The 'Real' Price Of Oil Is Below $17

Tyler Durden's picture




 

"You see a big destruction in the income of the oil and commodity producers," exclaims on analyst but, as Bloomberg notes, while oil prices flashing across traders' terminals are at the lowest in a decade, in real terms the collapse is considerably deeper. Adjusted for inflation, WTI is its lowest since 2002 and worse still Saudi Light Crude is trading at below $17 (in 1998 dollar terms) - the lowest since the 1980s...

Slumping prices are a critical signal that the boom in lending in China is “unwinding,” according to Adair Turner, chairman of the Institute for New Economic Thinking.

In fact, while sub-$30 per barrel oil sounds very scary, Saudi prices would be less than $17 a barrel when converted into dollar levels for 1998, the year oil sank to its lowest since the 1980s.

 

Slowing investment and construction in China, the world’s biggest energy user, is “sending an enormous deflationary impetus through to the world, and that is a significant part of what’s happening in this oil-price collapse,” Turner, former chairman of the U.K. Financial Services Authority, said in an interview with Bloomberg Television.

*  *  *

So while prices are very low any description, never forget about inflation - The Fed won't!

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Thu, 01/14/2016 - 19:03 | 7048039 db51
db51's picture

Bring it Bitch....Waiting for $0.29/gallon like when I filled myu 69 Mustang 429 Fastback in high school with a $5.oo and still had money left for the date and a six pack of condoms.

Thu, 01/14/2016 - 19:04 | 7048056 LawsofPhysics
LawsofPhysics's picture

sorry, state and municipal pensions need funding, expect gas taxes to inversely follow any price declines in oil.

Thu, 01/14/2016 - 19:11 | 7048088 El Oregonian
El Oregonian's picture

$15.00 to fill-the-tank days are here again? Hmmm... and $4.00 an hour wages?

Deja Vu all over again...

Thu, 01/14/2016 - 19:20 | 7048131 new game
new game's picture

connecting the dots tyme: china, fed zirp, oil price, hy credit, cargo drop, equities dropping, currency wars. did i miss a few dots? connecting them i see an image of something shaped like a doomer with a tin foil hat, ha-lol...

Thu, 01/14/2016 - 19:31 | 7048170 Save_America1st
Save_America1st's picture

in 1980 dollar terms (the silver all-time high of 50/oz), phyzz silver today is selling for close to 1 dollar an ounce.

Keep stackin', bitchez! ;-)

Thu, 01/14/2016 - 19:42 | 7048214 Scooby Dooby Doo
Scooby Dooby Doo's picture

This article was too damn short!

Thu, 01/14/2016 - 19:47 | 7048233 YuShun
YuShun's picture

To adjust the price for inflation, was the politically-manipulated CPI used?

Thu, 01/14/2016 - 20:05 | 7048286 Save_America1st
Save_America1st's picture

The answer to your question is addressed within the first 4 minutes of the excellent interview below via SGTReport.com

They state that they used John Williams (shadowstats.com) properly adjusted (non-gov-scum manipulated) calculations.  Listen to this interview w/ Steve St. Angelo (SRSRoccoReport.com):

https://www.youtube.com/watch?v=ChT_hSwldyk

 

Thu, 01/14/2016 - 21:07 | 7048434 dfwpike
dfwpike's picture

The "real" price of oil is below $17 just like the "real" unempoyment rate is above 15%.

I get this game and it's fun.  It's the Wheel of Fortune.  I'd like to buy a vowel.

M_N_P_L_T_ _ N

Thu, 01/14/2016 - 19:34 | 7048174 Arnold
Arnold's picture

http://www.thecarycompany.com/containers/main/drums.html

When the price of crude is less than the price of a new clean barrel, U R FKD.

 

Thu, 01/14/2016 - 19:21 | 7048133 Mr.Sono
Mr.Sono's picture

safe sex in 1960, wtf is wrong with you db51. Fuck rubbers

Thu, 01/14/2016 - 19:21 | 7048134 Dead Canary
Dead Canary's picture

429 Mustang! Damn. All I had was a Valient slant six. Puke yellow.

Thu, 01/14/2016 - 19:23 | 7048146 new game
new game's picture

first car -dikty dik cheav mon

Thu, 01/14/2016 - 20:01 | 7048289 Consuelo
Consuelo's picture

That slant 6 was a million-mile motor though...   One of the best in-line designs ever put to blueprint.

 

 

Thu, 01/14/2016 - 20:22 | 7048342 GoinFawr
GoinFawr's picture

the blocks were indestructible, but the stock carbs sucked and blew

Thu, 01/14/2016 - 20:00 | 7048285 Consuelo
Consuelo's picture

++++ Precisely.

Thu, 01/14/2016 - 20:02 | 7048288 Wulfkind
Wulfkind's picture

"sorry, state and municipal pensions need funding, expect gas taxes to inversely follow any price declines in oil."

 

Right....and also expect them never to go down again when the price of gas goes up to $6.00 / gal

Fri, 01/15/2016 - 07:09 | 7049638 wmbz
wmbz's picture

Yep, the assholes at our state house here in S.Carolina are getting ready to add an additional 10% tax on gas.

Scum sucking bastards!

Thu, 01/14/2016 - 19:14 | 7048103 PirateOfBaltimore
PirateOfBaltimore's picture

Why bother with rubbers in the 60s?

 

Especially with a fast car like that to GTFO with.

Thu, 01/14/2016 - 19:23 | 7048144 db51
db51's picture

429 Cobra Jet.   That was so sweet...if only I'd kept it.   Back in the day we didn't get paid by Obama to pop illigitimate kids out.   lmfao...hence the rubber.   I remember when a tard at the gas station poked holes in all the packages while filling the machine as a joke.  Do you realize how many births that guy is responsible for.  On Prom Night too.

Thu, 01/14/2016 - 19:38 | 7048198 cleverusername
cleverusername's picture

a six pack! what fuckin high school did you go to man?

Thu, 01/14/2016 - 19:03 | 7048046 Beam Me Up Scotty
Beam Me Up Scotty's picture

Why isn't gas .99 cents a gallon then? Or better yet .69 cents??

Thu, 01/14/2016 - 19:06 | 7048067 1stepcloser
1stepcloser's picture

ummm Taxes?

Thu, 01/14/2016 - 19:34 | 7048187 DetectiveStern
DetectiveStern's picture

In the UK petrol is around £1.13 a litre assuming £1 a litre the break down is said to be 

  • Petrol Fuel Duty - 48.35p
  • VAT (17.5%) - 14.9p
  • Refinery Petrol Costs - 31.75p
  • Forecourt Costs - 3p
  • Forecourt Profit - 2p
  • The cost of the actual oil is only a small part of the total cost at the pump

    Thu, 01/14/2016 - 20:00 | 7048282 JohnGaltsChild
    JohnGaltsChild's picture

    You make a good point. In the 50's and 60's gas pumps displayed the state and fed taxes per gallon. That went away and we all can figure out why.

    Thu, 01/14/2016 - 20:07 | 7048311 zaphire999
    zaphire999's picture

    I'ts 1.02 in n.ireland where I am, unless you're in London you're getting ripped man.  Oh, then you're still getting ripped!

    But you're breakdown is just about correct.

    Fri, 01/15/2016 - 03:20 | 7049439 RadioactiveRant
    RadioactiveRant's picture

    There figures are old, duty is 57.95p a litre and VAT has been 20% since Osborne raised it in 2011.

    Thu, 01/14/2016 - 20:50 | 7048492 Chuckster
    Chuckster's picture

    Hang on captain...I think it's on it's way!

    Thu, 01/14/2016 - 23:05 | 7048948 sun tzu
    sun tzu's picture

    Considering federal and state taxes on gasoline average 49 cents per gallon, that would leave 20 cents for transport, storage and profits for the refiners, trucking companies, and gas stations. Transport and refining cost 44 cents, so the gas stations would be buying at 93 cents per gallon even if the oil was free. 

    Thu, 01/14/2016 - 19:04 | 7048047 LawsofPhysics
    LawsofPhysics's picture

    LMFAO!!!  Talking about "prices" in the absence of price discovery is a fool's errand.  Priced in what exactly?

    NO means NO fuckers!  The price could be $0 just as easily as it could be $100 per barrel.

     

    Thu, 01/14/2016 - 19:09 | 7048079 Xibalba
    Xibalba's picture

    such is life in the 'petrodolla kingdum'

    Thu, 01/14/2016 - 19:12 | 7048094 LawsofPhysics
    LawsofPhysics's picture

    unfortunately, all fiat will die.  This time is different in so much as this time it will be global Weimar.

    There isn't a central bank on the planet that hasn't been exponentially printing and issuing debt for 40+ years...

    Debt jubilee or WWIII, period.

    Thu, 01/14/2016 - 19:16 | 7048107 Xibalba
    Xibalba's picture

    That's the plan!  Then the IMF can come rescue everyone with SDR's

    Thu, 01/14/2016 - 19:26 | 7048155 new game
    new game's picture

    exactly-world central banks convien to solve the problem they created. ha-lol.

    Thu, 01/14/2016 - 19:40 | 7048209 DaveyJones
    DaveyJones's picture

    yes I love their use of "real" price. Did they take a moment to tell us the "real" price of extraction

    Thu, 01/14/2016 - 19:04 | 7048052 Gregory Poonsores
    Gregory Poonsores's picture

    Hey so, if WTI gets to $10 will they pay you to take a barrel of western canadian select?

    Thu, 01/14/2016 - 19:16 | 7048111 PirateOfBaltimore
    PirateOfBaltimore's picture

    Is that like Seagram's 7?

    Thu, 01/14/2016 - 19:15 | 7048085 gmak
    gmak's picture

    I prefer to think that oil is trading at near it's real price right now - adjusted for the fake growth created by leverage on leverage on leverage on debt. Can't compare to 'inflation adjusted' becuase it's being punished as part of the money printing / debt creation destruction.

     

    I mean that if you're destroying the debt that created the inflation then you're destroying the inflation.

    Thu, 01/14/2016 - 19:26 | 7048156 actionjacksonbrownie
    actionjacksonbrownie's picture

    I think I understand what your are saying, but if there was an absolute halt to all borrowing in the world, the pace of debt repayment would deflate the "money" supply at a rate of approx. 1% - 3% per year. The commodity sector is being repriced at a rate far exceding even the most extreme scenario of deflation that is possible today.

    Thu, 01/14/2016 - 19:18 | 7048120 actionjacksonbrownie
    actionjacksonbrownie's picture

    The CRB index is at 1973 levels! And looking at a chart, there is zero technical support until it falls another 50%. How many hundreds of trillions of currency units have the various central banks of the world printed over the last 40+ years???

     

    What an upside down insane world we live in.

    Thu, 01/14/2016 - 19:22 | 7048145 chairman mao
    chairman mao's picture

    So is Russia going to collapse?

     

    Thu, 01/14/2016 - 19:27 | 7048158 Baron Munchausen
    Baron Munchausen's picture

    Deflation, all I ever wanted...

    Thu, 01/14/2016 - 20:47 | 7048474 Chuckster
    Chuckster's picture

    Maybe Bruce Springsteen can write and sing a song: "All I ever wanted was deflation and a tank of gas."

    Thu, 01/14/2016 - 19:29 | 7048165 new game
    new game's picture

    russia will be fine. they have real resources and some tough ass people that have lived thru tough times.

    Thu, 01/14/2016 - 19:43 | 7048216 besnook
    besnook's picture

    and no debt.

    Thu, 01/14/2016 - 22:27 | 7048829 DaveyJones
    DaveyJones's picture

    I know I've posted this before, but this piece is great stuff

    http://www.resilience.org/stories/2006-12-04/closing-collapse-gap-ussr-was-better-prepared-collapse-us

     

    Thu, 01/14/2016 - 19:32 | 7048176 Other Mr T
    Other Mr T's picture

    Saudi's / OPEC glutted the market to drive out  higher production cost competitors, but then there's Iran. How low long can they go before they're ready for war? http://money.cnn.com/2015/11/24/news/oil-prices-production-costs/

    Thu, 01/14/2016 - 19:41 | 7048193 InsanityIsWinning
    InsanityIsWinning's picture

    The price of most commodities was artificial based on central banks flooding the world with money.  When yields compressed to almost zero, speculators bought stuff that would hurt if you dropped it on your toe.  Now that the tide is reversed, true price discovery comes into play . . and it ain't pretty.  Yet, Bullard today is already hinting that his chart is not behaving, must go from bottom right to upper left or we will intervene  . . . just let the markets clear for god sake.

    Thu, 01/14/2016 - 20:52 | 7048465 Chuckster
    Chuckster's picture

    This is how Mr. Bullard and family and friends make money.  Can people seriously think the FED can control the price of commodities.  Had we know what the FED was doing the last 8 years we would be billionaires like their friends and relatives.  Mr. Bullard babbling about they may have to do something about the price of oil?  Please.

     

    If you think about Mr. Bullard's statements today.  They must have been for one purpose.  Try and send the market up.  The FED must be spooked.

    Thu, 01/14/2016 - 19:42 | 7048215 bobert727
    bobert727's picture

    Well, based on that chart one would be inclined to be a buyer. The only thing you see and hear is how oil is going to $20.

     

    Looks worth taking a shot to me.

     

    Buy Crude-Sell Stocks....look for convergence.

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