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OT the downside of low oil prices

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David G

Well-known Member
I just got back from a weeks work in western Oklahoma and got a good chance to talk with the local folks. Their economy is mostly work on the drilling fields with agriculture as back up. They are really hurting for jobs and wondering when the oil market will get back. I am really blessed to be living in an area with good manufacturing and agriculture, and feel for them.
 
I know of a local geologist who is out of work because of low crude prices. It seems that whenever they drill for oil, a geologist has to be on site at all times. Since his employer is not drilling, he has no job, or at least that's his excuse.
Still, if gasoline was at $4/gallon, how much worse would our economy be?
 
It is a two edged sword, lower gas prices put money into the economy but kill that industry.

I have no clue what is better.
 
I'm afraid if it stays this low for very long we will eventually have a shortage, and you know what happens then! I don't think domestic producers can keep going at under $40. Something I have noticed, when it got to 45 the price at the pump came down to about what it is now, but now it's down to 35 and the pump prices haven't changed much. I think they assume we are happy whenever it's under $2!
 


My Brother had his new septic tank for his truck built at Kalaska. They aren't building tanks for oil trucks now. He said they were slow and glad to get work.
 
Lots of people have lost their jobs in the energy industry recently, including upper management jobs. It's tough when many of these people may have just bought a house, or got married...
I do not believe TransCanada is doing much right now on their Keystone pipeline either. When the price of oil goes below $40.00 per barrel, there is not much profit if any at all.
 
With the lower oil prices, government is talking of upping the tax on gasoline and diesel by $1.00 per gallon. As soon as they get that done, oil price will sky rocket and pump price will be over $5.00.
 
Right now there are about 1000 unfinished oil wells in ND. That is a lot of holes in the ground hoping for better prices.

I think most people on here would lean towards higher oil prices, as that would pull most other commodities up to.
 
DavidG,
Some on TV are saying we may see $20 oil and the oil business is laying off big time. So it helps people at the pump and hurts the people drilling. Is cheap oil caused by someone behind the scenes pulling strings making it cheap. I read someplace where the US can't export oil, not sure why or even if it's true.

I wonder is the price of oil being pushed down somehow to hurt IS, which is funded by oil? Perhaps the plan is to have a surplus of oil on the world market to suppress prices. Only a guess on my part. Hard to believe that politics isn't somehow a part of it.
 
I heard a while back that the Saudi's were dumping oil to hurt the Russians, but do not know if that was or is still true.

The new budget bill in Congress opens up US exports of Oil for the first time.
 
(quoted from post at 03:04:54 12/19/15) DavidG,
Some on TV are saying we may see $20 oil and the oil business is laying off big time. So it helps people at the pump and hurts the people drilling. Is cheap oil caused by someone behind the scenes pulling strings making it cheap. I read someplace where the US can't export oil, not sure why or even if it's true.

I wonder is the price of oil being pushed down somehow to hurt IS, which is funded by oil? Perhaps the plan is to have a surplus of oil on the world market to suppress prices. Only a guess on my part. Hard to believe that politics isn't somehow a part of it.
Click to expand...

Saudi Arabia has been pumping oil like mad to make a huge surplus in oil. They want to make oil so cheap that the fracking wells will become unprofitable, and have to go out of business. The purpose behind our country extracting oil and natural gas from fracking was to become energy independent and not have to buy foreign oil. Now the oil companies want to export this extra oil to create a new market. All this was headline news several months ago.
https://www.google.com/?gws_rd=ssl#q=Saudi+arabia+flooding+market+with+oil
 
The so-called "experts" were predicting $100+ per barrel oil for as far as the eye could see a few years ago. Now, these same "experts" are saying that Saudi Arabia is selling oil as fast as they can because they (who have lots of oil) see the price tumbling even further in years to come due to many factors. Such as: natural gas (particularly in the US, the world's largest user of energy) wind farms; solar farms; more efficient motor vehicles. Iran will soon be releasing lots of oil to markets, Russia relies heavily on oil revenues to prop up its economy, China is slowing down or, at least, taking a pause. Economy in many leading countries is faltering causing a reduction in oil use or, perhaps, lack of growth in oil use. One energy sector in the US that is doing OK is the coal industry. Even though the US is trying to eliminate the use of coal most of our electric power is generated from coal fired plants and the world loves our hard coal. Germany is buying it as fast as they can. History never repeats itself so precisely that one can predict the future based on past events. The world and its economy evolve. Sometimes fast, sometimes not so fast. We, as farmers, love high prices for our products. So does, Deere, CNH, AGCO, etc. But, in spite of the predictions of the "experts" we are feeding about 7 BILLION people and we still manage to produce too much to keep the prices up. In fact, we produce enough in the US to allow wasting a high percentage and still eat way too much to be healthy. $8 corn is great for a corn farmer but not so great for a cattle feeder or to someone who buys tortillas. And, what if a new, almost free, source of energy comes on line. Oil fields will go the way of harness shops. Which, when you stop to think about it, we've only been on this oil kick for about 100 years. When I was a kid we had 2 harness shops in our town and another in the next town 7 miles down the road. They only were able to stay open due to WWII (THE BIG ONE). And, we could see another World War. That would change a lot of things. Real fast. Oh, and another thing. There has always been less than 10 cents worth of corn in a box of corn flakes. (;>))
 
I would assume there are certain static costs (production, transportation, marketing, taxes, etc.) that remain about the same whether the price at the pump is $2.00 or $4.00.
 
(quoted from post at 03:50:41 12/19/15) Where are the "behind the scene people that pushed the price of oil up $110??
Click to expand...

Good question. There's always someone looking for a conspiracy when they don't understand why something goes wrong. This line of thinking only creates finger pointing and making villains out of certain groups of people. Most people don't have time to research things through, so they start pointing their finger at someone and blaming them for the trouble.
 
I would assume not! Maybe someone can explain to me why the price of gasoline went up 15 cents/gallon today in NW Indiana. The price of gasoline is totally disconnected from the price of crude oil when oil prices are dropping but are totally in sync when oil prices rise. I believe the retailers are responsible for the wild gasoline spikes we have had to endure the last fifteen years. Anywhere from 10 cents a gallon to 90 cents a gallon. The bastards even have a name for it. It's called "price cycling".
 
they are still making durn good money on motor oils hydraulic and 90 wt gear oil ,, and sacrificing gasoline ,,. the mild winter has caused price to drop to 1.60 diesel off road.. the jets arethe real competition ..
 
Remember a few years ago when the current Administration claimed that increased drilling would have no effect on (then) high oil prices?
 
The purpose of our country extracting oil and natural gas from fracking is to make money for investors and shareholders, DC doesn't give a hoot about energy independence unless it can come from renewables.
 
David---I take some tools to BAKER Atlas Hughes for their wireline trucks--bring them out from Mi. I like the drive out there--do it nonstop except for fuel..................
 
My take on the subject.

Lots of people lose when oil prices are low.
The whole supply chain that feeds the oil company suffers.
Also states like Louisiana that get a good chunk of its revenue from oil suffer.

Just like when corn prices tank.
Not only does the farmer suffer but the whole supply chain suffers also.
$2 corn does not build a lot of new tractors.

But the average joe could care less.
All he wants is cheap gasoline.

WHY is oil prices low?
Lots of reasons but it boils down to supply and demand.

Over the past decade more non oil energy has come on line so oil demand is down.
A warm winter has helped explode this.
Then the U.S. and other countries have started producing more causing a glut.
In the past OPEC would have just cut production to stabilize the price.
But they can not do this now.
The reason is some countries can not cut production because their economy depends on selling oil.
If OPEC cut production now the price may stabilize some but with the glut of oil customers would just buy elsewhere.
They would lose market share.
In order to hold on to their market share they keep pumping out oil.
Now places like Iran will start selling oil with the new nuclear deal.
This will only make more of a glut on the world market.

I see oil going down more to we start to weed out the places that need higher prices to make a profit.
Once we weed out those guys oil should go back to the $50 to $60 range and stabilize.
But this may take another year to play out.
I do not see oil going back to $100.
If that were to happen then all the players we weeded out on this go around will be back in the game and we will be right back in the same boat we are now.
 
I don't deny the reality of opportunistic price gouging. I'm just saying that there is a floor of built-in costs that keep the price at the pump at a certain level. Don't know what that number might be.
I do know that the retailer's margin is not a large percentage of the pump price.
 
The oil people did not care about us,John Doe when we were suffering because of high oil prices. Now, maybe this is just fair play turn about?
 
I just came back from two weeks in the North Dakota oil patch working on electrical controls, things have really slowed down, empty hotels and drilling rigs sitting, saw several pump jacks just sitting not running, I doubt it will ever get back to what it was a few years ago, saw housing units in Williston that probably won't be finished, Quinn pumps closed the door in Montana and moved everything to Williston, abandoned campers everywhere and they are trying to turn some of the man camps into single family housing units, huge stacks of pipe for pipelines east of Dickinson, it's a crazy place, was in Houston two weeks ago and things slowed down there as well, gas was $1.71 there and $1.68 in Fargo today.
 
All-in-all, it is a market that goes up and down like most other markets. People just have to learn to ride out the lows or get into some other line of work. The way farm commodity prices are going, it is going to be tough times for a lot of farmers too.
 
Back when fuel prices were high, a lot of folks here said that if prices would just drop it would give the economy a big shot in the arm. I said "be careful what you wish for". There are plenty of downsides to cheap oil; not only does it have a devastating effect on the petroleum industry and other related industries (which is to say pretty much every industry), it makes imported products cheaper (lower transportation costs) and discourages the development of alternative energy sources.
 
(quoted from post at 19:04:54 12/18/15) DavidG,
Some on TV are saying we may see $20 oil and the oil business is laying off big time. So it helps people at the pump and hurts the people drilling. Is cheap oil caused by someone behind the scenes pulling strings making it cheap. I read someplace where the US can't export oil, not sure why or even if it's true.

I wonder is the price of oil being pushed down somehow to hurt IS, which is funded by oil? Perhaps the plan is to have a surplus of oil on the world market to suppress prices. Only a guess on my part. Hard to believe that politics isn't somehow a part of it.
Click to expand...

George, do you know this behind the scenes person? Everybody else was under the impression, at least what the news tells us, that it is the Saudis. They have been letting the price that they sell for to drop instead of along with the rest of the Arab Cartel, keeping their price high, like they had since 1973. it is all out in the open.
 
Yes there is a floor.
The manufacture cost for the refinery; transportation; EPA charges; Station cost; are just a few.
Oil could be free and these cost will stay the same.
With high price oil the oil price is a bigger percentage so it effects the price of the gas and diesel more easily.

But with that said the price of oil does not set the pump price.
The price at the station across the street does set the pump price.
Also margins at most big stations are pretty good.
It is because they are the jobber and retailer.
A mom and pop store could never keep up with the big boys because of this.
The big stores can sell gasoline at the pump for less than the mom and pop stores pays for it and still make money.
We use to (may still have) laws in Louisiana that forced the big boys to sell gasoline with at least a xx markup to try and protect small stores from this.
 
So? Economic booms and busts happen all the time in every industry/business just the nature of things,hope they saved up when times were good to get them thru the tough times.
Personally I'm loving low oil prices and so are Millions of others on the other hand
I'm not loving low cattle prices but no sense in me crying about it when things go up sooner or later they come down.
 
(quoted from post at 01:01:29 12/19/15) The oil people did not care about us,John Doe when we were suffering because of high oil prices. Now, maybe this is just fair play turn about?
Click to expand...

It's been said for many years now that the oil co make about 9 cents per gallon. Thats the guys that find and drill the wells, ship the crude and refine it into useful products like gas, diesel, plastics etc at a cost of hundreds of billions. 9 cents per gallon. NYS and the Feds invest nothing at all in the production of fuels, but they get over 70 cents a gallon in taxes here in NY state. The County taxes propane and fuel oil too.

And we're complaining about the oil companies screwing us over?
 
One down side is the greedy state of Georgia couldn't raise the gas tax fast enough when the price fell. Another is when gas rises the retailers justify raising prices because transportation costs rise. But do those prices come down with the gas price? No. So when the gas goes back up so will the so called even higher higher transportation cost. TDF
 
Low cattle prices????

If I would have offered you $1.20 a pound 6 years ago you would have been very delighted.

Cattle are still a good price if you did not buy high priced feeders last spring.

The cow calf guy that finishes his own is still making good money compared to the other commodities.

Yes they are lower than 5 months ago but still a good business to be in.

Gary
 
We have cheaper gasoline and diesel fuel true enough, but I have not seen any drop in tires, motor oil, hydralic oil, shipping or anything else to speak of. Some one is still making a bucket load of money taking advantage of low crude prices.
 



EVERY person in America benefits EVERY week from low oil prices. They are ALL saving 20 to 50 dollars a week.



Airlines, shipping, buses and all transportation benefits. All companies with cars and fleets benefit. The price of EVERYTHING can be made/grown cheaper. Car dealers are selling higher profit cars instead of econo boxes. Only the local drillers are being hurt.


Let the Saudi's pump ALL of their oil out first.

ITS A WIN FOR 99.9% of AMERICA and a kick in the butt to the terrorist.

Next you will complaining about the cost of air.
 
I believe the export deal was they could not export crude oil. That is I think what just changed in this budget deal this week. They can now export the crude they could not do before.
Please do correct me if I am wrong.
 
I have worked in the oilfield for 40 years and on the first job I ever had an older man told me to save 1/3 of every paycheck and live like I never got a raise because in this business ''you will always be temporary''. I cannot count how many times I have seen what the man told me come true and while I have been fortunate to have always worked I have seen more years of uncertain job prospects with reduced wages than I have of wide open with wages going up, anyone who works in the business has to learn the lessons early, what usually happens after a downturn is about 75% of the people laid off have found other work and never return, the ''once bitten'' syndrome I guess, when this happen the industry needs people badly and wages go up etc. and then a new generation believes it will never end. Its rough on people and I hope they find some kind of work to tide them over or a new profession. The Saudis have more than likely severely mis-calculated and this price crash that they engineered will spell the end of OPEC, or at least their clout as the worlds swing producers. The US industry has done what it always does when faced with a down market, they have dug I their heels and learned to cut costs, US shale Drillers will be profitable at 30-35 dollar oil going forward, the Saudis and the OPEC nations need 100 oil on average to pay for their welfare states and government shortfalls. There will be price spikes caused by various geopolitical events and natural disasters but for many years to come oil will be under 50 dollars per barrel, the middle east will have to make a profound lifestyle adjustment and are in for many years of pain.
 
Electric car sales are down since the price of fuel has dropped.That and there is not a support system for recharging anyway.
 
Cattle prices are still higher than they were for all but for 3 of the last 50 years, how is that low?
 
I read that too Cat guy. Wave goodbye to decent fuel prices. Too bad the tax breaks and subsidies for big oil won't leave when the low prices do. gm
 
Exactly. I've been telling people that for years, but the figure I heard and saw reported was 8 cents. Government produces nothing and takes everything.
 
There has been a ban on exports of US crude since the Arab oil embargo of 1973, the ban was lifted this week, if any oil is exported in the short term it will be cheaper grades that cannot be economically refined in the US due to regulations or high grade crude that can be sold at a higher price abroad and replaced by import oil. At some point in the future when the US is basically forced to assume the role of the worlds swing producer due to the collapse of OPEC and the comeback of shale then the right to export will allow US companies to regulate the supply and prevent wild price swings to the high side due to shortages in production elsewhere. The US is still a net importer of oil, that will change in the next couple of years due to the current oil price collapse.
 
I think wal-mart/Murphy oil got the minimum mark up law changed about 10 years ago.
 
You are correct, John. I was working for the Louisiana Oil Marketers Association (jobbers) back when the retailing of gasoline began to change from mom and pops and independent brand stations. When the refiners decided they wanted to control the retail market with company-owned C-Stores it was all over for the little guys. As you said, the company stores sold product for less than they sold it to the jobbers. No room for profit there. (That was 35 years ago so I may be a little fuzzy on all the details of what went on back then.)
 
(quoted from post at 09:58:19 12/19/15) I read that too Cat guy. Wave goodbye to decent fuel prices. Too bad the tax breaks and subsidies for big oil won't leave when the low prices do. gm
Click to expand...

What subsidies and tax breaks? There are NO subsidies for oil companies and they get no more in tax breaks than any other company. Companies can write of research and development cost. An oil company's R&D is drilling technology and exploration. Just because they find oil doesn't make those cost disappear. Like other businesses they can write off labor and equipment ECT. But they no special breaks or subsidies.

Rick
 
No complaints from me on low oil prices and no, I don't feel sorry for the job losses in the oil industry. Those are risks every one of us face in our profession. No one felt sorry for me when I lost my job several times. I just sucked it up and found a new one. As one poster said, I've always tried to save and have at least 6 months expenses in the bank. Went without a lot of things other people were running their credit cards up buying.

And no one in the oil industry feels sorry for us consumers when gas spikes due to "refinery maintenance" or some other excuse. No, I smile every time I pull up to the pump these days. :D
 
Hi there!!!

Global oil prices continue to defy all rationalization, as predictions fall flat on their face and both West Texas Intermediate (WTI) and Brent are displaying extreme volatility. Crude oil is now at its lowest price level in 11 years, but oil is likely to go lower before things get better.
So many questions have arisen that it has become difficult to address them with any real confidence.

http://www.profitconfidential.com/tag/opec-oil-prices/
 
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