
Oil price: Brent crude hits 11-year low - pmoriarty
http://www.bbc.co.uk/news/business-35152037
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shiftpgdn
Don't get used to it. The low oil prices are a result of the Saudis not
reducing production and continuing full steam ahead regardless of
profitability in order to drive other producers and sources such as North
American fracking out of business.

Most mom and pop oil companies have already been bought or have gone bankrupt
as they were not profitable under $50/barrel. Supermajors will begin to go
bankrupt and survival mode at $20-25/barrel. As soon as we see supermajors
going under the Saudis will roll back their production in order skyrocket
prices. It takes AT LEAST 18-24 months to get new wells and unconventional
sites online and that's if the entire ecosystem is operational.

~~~
simonh
Oil producers going bankrupt isn't going to magically make their assets and
production capacity disappear. It will just get bought up by better
capitalized investors. Meanwhile Iraq, Iran and others are ramping up
production right now. We're going to see further oil price fluctuations over
the coming decades for sure, but I don't think we'll ever see $100+ per barrel
oil again.

~~~
crdoconnor
>Oil producers going bankrupt isn't going to magically make their assets and
production capacity disappear. It will just get bought up by better
capitalized investors.

Oil that can't be pumped profitably at < $80 / bbl isn't going to be magically
become profitable when a better capitalized investor steps in.

~~~
AnimalMuppet
No, but it means that the Saudis can't raise prices much past $80/bbl. And I'm
not sure that $80 is the right number for a lot of the fracking wells - the
number that I seem to recall is $50. (I freely admit that I'm working from
vague memory here, and could easily be wrong...)

------
jeromeflipo
"The Stone Age didn't end for lack of stone, and the oil age will end long
before the world runs out of oil." \- Sheikh Zaki Yamani

~~~
mikeash
That's such a bad comparison. Stone is way more common and was being used by
far fewer people.

I sincerely hope it's true, but it's one of those snide comments that attempts
to make legitimate concerns look stupid.

~~~
dragontamer
> Stone is way more common

Stone is literally more expensive than oil. Note that at $2.00 / gallon,
gasoline (refined oil) is twice as cheap as bottled water. At $35 / barrel
(ie: $35 per 55-gallon drum), crude oil is literally cheaper than a huge
number of commodities.

Crude Oil is roughly $0.65 per gallon. Definitely cheaper than stone by every
measurement.

~~~
mikeash
Stones can be found just lying around on the ground all over the world. I
don't care how cheap oil is, it's not cheaper than "you can bend down and pick
some up."

Cheaper than bottled water? No it's not. You can find some bottled water
that's more expensive, sure, but you can find bottled water that's cheaper
too. I'm sure you can find some oil somewhere that's more expensive than good
champagne, too.

Bottled water is a terrible comparison anyway, because most of what you're
paying for is the "bottled." Oil is not cheaper than _water_ in most places.
Can you imagine paying 65 cents/gallon for your shower?

~~~
dingaling
The stones you can pick-up from the ground aren't much use in construction
other than for rubble-fill, which requires quantities vastly greater than
available in free [position] material.

To gather them in kilotonnes you'll need to remove and sift the regolith
layer. A lot more expensive than 'pick some up'.

~~~
mikeash
I don't believe the Stone Age was primarily about stone construction.

------
jaddison
"Many consumers have enjoyed the falling price of fuel in the form of lower
petrol prices; several UK supermarkets have begun selling petrol at below £1
per litre - which they last did in 2009."

It feels as though prices haven't fallen relatively here in Canada, at least
not on the west coast.

(112.9c CAD / litre in Victoria, BC)

~~~
prolepunk
1.00 CAD in the east, gasoline should be around 0.80 now but because of weak
loonie, oil refineries being in the US and Americans driving more, thus
increasing the demand for gas, prices are what they are.

------
hwstar
Quasi "outages" in California refinery crackers are bucking the price
decreases of gasoline in California. In 30 states, gasoline is under $2/gal
but in California, it is north of $2.50, and it isn't even the expensive
summer blend.

~~~
saryant
California's fuel prices will always be higher than other states because their
blend is stricter than most of the rest of the nation and far fewer refineries
are built to produce that blend.

~~~
refurb
I was going to say.

Last Christmas prices dropped significantly. There were $2.25 to $2.50/gal in
California, but almost $1.20/gal in Arizona and New Mexico.

California has another $0.30-$0.50/gal in taxes that other states don't have.
The price will always be higher.

------
rodionos
It's probably good enough for consumer finance sites, but they should really
factor in inflation. Inflation has been below average recently, so the margin
of error is not that large, but still ~1.015^10=1.16 which means that price
drop is steeper than reported.

------
pmoriarty
Where are the peak oil prophets?

~~~
joakleaf
Seems like OPEC's current strategy is to dump oil onto the market for a low
price.

This both makes it unsustainable for the competition to drill for oil, and
creates a higher demand.

Once many of the competing (e.g. Western) oil companies goes bankrupt, OPEC
can increase the prices and enjoy both higher demand and increased profit. At
that point, it will take a long time before investors feel comfortable
investing in oil again in fear of an identical situation. They also push
renewables into a similar spot.

I was looking for a reference that shows debt vs. market cap of US oil
companies, but cannot find it. It didn't look promising for the US oil
companies.

Anyway, this doesn't have anything to do with peak oil, which we are likely
passing these years (for conventional oil). Except we'll likely crash sooner
if we increase demand.

~~~
saryant
This is just a buying opportunity for the big boys like Exxon. They'll snatch
up the companies that fail and bide their time.

It's not a new strategy—the well-capitalized oil companies do this every time
the industry stalls. They call it "prospecting for oil on the floor of the
stock exchange."

Many shale producers will go bust but others have tightened their belt and
become more efficient. The technology itself has also gotten cheaper, allowing
those wells to be profitable even at depressed energy prices. More will likely
fail but the shakeout will leave the remaining shale producers in a very
strong place.

The idea that "OPEC can increase the prices" is farcical at this point. OPEC
has been in open revolt for a long time and can no longer function as a
unified front against the Western consuming countries. Smaller OPEC producers
have long ignored the quotas, battling for marketshare while comfortable in
the knowledge that Saudi Arabia would lower their production to maintain price
targets. The Saudis have grown tired of that role—this current salvo is as
much a move against their fellow OPEC members as it is new Western production.

This current situation is the Saudi's public recognition that OPEC has failed,
the final culmination of a decline that began decades ago.

Saudi Arabia is facing the prospect of increased production on several fronts
for both geopolitical reasons (Iran) and technological (America, deep sea,
Canadian oil sands, etc). When the US tears down export barriers, their
situation will become that much more dire as American shale producers will
find entire new markets for their oil. Finding markets has long been as
significant a task for the industry as finding oil itself.

Other investors are certainly fearful of investing in oil but I've been moving
more and more of my personal portfolio into energy over the last few months.
Given time, energy will rebound.

