Diesel today

[Tomtint]

The shale oil frackers say that they cannot economically operate when the crude price per barrel is less than $58. And the largest oil field (Permian Basin) is shale bedrock. Producers are not going to increase production to the extent that it drives crude prices below profitability.

That price they need for profitability... 58.00 Is based on today's prices of energy itself. Once that goes down it lowers every other metric across the board. Which lowers the number they themselves need to be profitable.

 

[jyoutz]

That price they need for profitability... 58.00 Is based on today's prices of energy itself. Once that goes down it lowers every other metric across the board. Which lowers the number they need themselves to be profitable.

True to an extent. They do have fixed costs for labor that are much higher than a few years ago, especially since there’s an oil field labor shortage. And there are other fixed costs as well. The other factor is world market supply and demand, much of which is outside of domestic industry control. We’ll see where this goes.

 

[Hay Dude]

Only one type of oil production for sure. But the largest oil field in the world and where most U.S. oil is produced. It’s been published in oil journals that $58 is the median price where shale oil production is profitable. Nothing about the gobment. Individual companies have higher or lower price points for profitability, but on average when west Texas crude prices fall below $58/barrel, the drillers start packing it up.

Some reading on this topic:

https://finance.yahoo.com/news/us-energy-dominance-die-under-010405219.html

Aren’t you the one who always said oil was a world wide commodity controlled by OPEC? Maybe they will pack it under under $58/brl with the most expensive types of oil drilling in the USA, but that don’t mean other types of drilling in the dozens of other OPEC countries won’t drill at $40/brl

 

[Hay Dude]

I don't really disagree, on a micro economic scale, but on a macro, stabile prices are more important than low prices.

I know guys that won continuing service contracts, at $2.25 gas/$2.75 diesel; and had no price escalations built in, at $4.50 diesel. They were loosing their butt's, and some of these are 3 year contracts.

For an average American, driving 12,000 miles per year, at $3.00/gal, getting a moderate 25 mph, 480 gal per year=$1440; vs $3.50/gal=$1680. Thats $240/year difference.

It's big effects are also regional; let oil go sub $50/barrel, and drive around Louisiana/Mississippi, and you will see the affects. If you drive through NY, it's probably the opposite effect.

What I never understood, the folks that Really focus on MPG are often the folks driving the least. If you have a 5 mile commute to work, it doesn't matter if you have an 8.1L Vortex getting 8 mph, or a Prius getting 45 mph, gas doesn't even show up on your budget.

Edit: my mom for instance was talking about getting a hybrid, and the great milage. She drives about 5000 miles per year now that she's retired. Same with a lot of people in larger metros, gas isn't even in their top 5 expenses. For a lot of rural guys, gad may be in the 2nd or 3rd overall expense...

Yeah if you wanna talk fuel prices, it gets my attention since I use about 100X what the average American uses.
It’s a big deal to me. Enormous effects on profitability. Whole business runs on #2.

 

[jyoutz]

Aren’t you the one who always said oil was a world wide commodity controlled by OPEC? Maybe they will pack it under under $58/brl with the most expensive types of oil drilling in the USA, but that don’t mean other types of drilling in the dozens of other OPEC countries won’t drill at $40/brl

I said oil is a commodity traded on the world market and subject to those price fluctuations from all sellers, not just OPEC. And yes, some of the middle eastern countries can profitably produce oil when prices are lower than $58/barrel due to the geologic nature of their oil reserves. But the U.S. is currently the world’s largest producer and the world’s largest oil reserves are in the Permian Basin. By far most U.S. production comes from this region. And this is shale geology where most production comes from fracking. U.S. industry isn’t going to drill if prices are below profitability.

 

[rScotty]

Yeah if you wanna talk fuel prices, it gets my attention since I use about 100X what the average American uses.
It’s a big deal to me. Enormous effects on profitability. Whole business runs on #2.

Doesn't look like a typical supply/demand curve. Special interests, maybe. Greed, too.

 

[paulsharvey]

Yeah if you wanna talk fuel prices, it gets my attention since I use about 100X what the average American uses.
It’s a big deal to me. Enormous effects on profitability. Whole business runs on #2.

Yeah 100% understand that, but is it easier to plan and build a business model on a relatively fixed price of say $3.25/gal; or wildly swinging prices from $2/gal to $4/gal over the coarse of 2 years. Sure, the second situation, you likely have a lower average, but if it sat at $4/gal (just for arguments sake, but it could be $5 or $6) for 4 months, you could go bankrupt.

It's honestly the same for a lots of people, they can learn to budget and make things work on a stable price, but when their normal $400/month shoots upto $650/month, they are missing mortage payments.

 

[paulsharvey]

It's hard to say, cut hay when diesel is $5/gal, and sell in the fall when fuel dropped to $3/gal, and recoup that price, because others hay on the market might have been cut at $4 or $3/gal.

 

[grsthegreat]

Hey… the price just droppedView attachment 2115432

I feel for you…heres one of ours yesterday.

 

[deserteagle71]

I feel for you…heres one of ours yesterday.


Wow! I'm in Nevada just south of you. Our regular unleaded is still about $1 a gallon higher than what you are seeing. But then all gasoline in northern Nevada comes in a pipeline from California.