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Old 12-12-2014, 06:11 PM   #1
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Gas prices falling

With gas prices going down, I am sure we are all hoping they won't do an upturn. Maybe we can see a little more of this great country come spring. [ moderator edit ] I would like to remind us all of the price of everything going way up in the past few years because it all has to be hauled in trucks or trains or planes which use fuel. Now, if fuel prices stay down, perhaps prices will stop going through the roof.I'm through now!
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Old 12-12-2014, 07:26 PM   #2
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There are soooooo many factors involved. Oil price instability is shocking all the markets and some think could be a "Black Swan" event.

Oil prices won't stabilize until global supply and demand equalize better. There are so many scenarios that could happen:

Supply only scenarios:
1. OPEC holds out, US shale caves;
2. OPEC holds out, US shale doesn't cave;
3. OPEC caves, US shale caves and then rises;
4. OPEC caves, US shale doesn't cave.

This doesn't even take into account Russia, Venezuela, currency reserves within the countries involved, or the demand scenarios.

Ultimately what needs to happen is supply to be cut somehow. This needs to be a significant cut. Right now demand for oil is neutral and slightly declining I believe. Right now, I would keep an eye on the supply side.

Beyond that there are some some winners and losers with contrasting interests.

1. Consumers are a winner.

2. For the time being the US economy is a winner. The caveat is that if the markets continue to remain jittery then we could see a more serious loss of investment value. However, if this situation hits the energy producer markets hard, it could have a reverse affect. Loss of production facilities could have a major affect on employment and infrastructure investments at many levels of the energy production spectrum.

3. Certain sectors are big winners. Airlines and other industries that run on petrol products are ecstatic.

4. The energy sectors are potential big losers. At one point it was thought that the break even point for shale production to be profitable was around $80-$85 a barrel. Today's prices are around $60 a barrel. One theory is that OPEC is intentionally pumping oil at present levels is to outlast shale oil producers and break their backs. There are some additional considerations that bonds used by a multitude of these small companies could reach junk status. This would occur when they reach point where they can't service their debt obligations. This could be a problem in the bond market similar to the real estate bubble.

OK...these are MY theories. Be careful what we ask for.
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Old 12-12-2014, 08:29 PM   #3
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Sky_Boss there are many people in the O&G sector that are not so happy. Your analysis is quite correct but the backlash here will be my layoffs in the sector. I have friends at Schlumberger and Halliburton that are already being let go in anticipation of even lower prices
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Old 12-12-2014, 08:52 PM   #4
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Very well ststed Skyboss. There is a cause and effect for each market change. I'm going ultra conservative in my portfolio for a few months and see what happens. Russia is a wild card right now, and if you poke a bear hard enough he will poke back if he feels his existence is threatened.
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Old 12-12-2014, 08:57 PM   #5
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Quote:
Originally Posted by spinn View Post
Sky_Boss there are many people in the O&G sector that are not so happy. Your analysis is quite correct but the backlash here will be my layoffs in the sector. I have friends at Schlumberger and Halliburton that are already being let go in anticipation of even lower prices
Even beyond that, we are already seeing some attitude changes that might not be quite so wise. Sales of lower MPG vehicles are increasing. It is like folks don't have a long view of things.

Also, low prices of petroleum based products could affect the movement in the progress to develop alternative energy options. Without getting into the politics I believe that unless we continue to develop alternative/renewable sources of energy we will be thinking too short term. These alternatives are part and parcel of keeping us independent of foreign factors having an undo influence our our base economy.

That doesn't eliminate the need to stabilize oil and gas prices at a level that is optimal for both the consumer and O&G producers. Well, that is over simplified but...that is IMHO.
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Old 12-12-2014, 09:12 PM   #6
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There's no end to the speculation. One is that we are squeezing Russia so they are now losing $ on every barrel. Another has to do with decreased demand from China for some reason, increasing supply.
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Old 12-12-2014, 09:19 PM   #7
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Even though gasoline prices are low, the spread for diesel seems to be high. Saw one station today where diesel was $1.15 more per gallon, but on average after driving close to 5000 miles over the past 2 weeks .. is .80 cents
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Old 12-12-2014, 09:26 PM   #8
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If I responded the way I want to it would be too political and would censored.

I just have a problem with other countries controlling our fuel cost.

Why has it been 5 years since we have seen fuel prices this low? It is more than just supply and demand. I would call it price fixing. And we let it happen.
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Old 12-12-2014, 10:29 PM   #9
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This is a pretty interesting article

One of the things I took from it was that the shale oil industry has made some important strides on efficiencies and perhaps are now closer to a $57 per barrel break even point. Still...as I said and the article seems to echo, there are some companies working on debt margins that will cause them to fail.

It is not possible to insulate oil prices to US vs the rest of the world. Oil is a world wide commodity and thus subject to world wide pressures. The ability to competitively extract oil from shale was a game changer. However, its also a reason for competitors to change strategies to protect their bottom line.

It will be interesting to see if some of the other potential consequences actually occur. The geo-political implications are like a soap opera. Venezuela bankrupt or Nigeria going totally broke are not good for us but probably not as big a deal. The one thing that has me concerned is the Russian factor. Russia is so embroiled in the Romanian conflict and sanctions are having an affect on internal politics, they could really deal out a wild card.

Never the less, I am enjoying the low fuel prices like all of you.
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Old 12-12-2014, 10:33 PM   #10
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It's all about a reset button being pushed again, and hope for change to get back on track. Unfortunately, I think there is a lot of bad weather ahead and I plan to think twice about where I park. I look forward to enjoying boondocking.
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Old 12-13-2014, 06:49 AM   #11
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Start up price of solar is falling and this technology is becoming more efficient. Relatively nominal effect right now, but getting stronger.

If US petroleum export sanctions are lifted, the O and G suppliers would be pleased and we would pay. OPEC is squeezing the US shale oil and gas producers and affiliates. I believe this is a short lived downturn in consumer fuel prices. Don't sell your Prius just yet.


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Old 12-13-2014, 07:10 AM   #12
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Hoping tire prices fall some by next spring when I need to replace 6.
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Old 12-13-2014, 07:17 AM   #13
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The US should be developing multiple methods of energy production. WW II changed the oil world map. We should be energy independent for security reasons. Low costs would be a happy benefit.
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Old 12-13-2014, 07:24 AM   #14
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All this talk about GAS prices.
It is really nice to see DIESEL at $2.99
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