Aa
Low Oil Prices
Somebody is going to have to explain this to me. I remember “The Gas Rationing” and not to long ago $5.00 a gallon. Does anybody have a reasonable explanation?
http://www.vox.com/2014/12/8/7339471/why-gas-prices-low
http://www.vox.com/2014/12/8/7339471/why-gas-prices-low
I should have stopped reading at teko's link. I think I'm going to see if there is a good show on TV and stick my head in the sand for awhile. If I keep reading this stuff, I'll have to hit the XanaX bottle.
I finally got to your link but I had to stop reading about 2/3rds through it, because it was pissing me off. In a nutshell, what I got out of it doesn’t matter what happens. The guy over bids the oil, refineries go down, etc. It doesn’t matter, because they will adjust the prices at the pump.
Low gas prices are not equatling lower airfare tickets, in fact they've risen and the airlines are making record profits.
Why oil under $30 per barrel is a major problem-
(to long to post)
http://www.resilience.org/stories/2016-01-21/why-oil-under-30-per-barrel-is-a-major-problem
(to long to post)
http://www.resilience.org/stories/2016-01-21/why-oil-under-30-per-barrel-is-a-major-problem
2 Comments
From the provided link:
"The primary way of offsetting recessionary forces is by directly or indirectly adding debt at low interest rates. With this increased debt, more homes and factories can be built, and more cars can be purchased. The economy can be forced to act in a more “normal” manner because the low interest rates and the additional debt in some sense counteract the adverse impact of high oil prices ......... Complicating the problem is the economy’s continued need for stimulus in order to keep the prices of oil and other commodities high enough to encourage production. Stimulus seems to takes the form of ever-rising debt at ever-lower interest rates. Such a program isn’t sustainable, partly because it leads to mal-investment and partly because it leads to a debt bubble that is subject to collapse.
Stimulus seems to be needed because of today’s high extraction cost for oil. If the cost of extraction were still very low, this stimulus wouldn’t be needed because products made using oil would be more affordable.
Decision makers thought that peak oil could be fixed simply by producing more oil and more oil substitutes. It is becoming increasingly clear that the problem is more complicated than this. We need to find a way to make the whole system operate correctly. We need to produce exactly the correct amount of oil that buyers can afford. Prices need to be high enough for oil producers, but not too high for purchasers of goods using oil. The amount of debt should not spiral out of control. There doesn’t seem to be a way to produce the desired outcome, now that oil extraction costs are high.
Rigidities built into the oil price-supply system (as described in Sections 3 and 4) tend to hide problems, letting them grow bigger and bigger. This is why we could suddenly find ourselves with a major financial problem that few have anticipated.
Unfortunately, what we are facing now is a predicament, rather than a problem. There is quite likely no good solution. This is a worry."
"The primary way of offsetting recessionary forces is by directly or indirectly adding debt at low interest rates. With this increased debt, more homes and factories can be built, and more cars can be purchased. The economy can be forced to act in a more “normal” manner because the low interest rates and the additional debt in some sense counteract the adverse impact of high oil prices ......... Complicating the problem is the economy’s continued need for stimulus in order to keep the prices of oil and other commodities high enough to encourage production. Stimulus seems to takes the form of ever-rising debt at ever-lower interest rates. Such a program isn’t sustainable, partly because it leads to mal-investment and partly because it leads to a debt bubble that is subject to collapse.
Stimulus seems to be needed because of today’s high extraction cost for oil. If the cost of extraction were still very low, this stimulus wouldn’t be needed because products made using oil would be more affordable.
Decision makers thought that peak oil could be fixed simply by producing more oil and more oil substitutes. It is becoming increasingly clear that the problem is more complicated than this. We need to find a way to make the whole system operate correctly. We need to produce exactly the correct amount of oil that buyers can afford. Prices need to be high enough for oil producers, but not too high for purchasers of goods using oil. The amount of debt should not spiral out of control. There doesn’t seem to be a way to produce the desired outcome, now that oil extraction costs are high.
Rigidities built into the oil price-supply system (as described in Sections 3 and 4) tend to hide problems, letting them grow bigger and bigger. This is why we could suddenly find ourselves with a major financial problem that few have anticipated.
Unfortunately, what we are facing now is a predicament, rather than a problem. There is quite likely no good solution. This is a worry."
So quit pretending we're players in the global petroleum market. Keep our production limited to what we need for ourselves, and as wells play out and alternatives become available, cap them and leave them capped. There's nothing written into the Constitution guaranteeing the Kochs and the other 150+ families profiteering from this mess a profit, no matter what their PACs and 'think tanks' tell you to believe.
I heard that also; and oil prices was lowered to cause a plummit on wallstreet
but I didn'twant to sound like a conspiracy nut' I hav'nt red your link yet
but I didn'twant to sound like a conspiracy nut' I hav'nt red your link yet
I also heard this morning that the low oil prices are affecting peoples 401k in a negative way. And since the cost of living raise for social security recipients depend on oil prices, there was none this year.
The North Dakota Crude Oil That's Worth Almost Nothing
January 18, 2016 — 12:28 AM PST Updated on January 18, 2016 — 2:01 PM PST
By
Dan Murtaugh
Javier Blas
Flint Hills values North Dakota Sour crude at $1.50 a barrel
Crude prices based on sulfur content and transport costs
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Oil is so plentiful and cheap in the U.S. that at least one buyer says it would pay almost nothing to take a certain type of low-quality crude.
Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire, said it offered to pay $1.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a corrected list of prices posted on its website Monday. It had previously posted a price of -$0.50. The crude is down from $13.50 a barrel a year ago and $47.60 in January 2014.
While the near-zero price is due to the lack of pipeline capacity for a particular variety of ultra low quality crude, it underscores how dire things are in the U.S. oil patch. U.S. benchmark oil prices have collapsed more than 70 percent in the past 18 months and fell below $30 a barrel for the first time in 12 years last week. West Texas Intermediate traded as low as $28.36 in New York. Brent, the international benchmark, settled at $28.55 in London.
“Telling producers that they have to pay you to take away their oil certainly gives the producers a whole bunch of incentive to shut in their wells,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said of the price that was posted as negative until Flint Hills revised it on Monday.
Jake Reint, a Flint Hills spokesman, said the price was fixed on the website after the firm incorrectly posted it as negative. The prices reported by Flint Hills Resources and rivals such as Plains All American Pipeline LP are used as benchmarks, setting reference prices for dozens of different crudes produced in the U.S.
Plains All American quoted two other varieties of American low quality crude at very low prices: South Texas Sour at $13.25 a barrel and Oklahoma Sour at $13.50 a barrel.
Canadian BitumenHigh-sulfur crude in North Dakota is a small portion of the state’s production, with less than 15,000 barrels a day coming out of the ground, said John Auers, executive vice president at Turner Mason & Co. in Dallas. The output has been dwarfed by low-sulfur crude from the Bakken shale formation in the western part of the state, which has grown to 1.1 million barrels a day in the past 10 years.
Different grades of oil are priced based on their quality and transport costs to refineries. High-sulfur crudes are generally priced lower because they can only be processed at plants that have specific equipment to remove sulfur. Producers and refiners often mix grades to achieve specific blends, and prices for each component can rise or fall to reflect current economics.
Enbridge Inc. stopped allowing high-sulfur crudes on its pipeline out of North Dakota in 2011, forcing North Dakota Sour producers to rely on more expensive transport such as trucks and trains, according to Auers.
Producers outside the U.S. are also feeling pain. The price for Canadian bitumen -- the thick, sticky substance at the center of the heated debate over TransCanada Corp.’s Keystone XL pipeline -- fell to $8.35 last week, down from as much as $80 less than two years ago.
Negative energy prices are rare but not unprecedented. Propane traded at a negative value in Edmonton, a key pipeline hub in oil-rich Alberta, for about three months last year. Oil refineries sometimes pay people to take away low-demand products such as sulfur or petroleum coke to free up space. However, those are both processing byproducts, while oil is a raw material, according to Auers.
“You don’t produce stuff that’s a negative number,” Auers said. “You shut in the well.”
bloomberg.com
January 18, 2016 — 12:28 AM PST Updated on January 18, 2016 — 2:01 PM PST
By
Dan Murtaugh
Javier Blas
Flint Hills values North Dakota Sour crude at $1.50 a barrel
Crude prices based on sulfur content and transport costs
Share on Facebook
Share on Twitter
Share on LinkedIn
Share on Reddit
Share on Google+ E-mail
Oil is so plentiful and cheap in the U.S. that at least one buyer says it would pay almost nothing to take a certain type of low-quality crude.
Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire, said it offered to pay $1.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a corrected list of prices posted on its website Monday. It had previously posted a price of -$0.50. The crude is down from $13.50 a barrel a year ago and $47.60 in January 2014.
While the near-zero price is due to the lack of pipeline capacity for a particular variety of ultra low quality crude, it underscores how dire things are in the U.S. oil patch. U.S. benchmark oil prices have collapsed more than 70 percent in the past 18 months and fell below $30 a barrel for the first time in 12 years last week. West Texas Intermediate traded as low as $28.36 in New York. Brent, the international benchmark, settled at $28.55 in London.
“Telling producers that they have to pay you to take away their oil certainly gives the producers a whole bunch of incentive to shut in their wells,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said of the price that was posted as negative until Flint Hills revised it on Monday.
Jake Reint, a Flint Hills spokesman, said the price was fixed on the website after the firm incorrectly posted it as negative. The prices reported by Flint Hills Resources and rivals such as Plains All American Pipeline LP are used as benchmarks, setting reference prices for dozens of different crudes produced in the U.S.
Plains All American quoted two other varieties of American low quality crude at very low prices: South Texas Sour at $13.25 a barrel and Oklahoma Sour at $13.50 a barrel.
Canadian BitumenHigh-sulfur crude in North Dakota is a small portion of the state’s production, with less than 15,000 barrels a day coming out of the ground, said John Auers, executive vice president at Turner Mason & Co. in Dallas. The output has been dwarfed by low-sulfur crude from the Bakken shale formation in the western part of the state, which has grown to 1.1 million barrels a day in the past 10 years.
Different grades of oil are priced based on their quality and transport costs to refineries. High-sulfur crudes are generally priced lower because they can only be processed at plants that have specific equipment to remove sulfur. Producers and refiners often mix grades to achieve specific blends, and prices for each component can rise or fall to reflect current economics.
Enbridge Inc. stopped allowing high-sulfur crudes on its pipeline out of North Dakota in 2011, forcing North Dakota Sour producers to rely on more expensive transport such as trucks and trains, according to Auers.
Producers outside the U.S. are also feeling pain. The price for Canadian bitumen -- the thick, sticky substance at the center of the heated debate over TransCanada Corp.’s Keystone XL pipeline -- fell to $8.35 last week, down from as much as $80 less than two years ago.
Negative energy prices are rare but not unprecedented. Propane traded at a negative value in Edmonton, a key pipeline hub in oil-rich Alberta, for about three months last year. Oil refineries sometimes pay people to take away low-demand products such as sulfur or petroleum coke to free up space. However, those are both processing byproducts, while oil is a raw material, according to Auers.
“You don’t produce stuff that’s a negative number,” Auers said. “You shut in the well.”
bloomberg.com
Lots of reasons for the low prices right now. I think this link describes it best, but due to drilling in the gulf, fracking and us producing more of what we use and less imports, as well as the value of the dollar and futures. Best to read the link. lol
http://useconomy.about.com/od/commoditiesmarketfaq/p/high_gas_prices.htm
http://useconomy.about.com/od/commoditiesmarketfaq/p/high_gas_prices.htm
We have many production platforms in the Gulf and Wells capped off in the name of Reserve Do you think we may have tapped into those? Also if we “all of a sudden”,have access to this oil, what was the big deal over the Key Stone Pipeline?
I’ve heard that some oil companies were threatening to stop drilling and capping off some wells until the price per barrel goes up.
I’ve heard that some oil companies were threatening to stop drilling and capping off some wells until the price per barrel goes up.
I think it boils down to the technological advancement in the energy space in locating the energy source (3D-4D seismic), new extraction technologies,as well as transportation of the commodity. And of course the industry has always been "boom/bust".
BUT- I think the single biggest reason for these exaggerated swings in energy pricing is the entering of the large hedge funds and private equity now involved in the energy space(they're getting taken to the woodshed as a result). Not to mention helicopter Ben's drop of interest free cash into the economy via QE.
jmho
BUT- I think the single biggest reason for these exaggerated swings in energy pricing is the entering of the large hedge funds and private equity now involved in the energy space(they're getting taken to the woodshed as a result). Not to mention helicopter Ben's drop of interest free cash into the economy via QE.
jmho
You see Ricky, it has a lot to do with unicorns farting rainbows, and pixie dust..... Uhm, no. I don't have a reasonable explanation. It doesn't make sense.
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