tried our form of QE about 20 months ago with no apparent inflationary results. Their latest quarterly GDP was down about 7%. They will keep trying to offset the deflation in Japan by exporting it to their trading partners by driving down their yen in relation to their trading partners’ currencies. This is called “competitive devaluation” and we have been stuck for years on this part of our “Cycle of Deflation”(which is attached). Soon, many countries that are caught in the “Cycle” will be forced to move down the “Cycle” to “protectionism and tariffs” and then next to “beggar-thy-neighbor” (an example of this is Saudi Arabia lowering the price of oil today in an attempt to gain market share from the U.S.). They are doing this in an attempt to export their deflation.
This global deflationary environment has resulted in a Central Bank “bubble” that we believe will end badly both here and abroad! The reason for this difficult deflationary environment all over the world is explained very well in The Geneva report titled "Deleveraging, What Deleveraging?" It explains that, most believed that the 2008 crash (caused by the debt explosion) would result in deleveraging. But, instead, due mostly by government spending, worldwide debt grew rapidly. According to the report, global debt as a percentage of GDP has risen 36 percentage points since 2008, to a record 212%.
The Cycle of Deflation
http://www.comstockfunds.com/files/NLPP00000/581.pdf
That probably won't happen.
ISIL (or ISM, ISS, ILV) need their Petrol Sales to continue, so i think they just might get more aggressive Pirating and Bombiing Oil Assets to pump up the scare.
Interesting article. So now we're talking about $30? I recall just a few months ago the "experts" were predicting oil prices back at $100 at year end... where are these "experts" now? I guess there are two main reasons for the falling oil price - the emergence of another key player on the market (USA) and the overall decline in demand all over the world with most economies on the verge of recession (for China anything below 7% is technically a recession...). And of course geo-politics does play a role here - both the US and the Saudis perhaps have different interests (especially as far as shale oil is concerned), but they also have a number of key adversaries... so essentially the cheap oil mostly hurts these i.e. Venezuela, Nigeria, Russia and "presumably"... ISIS.
Looks like I picked the wrong year to trade my truck in for a Prius.