OT: At what point are oil prices too low?
- Thread starter LionJim
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Boyer is a smart man, listen to him. Declining world demand for oil is not going to turn around anytime soon as the world is not going to move from a recessionary period into a growing economy for many years. So it is now purely a supply side issue right now with OPEC cartel really no longer relevant as it is every country for themselves essentially at this point. Oil will rebound over the coming months/years as the higher cost suppliers start taking their oil off the market, but the difference now versus before is that those oil spickets can be turned back on relatively quickly once the price starts to go back up.
And if electric cars ever can get over the hump, all of a sudden a large amount of oil comes off the market not needed for gasoline and their is a nighttime demand for electric (as that is when everybody will be charging their cars) that greatly smooths out the ups and downs of energy demand. Solar panels on your roof with a battery pack the size of standard outside air conditioning condensor that stores that power during the day and puts it back into your car at night. Electric company no longer required.
And if electric cars ever can get over the hump, all of a sudden a large amount of oil comes off the market not needed for gasoline and their is a nighttime demand for electric (as that is when everybody will be charging their cars) that greatly smooths out the ups and downs of energy demand. Solar panels on your roof with a battery pack the size of standard outside air conditioning condensor that stores that power during the day and puts it back into your car at night. Electric company no longer required.
This thread reminds me of the Simmons-Tierney bet. In 2005 the bet was made and it was that the average price for a barrel of oil in 2010...averaging all the days in the year...would be over $200 (in 2005 dollars). The average price in 2010 turned out to be $80, which was $71 in 2005 dollars. The single highest daily price of a barrel of oil since then was $145, in 2008.
https://en.wikipedia.org/wiki/Simmons–Tierney_bet
https://en.wikipedia.org/wiki/Simmons–Tierney_bet
I've seen estimates as low as $15 per barrel. Ive also read people in the industry who admit to not having the foggiest idea where this turns out. I wouldn't put much of my money into oil stocks now, but that's just me.
It was $16.33 in December 1998; inflation adjusted, If you look at all declines since 1948, none have ever lasted long. If you throw out 1998, $24-$26 appears to be solid support for a bottom.
Take a US Mail truck full of aluminum cans to recycle, buy the gas cans in bulk there and bring the gas back. The numbers will work.
maybe you're right. housing prices also never experienced the downturn they did in '07-'08 and we know how that story ended, so not sure I'd be willing to invest under that thesis (and even if I did, I'm not sure the oil companies are being valued at $24-$26 now, guessing it's higher...). We also have more supply in the market than in '08. At least two big banks have come out with lower estimates than $25 range.
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To me the issue is not what is the 'low' point as that is almost not important. It is how long will the price for a barrel of oil stay under let's say $40 and then how long after that will it stay under $65-$70. I only pick $40 as it is a price point that I think is too low for the frackers and higher dollar guys to make money and therefore they will not be pumping at this rate. Only the 'historical' oil wells can make pump out of that ground and make money at that amount. So that is a price point that could be set. Obviously at that point, many of OPEC cannot survive as they need much higher pricing to subsidize the welfare states they have set up. I see the next price point at $65-$70 as that is where the frackers and canada sands and other non-conventional players start to be able to make money and come into the market in force.
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I don't see $40 as sustainable either. At that rate most off shore is dead. So is North Shore Alaska or other extreme weather sites. I doubt that European North Sea can make that cut. Venezuela, N Africa, most of the ME, Russia all need higher than $40.If it stays around $40 for the entire year, expect to see some major turmoil in several countries.
The $65-70 range seems right to me. At that point a lot of sources become doable even if it is too low for some of those social welfare/addicted-to-oil states. And nat gas will stay very low so it may compete with oil for several markets. I would still love to see eighteen wheelers all convert to nat gas. That would really keep oil prices low.
Follow up to low oil price thread...
Potential impacts of Shale Oil 2.0.
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Potential impacts of Shale Oil 2.0.
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Why oil prices are likely to remain low for the foreseeable future – Shale 2.0
Shale Revolution Changes Everything
How the Shale Revolution Has Reduced Geopolitical and Price Risk
Opec was on the verge of claiming victory over its North American rivals last night after its strategy of squeezing out the shale industry by flooding the markets with oil appeared to be vindicated. The oil producers’ cartel said that falling prices would force lower production from its rivals by the end of this year, with American and Canadian producers particularly affected. –Marcus Leroux, The Times, 19 January 2016
When oil prices tick up, thousands of profit-seeking investors make individual decisions to turn each shale factory’s switch to “on.” That’s how the U.S. so rapidly achieved, from 2009 to 2015, the record-breaking rise in production of four million barrels a day.
Shale 2.0, when it comes, will be even better. The technology is advancing at a speed usually associated with Silicon Valley. Just as a new Internet ecosystem rose from the ashes of the dot-com crash, Shale 2.0 will emerge—and for the same structural reasons. –Mark P Mills, The Wall Street Journal, 19 January 2016
Even as the U.S. rig count has retreated like Napoleon from Russia, shale remains the key to understanding the global oil landscape. Consider that despite all of the turmoil in key oil-producing regions, namely the Middle East, oil prices have not spiked. Nothing — not Russian intervention in Syria, not ISIS attacks on Libyan oil infrastructure, not the torching of the Saudi Embassy in Tehran — has been able to stop the oil price collapse. What is going on here? Does turmoil in the Middle East suddenly no longer matter? The American shale oil model has changed the world oil marketplace for the foreseeable future. Shale producers’ ability to quickly throttle down or ramp up upstream investment spending, drilling and production, as oil prices change, is viewed as an effective shock absorber against any potential oil price spikes. Mark J Perry, Investor’s Business Daily, 15 January 2016
The full measure of the shale oil model’s impact will be tested when the current crude glut clears and geopolitical risk returns, which is a near certainty. As oil prices eventually rise, will production from America’s shale oil fields rise in tandem and absorb the shock? The next president is likely to find out, and the answer will almost certainly be “yes.” And maybe that president will do something President Obama has never done — acknowledge the game-changing shale revolution as the most extraordinary energy success story in U.S. history. Mark J Perry, Investor’s Business Daily, 15 January 2016
Shale Revolution Changes Everything
How the Shale Revolution Has Reduced Geopolitical and Price Risk
Opec was on the verge of claiming victory over its North American rivals last night after its strategy of squeezing out the shale industry by flooding the markets with oil appeared to be vindicated. The oil producers’ cartel said that falling prices would force lower production from its rivals by the end of this year, with American and Canadian producers particularly affected. –Marcus Leroux, The Times, 19 January 2016
When oil prices tick up, thousands of profit-seeking investors make individual decisions to turn each shale factory’s switch to “on.” That’s how the U.S. so rapidly achieved, from 2009 to 2015, the record-breaking rise in production of four million barrels a day.
Shale 2.0, when it comes, will be even better. The technology is advancing at a speed usually associated with Silicon Valley. Just as a new Internet ecosystem rose from the ashes of the dot-com crash, Shale 2.0 will emerge—and for the same structural reasons. –Mark P Mills, The Wall Street Journal, 19 January 2016
Even as the U.S. rig count has retreated like Napoleon from Russia, shale remains the key to understanding the global oil landscape. Consider that despite all of the turmoil in key oil-producing regions, namely the Middle East, oil prices have not spiked. Nothing — not Russian intervention in Syria, not ISIS attacks on Libyan oil infrastructure, not the torching of the Saudi Embassy in Tehran — has been able to stop the oil price collapse. What is going on here? Does turmoil in the Middle East suddenly no longer matter? The American shale oil model has changed the world oil marketplace for the foreseeable future. Shale producers’ ability to quickly throttle down or ramp up upstream investment spending, drilling and production, as oil prices change, is viewed as an effective shock absorber against any potential oil price spikes. Mark J Perry, Investor’s Business Daily, 15 January 2016
The full measure of the shale oil model’s impact will be tested when the current crude glut clears and geopolitical risk returns, which is a near certainty. As oil prices eventually rise, will production from America’s shale oil fields rise in tandem and absorb the shock? The next president is likely to find out, and the answer will almost certainly be “yes.” And maybe that president will do something President Obama has never done — acknowledge the game-changing shale revolution as the most extraordinary energy success story in U.S. history. Mark J Perry, Investor’s Business Daily, 15 January 2016
I agree that oil prices will remain low for the foreseeable future. The shale fracking industry is just waiting for OPEC to raise prices and they are on their way to drilling to new highs. The major question is how this affects the US and worldwide economies with emphasis on the stock market affect. Saving money on gas and oil prices is a nice thing, but the real financial impact on most Americans is how their life savings are affected by all this. I have been told by economists that the China market crash is also directly or indirectly tied to depressed oil prices, so this requires a more thorough understanding. I would appreciate any experts to chime in with your thoughts here. My stock broker is at a panic point and is switching most of his clients over from stocks to cash and bonds. I believe this is a wrong move and have kept my portfolio as is. He had predicted a huge market slide today which hasn't occurred. Perhaps he was right and the plunge is soon to come.I'm literally putting my money on him being wrong!Follow up to low oil price thread...
Potential impacts of Shale Oil 2.0.
=====
Why oil prices are likely to remain low for the foreseeable future – Shale 2.0
Shale Revolution Changes Everything
How the Shale Revolution Has Reduced Geopolitical and Price Risk
Opec was on the verge of claiming victory over its North American rivals last night after its strategy of squeezing out the shale industry by flooding the markets with oil appeared to be vindicated. The oil producers’ cartel said that falling prices would force lower production from its rivals by the end of this year, with American and Canadian producers particularly affected. –Marcus Leroux, The Times, 19 January 2016
When oil prices tick up, thousands of profit-seeking investors make individual decisions to turn each shale factory’s switch to “on.” That’s how the U.S. so rapidly achieved, from 2009 to 2015, the record-breaking rise in production of four million barrels a day.
Shale 2.0, when it comes, will be even better. The technology is advancing at a speed usually associated with Silicon Valley. Just as a new Internet ecosystem rose from the ashes of the dot-com crash, Shale 2.0 will emerge—and for the same structural reasons. –Mark P Mills, The Wall Street Journal, 19 January 2016
Even as the U.S. rig count has retreated like Napoleon from Russia, shale remains the key to understanding the global oil landscape. Consider that despite all of the turmoil in key oil-producing regions, namely the Middle East, oil prices have not spiked. Nothing — not Russian intervention in Syria, not ISIS attacks on Libyan oil infrastructure, not the torching of the Saudi Embassy in Tehran — has been able to stop the oil price collapse. What is going on here? Does turmoil in the Middle East suddenly no longer matter? The American shale oil model has changed the world oil marketplace for the foreseeable future. Shale producers’ ability to quickly throttle down or ramp up upstream investment spending, drilling and production, as oil prices change, is viewed as an effective shock absorber against any potential oil price spikes. Mark J Perry, Investor’s Business Daily, 15 January 2016
The full measure of the shale oil model’s impact will be tested when the current crude glut clears and geopolitical risk returns, which is a near certainty. As oil prices eventually rise, will production from America’s shale oil fields rise in tandem and absorb the shock? The next president is likely to find out, and the answer will almost certainly be “yes.” And maybe that president will do something President Obama has never done — acknowledge the game-changing shale revolution as the most extraordinary energy success story in U.S. history. Mark J Perry, Investor’s Business Daily, 15 January 2016
Iranian oil will now be introduced to the market as well...http://money.cnn.com/2016/01/18/inv....html?iid=ob_article_hotListpool&iid=obinsite
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I don't think depressed oil prices caused the China market crash, rather I think the China market crash is one of the causes of depressed oil prices. I don't know what caused the China market crash but given that it happened that decreases demand for energy and thus lowers oil prices. If you recall, the last time gas was this cheap it was when the economies were tanking in 2008. Tanking economies depress oil prices.
While there might be some pain and tumult in the short run, I don't see how low oil prices can be anything but good in the long run (unless maybe you say it'll encourage more oil use and thus increase global warming, but that's a whole other topic). We have now lower prices of a very important commodity and a lot of the sellers of said commodities (Middle East, Venezuela, Russia) are bad guys that will get less money as a result of the lower prices. Sounds like a win-win to me. And part of the cause is the shale revolution in the US, which helps the US economy. Make that a win-win-win.
I don't know. I can't figure out the mystery of the stock market so my strategy is to buy index funds because they're cheap and they cover the whole market. I think that's a good long term strategy but of course as you get closer to retirement age you have to start guessing whether to start taking your money out of the market and putting it into something safer lest a big drop happen right before you retire and your retirement money vanishes.
But in the bigger picture and in the longer run, I think a lower price for such an important commodity as oil only helps.
I am 2 years from retirement age. The markets have dropped significantly over the past month or so.We have all encountered paper losses if we are invested in stocks. With the long-term defined as 2 years for me, do you think I should now stay the course or switch stock funds over to safer money and bond markets? I am leaning towards staying the course. Selling out now would negate any equity upside on a stock rally this year.
I don't know and I'm wary of giving advice when I don't know. Part of it depends on what percentage you have no in stocks and bonds and all that. Everybody likes to think they can time the market but of course that's easier said than done. That said, I'd be curious to hear what others think. I'm far from an expert.
