1$/gal. gasoline? Maybe, but what does it mean really?

[dmccarty]

... I believe the break even for shale is 45-48 per barrel. Saudi is simply going to drive the competition into bankruptcy.

A year or so back I was reading the same $45 per barrel break even number but recently I have been reading that the number has been lowered because some of the companies have become more efficient at producing more oil from existing wells and platforms. I assume the break even cost is the entire expenses of a given company to produce oil, including debt. Many of these shale oil companies are heavily in debt and so the question becomes how much of the cost per barrel is from paying the debt loan? I suspect it is a pretty big part of cost per barrel.

Some companies are going into bankruptcy but will this drive up oil costs? I am thinking no. Why? Because there are companies out there waiting for the shale oil companies to go bankrupt so they can get the wells for cents on the dollars. At that point, the question becomes how much does it cost to produce a barrel when a company has no or little debt and bought wells for pennies instead of dollars? bet it is not $45.

China is still importing lots of oil but it is not USING the oil, though it does seem to be stockpiling which makes sense. The Chinese refineries, both large and small ones, are running at high utilization rates and EXPORTING the gas and diesel. China is controlling the internal cost of fuel so they do NOT increase demand in the country.

Since it seems like the Iranians are about to have access to the oil markets, the oil prices are going to have to continue to drop since there is no increase in demand. Mexico seems to be making moves to open up areas in the Gulf for oil production as well. Mexican oil production has been decreasing for years and their government spending is dependent on that revenue so they don't have any choice but to open up new fields yet that will help drive down the oil price....

Venezuelan oil production has fallen greatly since it's peak at the turn of the century. Oil revenue have been diverted from maintaining oil production, so surprise, surprise, oil production has fallen. If the thugs in power can be tossed out, then maybe oil production will increase but more oil on the market will decrease prices if demand does not increase.

This week I read an oil "expert" who said oil prices are not going to increase for two years. I wonder if two years is too short a time?

Later,
Dan

 

[oldpilgrim]

If you think oil companies are selling their products for less than it costs to make them, I've got a bridge to sell you. The final price of their products is ALWAYS based on what they pay for the raw materials.

There's no reason they can't sell what they make for more than they are now. There's no competition in this country as all the oilco's work together to maximize their profits.

As Sherlock says, "Something is afoot."

Remember when oil prices went up and up and affected everything that was either manufactured or transported. Oil price increases added to farmers' costs, mfg costs, trans costs, electrical costs, etc, etc, etc. across the whole economy.

Now oil is the lowest it's been in a dozen years.

Do you see the associated costs going down? I didn't think so. Watch what happens next. Oil prices will surge again and so will all the same prices of everything that went up and didn't come down before.

 

[newbury]

A year or so back I was reading the same $45 per barrel break even number but recently I have been reading that the number has been lowered because some of the companies have become more efficient at producing more oil from existing wells and platforms. I assume the break even cost is the entire expenses of a given company to produce oil, including debt. Many of these shale oil companies are heavily in debt and so the question becomes how much of the cost per barrel is from paying the debt loan? I suspect it is a pretty big part of cost per barrel.

Some companies are going into bankruptcy but will this drive up oil costs? I am thinking no. Why? Because there are companies out there waiting for the shale oil companies to go bankrupt so they can get the wells for cents on the dollars. At that point, the question becomes how much does it cost to produce a barrel when a company has no or little debt and bought wells for pennies instead of dollars? bet it is not $45.

China is still importing lots of oil but it is not USING the oil, though it does seem to be stockpiling which makes sense. The Chinese refineries, both large and small ones, are running at high utilization rates and EXPORTING the gas and diesel. China is controlling the internal cost of fuel so they do NOT increase demand in the country.

Since it seems like the Iranians are about to have access to the oil markets, the oil prices are going to have to continue to drop since there is no increase in demand. Mexico seems to be making moves to open up areas in the Gulf for oil production as well. Mexican oil production has been decreasing for years and their government spending is dependent on that revenue so they don't have any choice but to open up new fields yet that will help drive down the oil price....

Venezuelan oil production has fallen greatly since it's peak at the turn of the century. Oil revenue have been diverted from maintaining oil production, so surprise, surprise, oil production has fallen. If the thugs in power can be tossed out, then maybe oil production will increase but more oil on the market will decrease prices if demand does not increase.

This week I read an oil "expert" who said oil prices are not going to increase for two years. I wonder if two years is too short a time?

Later,
Dan

You left out Cuba:

The government announced there may be more than 20bn barrels of recoverable oil in offshore fields in Cuba's share of the Gulf of Mexico, more than twice the previous estimate.

If confirmed, it puts Cuba's reserves on par with those of the US and into the world's top 20. Drilling is expected to start next year by Cuba's state oil company Cubapetroleo, or Cupet.

from 20bn barrel oil discovery puts Cuba in the big league | World news | The Guardian

If you think oil companies are selling their products for less than it costs to make them, I've got a bridge to sell you. The final price of their products is ALWAYS based on what they pay for the raw materials.

There's no reason they can't sell what they make for more than they are now. There's no competition in this country as all the oilco's work together to maximize their profits.

As Sherlock says, "Something is afoot."

Remember when oil prices went up and up and affected everything that was either manufactured or transported. Oil price increases added to farmers' costs, mfg costs, trans costs, electrical costs, etc, etc, etc. across the whole economy.

Now oil is the lowest it's been in a dozen years.

Do you see the associated costs going down? I didn't think so. Watch what happens next. Oil prices will surge again and so will all the same prices of everything that went up and didn't come down before.

Prices ratchet up quickly, down slowly, unless it reaches tipping point. But it may be many years before oil prices get back near $100/barrel unless we have a war.

As far as ISIS - think how bad it must be hurting them, they fought for $50 a barrel oil and are probably lucky to get $30.

My tractor tanks will remain empty for a while.

 

[k0ua]

Okay Dokey. A few years ago, we were "running out of oil" "peak oil" and all of that CRAP. Now we have oil running out of our ears, and having trouble finding places to put it. Yep, they just keep on finding it. Viet-Nam may be floating on oil too. Now Cuba has lots of oil.. Of course they do.

 

[charlz]

Remember when oil prices went up and up and affected everything that was either manufactured or transported. Oil price increases added to farmers' costs, mfg costs, trans costs, electrical costs, etc, etc, etc. across the whole economy.

Now oil is the lowest it's been in a dozen years.

Do you see the associated costs going down? I didn't think so. Watch what happens next. Oil prices will surge again and so will all the same prices of everything that went up and didn't come down before.

For now I am sure all the middle men are just enjoying some extra profit.... UPS, FedEx, other assorted shipping companies fuel bills have been greatly slashed. It is some relief to us 'average consumers' as well. However, if 'things' start getting cheaper it could signal deflation which is something our governments are all panicky about as it could slow down the economy. Personally, a slow economy where everything is getting cheaper doesn't sound all that bad

 

[oldpilgrim]

Viet-Nam may be floating on oil too.

Why do you think we went there? We knew that back then.

 

[teejk]

Do you see the associated costs going down? I didn't think so. Watch what happens next. Oil prices will surge again and so will all the same prices of everything that went up and didn't come down before.

Actually I was surprised it took as long as it did for higher fuel prices to show up in the supermarket. It will probably take just as long for the drop to show-up. Capitalism being what it is, producers trying to keep the extra profits will get creamed in the market place. As Norm from "Cheers" once said, "it's a dog eat dog world out there and I'm wearing Milk-bone underwear".

 

[Redneck in training]

For now I am sure all the middle men are just enjoying some extra profit.... UPS, FedEx, other assorted shipping companies fuel bills have been greatly slashed. It is some relief to us 'average consumers' as well. However, if 'things' start getting cheaper it could signal deflation which is something our governments are all panicky about as it could slow down the economy. Personally, a slow economy where everything is getting cheaper doesn't sound all that bad

Refineries are making killing. When crude is high it is hard for them to pass the expense on the customers. Opposite is true now.

 

[QRTRHRS]

It shows that alot of people have been living high on the hog at the expense of people overly dependent on gasoline. Many of these people have out of necessity curbed their livelihoods to limit that previously expensive trip to the pump. Having realized that with thoughtful choices they can live just fine with a more economical vehicle, limit trips by paying attention to scheduelling, etc, etc.

Hopefully, many of these people will not cede to the low pump prices and return to those bad habits.

While people have more income to spend on other things rather than the pump, the lackluster economy shows just how deep in doo doo this country has become. People that once had a somewhat decent job are now accepting (if at all) a lower wage to survive if you can call it that.

While I am on my, I have to wonder what will come? The rich are supposedly getting richer. The car ads on TV state, "well qualified buyers can...". Stock holders are demanding that companies forego R&D and focus on returns. All for the short term, nothing long term.

 

[300UGUY]

It shows that alot of people have been living high on the hog at the expense of people overly dependent on gasoline. Many of these people have out of necessity curbed their livelihoods to limit that previously expensive trip to the pump. Having realized that with thoughtful choices they can live just fine with a more economical vehicle, limit trips by paying attention to scheduelling, etc, etc.

Hopefully, many of these people will not cede to the low pump prices and return to those bad habits.

While people have more income to spend on other things rather than the pump, the lackluster economy shows just how deep in doo doo this country has become. People that once had a somewhat decent job are now accepting (if at all) a lower wage to survive if you can call it that.

While I am on my, I have to wonder what will come? The rich are supposedly getting richer. The car ads on TV state, "well qualified buyers can...". Stock holders are demanding that companies forego R&D and focus on returns. All for the short term, nothing long term.

Everything is wall street. Companies cannot retain too much money, or invest in long term projects, the raiders will come for them, demanding that the firm's be parted out. Look at the Timken company - forced to split in 2 by raiders - now both parts are worth less than they were as a whole, and the company may not survive.