Falling oil prices....really the work of the Saudis?

[Crazy_Ivan80]

1,08€/l in the cheapest pump in the area. I wonder if I will see sub-1€ gas prices again.

.997€ was lowest in region I know of

[Crazy_Ivan80]

The wife read a thing where some Saudi Prince or other was quoted as saying "you won't see $100+/barrel oil prices for decades. Whenever we cut production, we lose market share so we're not going to do that."

good, when prices rise the money will be going to the west while their well's a big bit dryer

[alfred russel]

I wish I could install a giant 1000 gallon unleaded tank in my garage so I could just buy all my fuel now.

You could buy oil futures to hedge future fuel purchases.

[Admiral Yi]

You could buy oil futures to hedge future fuel purchases.

I'm guessing the minimum contract is larger than 20 gallons.

[celedhring]

1,08€/l in the cheapest pump in the area. I wonder if I will see sub-1€ gas prices again.

There are already a few places in Spain where diesel costs less than a € per litre.

Diesel is under 1€ over here, but I was talking about gasoline.

[Razgovory]

You could buy oil futures to hedge future fuel purchases.

I'm guessing the minimum contract is larger than 20 gallons.

If only there was a way to make long term investmensts in oil without out using the swimming pool.

[Capetan Mihali]

Diesel is under 1€ over here, but I was talking about gasoline.

Your diesel is less money/unit than gas?  Interesting, diesel always leads premium by a bit over here.  Regular gas for me is about $2.25/gallon (so roughly.50€/L) , but diesel is still $2.70-2.99 (.63-.68€/L).

[garbon]

Diesel is under 1€ over here, but I was talking about gasoline.

Your diesel is less money/unit than gas?  Interesting, diesel always leads premium by a bit over here.  Regular gas for me is about $2.25/gallon (so roughly.50€/L) , but diesel is still $2.70-2.99 (.63-.68€/L).

I believe we had discussed something here about "gas" term generally being applied to diesel in other countries and what we call diesel, they have as some variation of benzene. All of that to say, it would seem that diesel vehicles are more common to use in Europe than here?

[alfred russel]

You could buy oil futures to hedge future fuel purchases.

I'm guessing the minimum contract is larger than 20 gallons.

If he is worried about 2020 fuel purchases, I'm guessing he is planning on purchasing more than 20 gallons in 2020.

[Ed Anger]

I've got gas.

[OttoVonBismarck]

The Saudi prince is right, and he was right some months ago when he said oil prices were essentially an illusion. They were predicated on the belief that OPEC wouldn't let oil drop much below $100, the reality is they did. The moment that happened traders reacted very rapidly and oil price cratered to where it should be given what can only be described as a massive oversupply of crude.

Are there political aspects to it that make SA happy? Sure, but I think the reality is SA realizes that it doesn't benefit SA to artificially keep oil prices at $100/bbl. SA doesn't necessarily run OPEC, but they're the biggest producer and the only one that doesn't blatantly ignore OPEC production limits (most of the rest cheat OPEC.) Since they're the only real lever that gets moved in OPEC, if they don't agree to a move then OPEC is meaningless. In fact for most intents and purposes OPEC is now meaningless because any of its members that aren't the low cost gulf producers are so far out of alignment economically with the gulf states that there is really no way for them to act collectively without one group screwing the other. Iran, Venezuela and Nigeria just have a very different oil economy and for the Saudis and smaller gulf states like Kuwait or UAE to artificially prop up prices for the benefit of those countries really makes no sense. It's arguable that OPEC as an entity really isn't valuable anymore for its members.

Where the Saudi prince is being prescient is I think he knows that there has been a permanent loss of market share, not to other producers, but to alternative energy or just to increased efficiency in much of the Western world. CAFE standards are not going anywhere and are likely to continue to get stronger, a growing number of individuals are making a political decision to move to either ultra-high efficiency hybrids or plug-in electrics. Given the tax credits incentivizing this and the political climate around it that's not a trend I see going away in the West. Saudi Arabia probably correctly realizes that what helped push people this way was the $4/gallon gasoline. Gas being so expensive for so long has caused a societal shift in the West that is not going back the other way, ever.

I suspect on the long horizon SA sees China, which is a major polluter but to be honest more progressive on the environment than you would expect (and showing an interest in becoming more so), and wants to have really cheap oil on the market so that China doesn't go down the same path as the West and get too obsessive over efficiency and the environment. But, to be honest I think in the longer run all governments are going to want to move away from fossil fuels, and because of that being a reality it's unlikely the price will spike as high as it was in an era of heightened demand.

I don't think SA is particularly concerned about striking at American "energy independence", something conspiracy theorists are claiming. SA has savvy oil market analysts, they know that fracking wells aren't like huge oil sands projects or deep sea projects which take billions of dollars and sometimes up to a decade to get pumping. I don't think they have a short-term "knock frackers out, then jack up prices, profit" strategy, I think they know they can't really do that. If oil stays below $50 for long enough then most new fracking will stop and old wells will only continue until they are unproductive (the life span of a shale fracked well isn't super long.) But when all the companies like Chesapeake which have expanded solely through crazy indebtedness go out of business the big guys like Exxon will just buy up the drilling rights they had for pennies on the dollar and quietly hold them in their portfolio. If/when prices go up they can easily ramp up production at that point.

What will particularly hurt some of the shale players is many of them, once they get a well drilled and pumping they spin a bunch of wells off as an MLP or Royalty Trust and get a big lump sum for it, but they have to by agreement keep pumping the wells typically until a certain amount of barrels or cubic feet (for gas) has been extracted. So these agreements can mandate they keep contributing to the supply glut even as it drives them into bankruptcy.

[Jacob]

Very informative - thanks Otto

[Zanza]

Just like the stone age didn't end because we ran out of stones, the oil age won't end because we run out of oil, but because we find something better.

As Otto says, there has already been a shift in the western world. And China has an extremely high interest to make electric cars etc. work. They have no oil and they could become the center of the electric car industry for the world if they do it right. There are massive incentives for electric cars in China right now.

[Admiral Yi]

They would need to steal some battery technology first.

[Jacob]

They would need to steal some battery technology first.

... a bunch of it is available, patent free.