The State of Affairs in Russia

[Malthus]

Oh and it is going to plunge lower.  The Saudis are on a mission to destroy the North American oil threat.  It is hard not to take immense pleasure in lower gas prices and the inconvenience this is causing all the petro-tyrannies, but we have to remember this is ultimately done on their behalf.

How is this expected to work? I mean, we know the oil is there and we know how to extract it - sure they can shut down production with super cheap oil, but if they want to make cash they have to raise prices again - making that more expensive NA oil worth extracting again.

[DontSayBanana]

Wait, oil is $67 a barrel now? Holy shit. Wasn't it already at an all time low at $80-something a barrel few months ago, or was that a different kind?

It dipped under $45/barrel briefly right around the beginning of 2009.

http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=7y

[Valmy]

How is this expected to work? I mean, we know the oil is there and we know how to extract it - sure they can shut down production with super cheap oil, but if they want to make cash they have to raise prices again - making that more expensive NA oil worth extracting again.

Well it worked when the prices tanked in the 80s.  Took oil and gas decades to recover here.  So maybe they figure they can do it again.

[DGuller]

Oh and it is going to plunge lower.  The Saudis are on a mission to destroy the North American oil threat.  It is hard not to take immense pleasure in lower gas prices and the inconvenience this is causing all the petro-tyrannies, but we have to remember this is ultimately done on their behalf.

How is this expected to work? I mean, we know the oil is there and we know how to extract it - sure they can shut down production with super cheap oil, but if they want to make cash they have to raise prices again - making that more expensive NA oil worth extracting again.

Predatory pricing can work when fixed expenses are sizable.  It takes a lot of up-front investment to dig up oil.

[Martinus]

Yeah. The biggest costs in oil industry involve land acquisition and prospecting. Once you have the oil fields going, it's liquid cash.

[CountDeMoney]

Oh and it is going to plunge lower.  The Saudis are on a mission to destroy the North American oil threat.  It is hard not to take immense pleasure in lower gas prices and the inconvenience this is causing all the petro-tyrannies, but we have to remember this is ultimately done on their behalf.

The Saudis aren't concerned about the North American oil threat.  They're dialing back the spigots specifically to poke Tehran in the eye.

[Barrister]

Yeah. The biggest costs in oil industry involve land acquisition and prospecting. Once you have the oil fields going, it's liquid cash.

Depends on what kind of oil field.  A conventional field, sure.  But if you're looking at offshore stuff, or unconventional plays like the oilsands, the upfront capital costs of developing the field are enormous.

[Norgy]

Putin's becoming the idol of many on the far right (and I mean far right, not relatively sane conservatives) here. After all, he tells women where it's at and doesn't tolerate liberal media. I just don't get it.

One think I have found stunning is the sheer number of people posting in various places around the Internet who appear to love Putin. Granted, many of them are no doubt Russians, but many appear not to be - it seems like folks on the extreme right and left alike see things they like in him and/or blame any confrontation on the West.

Considering how outright full-retard batshit insane he and his supporters appear to be, this is very odd.

Yes and no, I suppose. In the post-modern world a point of view is as good as a fact, and if one is critical towards Western behaviour (which is far from coherent and uniform, I might add), Putin offers an alternative. A shirtless, riding on a horse while petting tigers and hunting game alternative. An alternative where critical voices suffer from vertigo and fall down from windows or have an uncanny knack of being caught up in "unrelated shootings" and get hit by stray bullets.

To me, the RT retweeting, Facebook-sharing people are the same as the anti-vaccination chemtrails believers. They're listening to Alex Jones and getting their minds blown. Up.

[The Minsky Moment]

Oh and it is going to plunge lower.  The Saudis are on a mission to destroy the North American oil threat.  It is hard not to take immense pleasure in lower gas prices and the inconvenience this is causing all the petro-tyrannies, but we have to remember this is ultimately done on their behalf.

How is this expected to work? I mean, we know the oil is there and we know how to extract it - sure they can shut down production with super cheap oil, but if they want to make cash they have to raise prices again - making that more expensive NA oil worth extracting again.

The idea is that you drive the financially weaker companies to the wall and take out that supply.  If prices later go up, investment will return but there are lead times before that leads to more supply again. 

[The Minsky Moment]

Oh and it is going to plunge lower.  The Saudis are on a mission to destroy the North American oil threat.  It is hard not to take immense pleasure in lower gas prices and the inconvenience this is causing all the petro-tyrannies, but we have to remember this is ultimately done on their behalf.

The Saudis aren't concerned about the North American oil threat.  They're dialing back the spigots specifically to poke Tehran in the eye.

One stone, two birds.

[CountDeMoney]

One stone, two birds.

We've been reduced to squeezing the oil out of sand.  It's not a sustainable solution.  It's not going to make the Saudis sweat the long game.

[MadImmortalMan]

Yeah. The biggest costs in oil industry involve land acquisition and prospecting. Once you have the oil fields going, it's liquid cash.

Depends on what kind of oil field.  A conventional field, sure.  But if you're looking at offshore stuff, or unconventional plays like the oilsands, the upfront capital costs of developing the field are enormous.

The environmental impact reports alone take armies of lawyers and nearly a decade sometimes.

[Razgovory]

One stone, two birds.

We've been reduced to squeezing the oil out of sand.  It's not a sustainable solution.  It's not going to make the Saudis sweat the long game.

No not forever, but possibly for many years to come.  It may severely damage Russia though and with a lot of luck maybe Putin will be dethroned.  Honestly, this is a beautiful opportunity for foreign policy.  Our enemies are weakened, we may be able to wring concession out of Iran and Russia.  Angola and Nigeria are not countries we have a beef with, but if they are hurting we could increase our influence there and possibly make important allies in the region.  Venezuela may simply go into free fall which is nice.  If this is the result of fracking then Frack me up, Scotty!

[Tonitrus]

Putin won't be dethroned in any case.  Russians are good at hunkering down and enduring the suffering.

[Razgovory]

Putin won't be dethroned in any case.  Russians are good at hunkering down and enduring the suffering.

Yeah, it's not like the Russian government was overthrown in our life time.  Putin is popular, that's why he has power.  He's popular because the economy is better under him and he is making Russia look strong again.  The oil money drives both of these.  If those are undermined he'll have to rely on the security apparatus.  He knows this and worked hard at strengthening it.  The question is if it's enough.