

Oil Crisis Explained in 3 Minutes - kyu
http://blog.nvestly.com/oil-crisis-explained-in-3-minutes/

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stickperson
Knowing absolutely nothing about oil and the industry, I don't view paying $3
a gallon now vs $4.29 a couple months ago as a "crisis."

~~~
mikeyouse
Basically, many economies suffer from the "Dutch Disease" where the easy
profits in oil and gas crowd out all investment into other parts of the
economy. The massive export economy props up the currency as well to the
detriment of other exporting businesses.

When profitability is hurt by lower prices, these natural resources firms all
pull back at the same time and there is no other industry that can take up the
slack. The declining capital investment, jobs, and tax base all lead to pain..

[http://www.economist.com/blogs/economist-
explains/2014/11/ec...](http://www.economist.com/blogs/economist-
explains/2014/11/economist-explains-2)

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Sven7
Time for some shale driller bailout planning. If it breaks OPEC it's good for
everyone. The unholy amount of funding that supports global terrorism will
take a big hit.

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fffrad
Something I do not understand:

\- barrel price went from $100 to $60. That's $40 drop.

\- Price went from $3.60 to $2.80 a gallon in my city. That's $0.80 only

I don't get it.

~~~
refurb
$100 to $60 is a 40% drop in the price of oil.

The price of gas is only partially due to the cost of oil. Taxes make up a
pretty chunk of the cost of gas. On average $0.50/gal.[1]. Don't forget the
cost of refining and transportation. This chart says 62% of the cost of gallon
is due to crude oil costs[2]

So based on your $3.60/gal, $2.23/gal is oil. Reduce that by 40%, you get
$1.33 and add back in the other stuff and I get $2.70/gal now.

Not far off huh?

[1][http://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States](http://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States)
[2]
[http://www.eia.gov/petroleum/gasdiesel/](http://www.eia.gov/petroleum/gasdiesel/)

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desdiv
Does anyone know why fuel taxes are calculated by _volume_ instead of _value_?
That's the opposite of pretty much every other tax on goods in the country.

~~~
phil21
Because fuel taxes are supposed to be an approximation of how many miles you
drive, aka how much wear and tear you put on the road infrastructure.

You put the same wear and tear on the road at $1/gal vs. $4/gal. Trying to
create budgets against a commodity that rapidly changes prices as much as
gas/diesel does would be rather difficult.

For example, in 2015 we'd be forecasting huge budget shortfalls for any
planned road maintenance due to the unforseen huge drop in gas prices.

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ta75757
From what I've read ordinary passenger vehicles put just about no strain on
modern roads. Only heavy vehicles like semis do.

Tax is tax, money is fungible.

~~~
superuser2
Even if this is true, the business owners' argument to Congress would be that
the consumer _will_ pay for it either way; businesses that depend on
transportation would just raise prices to compensate.

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forgotpasswd3x
I believe that it should the cost to repair roads should be the responsibility
of those who cause the damage. Yes, this would raise cost of goods shipped via
truck. If you're ordering things that need to be shipped via truck, you should
be responsible for that damage.

Why should I be taxed to fix road damage based on a metric that doesn't begin
to accurately reflect my actual contribution to the problem?

Additionally, if the trucking industry had to raise rates due to a higher
'road maintenance tax' this may also make more efficient forms of
transportation more popular, ie trains.

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jaddison
I'm admittedly naïve in this, but wouldn't it make financial sense to buy OPEC
based oil stock in the coming few months? Based on whether this is true, of
course - so... In theory naturally.

~~~
desdiv
All the OPEC oil companies are state-owned. That's how the OPEC countries are
able to control their production numbers.

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_nullandnull_
Shucks, fracking is no longer profitable. I was really looking forward to more
earth quakes and flammable tap water.

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tracker1
Why not just implement tariffs on foreign oil?

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crpatino
You'd need to have enough local oil to pick up the slack. For what I know, US
has been a net importer for decades...

Or maybe there are enough reserves, but they are in the long game and want to
buy the foreign oil first... while the taking is good.

~~~
tracker1
Tariffs don't need to make foreign oil go away, only be strong enough to level
domestic competition a bit. A $40/barrel tariff would still leave very low oil
prices for imports, but at least allow for domestic competition... it isn't
about totally squeezing a market out, only leveling some unfair trade
practices that would hurt consumers/citizens in the long run.

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innguest
Why does the author keep saying "If OPEC doesn't interfere"? Is the author in
favor of price-fixing? I thought all sane human beings understand that a
monopoly controlling the price of something is bad.

That's why the author did not mention the reason that "OPEC doesn't interfere"
is that the Saudis are waiting for this new price level to bankrupt the Shale
enterprise in the US.

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civilian
I also read an article talking about how the Saudi's wanted to ruin Iran. And
another one about how they want to ruin Russia. I feel like any simple
explanation like that is probably wrong.

They realize that OPEC doesn't have enough of a majority of the production to
take true advantage of lowering prices. America isn't part of the cartel, so
our shale companies would be making out with a lot of money, b/c they're not
going to lower production.

[http://www.economist.com/news/finance-and-
economics/21635510...](http://www.economist.com/news/finance-and-
economics/21635510-what-oil-cartel-up-making-best-low-price)

However, yeah, it's definitely weird how some journalists are coming out in
favor of cartels in this scenario. I assume it's from not having a well-
rounded education.

