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Author Topic:   The Drop in Oil: How Big a Problem?
Percy
Member
Posts: 22392
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.3


Message 1 of 47 (746330)
01-05-2015 3:25 PM


The price of US crude today dropped below $50/barrel. The stock market responded in kind, the DOW dropping nearly 350 points with less than an hour of trading still remaining. Lower energy prices are welcome, but concerns abound that too low a price for oil will damage the energy sector and thereby the rest of the economy.
Low oil prices will hurt both oil exploration and shale oil production. It isn't worthwhile searching for oil that will bring less than it costs to produce, and much shale oil costs much more to produce than current prices. And it's regrettable that formerly economically desolate regions like North Dakota will be hurt and give back recent gains.
But shouldn't low oil prices affect the rest of oil company business positively? Presumably they're maintaining profit margin on the oil-derived products they sell, and now they'll sell more of them, but at lower prices that will benefit the rest of the economy.
So where does the net between good and bad effects fall out? Today's DOW says sub-$50 oil prices are a net negative, but no one would claim the DOW never overreacts. Just last month the DOW plunged to 17,200, then bounced back above 18,000. Probably not a good idea to put much weight on short term market moves.
I'm not sure I have an opinion yet on where the net economy will go as a result of the drop in oil prices - I don't know enough at this point.
--Percy

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Theodoric
Member
Posts: 9076
From: Northwest, WI, USA
Joined: 08-15-2005
Member Rating: 3.7


Message 2 of 47 (746331)
01-05-2015 4:21 PM
Reply to: Message 1 by Percy
01-05-2015 3:25 PM


And it's regrettable that formerly economically desolate regions like North Dakota will be hurt and give back recent gains.
Just going to comment on this little bit right now. North Dakotans as a whole have not done well with the shale oil boom. Out side companies, outside workers are enjoying the lion's share. Now that it is going bust North Dakotans are going to be stuck with the bill to clean up the toxic mess the boom has made in ND. There are many other problems they will be facing now that the glory days seem to be over.
This is one of those careful what you wish for things.
North Dakota's Troublesome Oil Boom
The Downside of the Boom - The New York Times
Thats ok I am sure the industry will just have the public foot the bill for any cleanup needed.

Facts don't lie or have an agenda. Facts are just facts
"God did it" is not an argument. It is an excuse for intellectual laziness.

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New Cat's Eye
Inactive Member


(1)
Message 3 of 47 (746332)
01-05-2015 4:21 PM


The whole economy might come crashing down around me, but I just paid $1.77 per gallon of gas. So I got that going for me, which is nice.

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NoNukes
Inactive Member


Message 4 of 47 (746333)
01-05-2015 4:32 PM
Reply to: Message 1 by Percy
01-05-2015 3:25 PM


but concerns abound that too low a price for oil will damage the energy sector and thereby the rest of the economy.
What's the scenario for this? Damaging the economy certainly seems counter intuitive. I know that this is not a scientific method of investigating, but a quick google search turns ups mostly articles describing optimism about the effect of low gas prices on the economy.

Under a government which imprisons any unjustly, the true place for a just man is also in prison. Thoreau: Civil Disobedience (1846)
I have never met a man so ignorant that I couldn't learn something from him. Galileo Galilei
If there is no struggle, there is no progress. Those who profess to favor freedom, and deprecate agitation, are men who want crops without plowing up the ground, they want rain without thunder and lightning. Frederick Douglass

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Tangle
Member
Posts: 9489
From: UK
Joined: 10-07-2011
Member Rating: 4.9


(4)
Message 5 of 47 (746334)
01-05-2015 4:43 PM
Reply to: Message 1 by Percy
01-05-2015 3:25 PM


Do you remember when we all cheered when oil prices went up?
No, neither do I.

Life, don't talk to me about life - Marvin the Paranoid Android
"Science adjusts it's views based on what's observed.
Faith is the denial of observation so that Belief can be preserved."
- Tim Minchin, in his beat poem, Storm.

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RAZD
Member (Idle past 1405 days)
Posts: 20714
From: the other end of the sidewalk
Joined: 03-14-2004


(1)
Message 6 of 47 (746335)
01-05-2015 4:48 PM
Reply to: Message 1 by Percy
01-05-2015 3:25 PM


low energy cost lost leader to harm alternative energy?
The price of US crude today dropped below $50/barrel. ...
It can't last, this is just a result of overproduction from the shale oil rush of the last two years glutting the market. Saudis refuse to cut their production because they can let the US companies stew in the mess they made, losing trillions in partially complete operations that have now been halted due to the price of oil.
Low oil prices will hurt both oil exploration and shale oil production ...
The time for oil production is over, there is just too much cost to the environment and global warming to justify such greedy rapacious behavior.
... And it's regrettable that formerly economically desolate regions like North Dakota will be hurt and give back recent gains.
Or as Theodoric said, that they will be stuck with the cleanup as the companies disappear.
... Lower energy prices are welcome, but concerns abound that too low a price for oil will damage the energy sector and thereby the rest of the economy.
Personal opinion ... this could be engineered by the oil companies to take the wind out of alternative energy, which has seen major growth in the last year. Let that growth implode and they will be back to (overcharging) for oil. Call it a "lost-leader" program ... call me paranoid.
Curiously what this means is that it could be a very good time to move into solar and wind power, to invest in it with prices down, to install it with costs reduced and to then benefit from it in perpetuity.
What are the oil companies most afraid of? That people will find that they don't need oil. Can you imagine the effect on the Koch fortunes if the oil market collapses if people take advantage to go en mass into renewable energy and electric cars?
Enjoy
Edited by RAZD, : ...

we are limited in our ability to understand
by our ability to understand
RebelAmerican☆Zen☯Deist
... to learn ... to think ... to live ... to laugh ...
to share.


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This message is a reply to:
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Replies to this message:
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Larni
Member (Idle past 164 days)
Posts: 4000
From: Liverpool
Joined: 09-16-2005


Message 7 of 47 (746342)
01-05-2015 5:52 PM
Reply to: Message 3 by New Cat's Eye
01-05-2015 4:21 PM


I just paid $1.77 per gallon of gas.
I got excited yesterday when I only had to pay 1.06 a litter

The above ontological example models the zero premise to BB theory. It does so by applying the relative uniformity assumption that the alleged zero event eventually ontologically progressed from the compressed alleged sub-microscopic chaos to bloom/expand into all of the present observable order, more than it models the Biblical record evidence for the existence of Jehovah, the maximal Biblical god designer.
-Attributed to Buzsaw Message 53
The explain to them any scientific investigation that explains the existence of things qualifies as science and as an explanation
-Attributed to Dawn Bertot Message 286
Does a query (thats a question Stile) that uses this physical reality, to look for an answer to its existence and properties become theoretical, considering its deductive conclusions are based against objective verifiable realities.
-Attributed to Dawn Bertot Message 134

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jar
Member (Idle past 394 days)
Posts: 34026
From: Texas!!
Joined: 04-20-2004


(1)
Message 8 of 47 (746343)
01-05-2015 5:56 PM


add taxes
Hopefully someone at the Federal level will have sense enough to tax oil and gasoline back up to a reasonable level of $3.00-5.00 a US Gallon.

Anyone so limited that they can only spell a word one way is severely handicapped!

  
Percy
Member
Posts: 22392
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.3


(2)
Message 9 of 47 (746345)
01-05-2015 6:13 PM
Reply to: Message 7 by Larni
01-05-2015 5:52 PM


Larni writes:
I got excited yesterday when I only had to pay 1.06 a litter
Only a pound for a bunch of kittens?
$6.12/gallon.
--Percy

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Coragyps
Member (Idle past 734 days)
Posts: 5553
From: Snyder, Texas, USA
Joined: 11-12-2002


Message 10 of 47 (746347)
01-05-2015 6:55 PM
Reply to: Message 1 by Percy
01-05-2015 3:25 PM


Well, it sucks for me, as my livelihood comes from the drilling and frac businesses. All the guys that support the oil producing companies - us, our raw material suppliers, drilling contractors, the service companies that frac and cement wells for the oil companies - will likely be sitting on our hands for a while. Or picking up aluminum cans beside the road.

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Jon
Inactive Member


Message 11 of 47 (746358)
01-05-2015 9:06 PM
Reply to: Message 1 by Percy
01-05-2015 3:25 PM


The U.S. Pumps Oil Too
The U.S. also pumps oil.
As far as I know, the Middle East countries utilize government intervention in their oil production, which allows them to better weather low prices. U.S. oil production does not have such intervention, and the oil is more expensive to pump. Below a certain selling price it becomes unprofitableeven a loss. From what I've heard that price is around $50, but some have said they can still make money at $40. Whichever the case, there is clearly a lot of uncertainty about what will happen to U.S. oil production in the face of plummeting prices. And uncertainty is usually what sends the stock market spiraling down.

Love your enemies!

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Jon
Inactive Member


Message 12 of 47 (746359)
01-05-2015 9:15 PM
Reply to: Message 6 by RAZD
01-05-2015 4:48 PM


Re: low energy cost lost leader to harm alternative energy?
It can't last, this is just a result of overproduction from the shale oil rush of the last two years glutting the market. Saudis refuse to cut their production because they can let the US companies stew in the mess they made, losing trillions in partially complete operations that have now been halted due to the price of oil.
From what I've read the Saudis can only maintain the low rate for a couple of years without plunging their economy into destruction. The problem with the Saudis and their relationship to oil is that there entire economy is built on oil production. The U.S. does not have that problem. We could probably even start subsidizing U.S. oil and still be okay for a good long whilemuch longer than two years.
If we chose, we could likely bring the Saudi oil business to its knees. The boom is already bringing smaller oil-producing countries under.
The time for oil production is over, there is just too much cost to the environment and global warming to justify such greedy rapacious behavior.
All true statements, but unfortunately they fail to get to the economic heart of the matter as Percy is interested in discussing it.
... Lower energy prices are welcome, but concerns abound that too low a price for oil will damage the energy sector and thereby the rest of the economy.
Personal opinion ... this could be engineered by the oil companies to take the wind out of alternative energy, which has seen major growth in the last year. Let that growth implode and they will be back to (overcharging) for oil. Call it a "lost-leader" program ... call me paranoid.
Curiously what this means is that it could be a very good time to move into solar and wind power, to invest in it with prices down, to install it with costs reduced and to then benefit from it in perpetuity.
What are the oil companies most afraid of? That people will find that they don't need oil. Can you imagine the effect on the Koch fortunes if the oil market collapses if people take advantage to go en mass into renewable energy and electric cars?
People like oil. The alternatives aren't competitive enough. I have had so many troubles with cars and their damn electronics and gadgetry lately I'm sick of it. And the cars I use still run with a fully gasoline engine. I couldn't imagine the nightmare if the whole damn thing were nothing but trinkets, buzzers, and sparkies.
How happy I'd be with a tube, some pistons, four wheels, and a few dozen gallons of gas to run the whole thing without any wires or computers. Given the success I've had so far with electronics in cars (none), I'd never switch to an electric car.
If you want alternative energy to be competitive and to actually have a chance to replace fossil fuels, then get to the drawing board and make the damn stuff work. Screaming about conspiracies and flower power isn't getting anything accomplished.
Jon

Love your enemies!

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RAZD
Member (Idle past 1405 days)
Posts: 20714
From: the other end of the sidewalk
Joined: 03-14-2004


Message 13 of 47 (746363)
01-05-2015 9:47 PM
Reply to: Message 12 by Jon
01-05-2015 9:15 PM


opportunity
... We could probably even start subsidizing U.S. oil and still be okay for a good long whilemuch longer than two years.
Ummm the oil business is already heavily subsidized by the government.
... I have had so many troubles with cars and their damn electronics and gadgetry lately I'm sick of it. ...
Fully agree with you there. I have a car with a bad wire in the burglar alarm system -- a system I did not want and did not ask for ... but it comes wired in to the car to such an extent that if I disable it the car won't start and the radio wont play. Every time it rains this bad wire drains the battery dead (it used to turn the burglar alarm on but I found out if I leave a key in the ignition it won't do that, so I have to lock a key inside the car )
How happy I'd be with a tube, some pistons, four wheels, and a few dozen gallons of gas to run the whole thing without any wires or computers ...
So I am restoring a 1967 austin mini ... no electronics, no buzzers, no radio, and the only blinking lights are turn signals ...
But I am also spending a lot more miles on my bike.
People like oil. The alternatives aren't competitive enough. ...
A lot of young people are trading their cars for public transportation and bikes. My son sold his car and doesn't think he will replace it.
Electric trolley buses are excellent transportation vehicles in larger cities - Toronto has a good system of public transportation that allows you to get anywhere in ~1/2 hour. No hassle with parking places and costs.
Germany has a commuter train that is powered by photovoltaic cells on the canopy over the tracks, so the power and consumption are integrated along the same route.
If you want alternative energy to be competitive and to actually have a chance to replace fossil fuels, then get to the drawing board and make the damn stuff work. ...
And the first most practical approach would be via public transportation as they have economies of scale and redundancy so vehicles can be regularly cycled through maintenance and service with backup for replacing any in-service failures.
Next most practical is a shared vehicle system that also means the individual is not stuck with the breakdown and maintenance headaches, they just check out another car while the problem vehicle is being fixed. Electric vehicles would be ideal for this as their range is limited by batteries and the recharging could be limited to the central garages with security plugs.
Enjoy

we are limited in our ability to understand
by our ability to understand
RebelAmerican☆Zen☯Deist
... to learn ... to think ... to live ... to laugh ...
to share.


Join the effort to solve medical problems, AIDS/HIV, Cancer and more with Team EvC! (click)

This message is a reply to:
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Coyote
Member (Idle past 2106 days)
Posts: 6117
Joined: 01-12-2008


Message 14 of 47 (746364)
01-05-2015 9:50 PM
Reply to: Message 13 by RAZD
01-05-2015 9:47 PM


Re: opportunity
Who in their right mind would want to live in a city, let alone a large one?
Try your public transportation out in the hills and see how far you get.

Religious belief does not constitute scientific evidence, nor does it convey scientific knowledge.
Belief gets in the way of learning--Robert A. Heinlein
How can I possibly put a new idea into your heads, if I do not first remove your delusions?--Robert A. Heinlein
It's not what we don't know that hurts, it's what we know that ain't so--Will Rogers
If I am entitled to something, someone else is obliged to pay--Jerry Pournelle
If a religion's teachings are true, then it should have nothing to fear from science...--dwise1
"Multiculturalism" demands that the US be tolerant of everything except its own past, culture, traditions, and identity.

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Jon
Inactive Member


Message 15 of 47 (746366)
01-05-2015 10:51 PM
Reply to: Message 13 by RAZD
01-05-2015 9:47 PM


Re: opportunity
A lot of young people are trading their cars for public transportation and bikes.
It's almost impossible to have a real job while relying on public transportation. The type of transportation systems that make it possible exist only in heavily populated cities (few hundred thousand people or more). You don't even have to move to the hills as Coyote suggests to find entirely inadequate public transportation.
And the first most practical approach would be via public transportation as they have economies of scale and redundancy so vehicles can be regularly cycled through maintenance and service with backup for replacing any in-service failures.
The fact that it relies on economies of scale to make it practical is why it is impossible to create decent public transportation in anything but the largest of cities.
Electric vehicles would be ideal for this as their range is limited by batteries and the recharging could be limited to the central garages with security plugs.
So long as you can bum a ride to the central garage from someone with a real car.

Love your enemies!

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