Gas prices.

[meow]

I am still failing to see the downside to any of this. I'm not saying there isn't one but I am having a hard time noticing it from an uneducated standpoint.

There isn't really a downside. It is just another hump in the roller coaster of global oil prices.

[mac5155]

Parked my 42 MPG diesel VW and driving my 28MPG honda since it's about the same price to drive now, but the VW isn't paid off and is more expensive to maintain. Wife drives the VW to work every other week.

[dodint]

I am still failing to see the downside to any of this. I'm not saying there isn't one but I am having a hard time noticing it from an uneducated standpoint.

It isn't a downside in and of itself, but it's a strong indicator that the global economy is weakening which is the problem. Part of the reason the demand side is decreasing is because China is producing less which lowers its consumption of petroleum. OPEC responding by not decreasing supply just floods the market and drives prices even lower. As a consumer it's cool, but the economist and foreign policy part of you should observe cautiously. One of the big losers here is Putin's Russia and instability over there is never a great thing.

[meow]

I am still failing to see the downside to any of this. I'm not saying there isn't one but I am having a hard time noticing it from an uneducated standpoint.

It isn't a downside in and of itself, but it's a strong indicator that the global economy is weakening which is the problem. Part of the reason the demand side is decreasing is because China is producing less which lowers its consumption of petroleum. OPEC responding by not decreasing supply just floods the market and drives prices even lower. As a consumer it's cool, but the economist and foreign policy part of you should observe cautiously. One of the big losers here is Putin's Russia and instability over there is never a great thing.

That is one take on it. Another take, one in which I believe to be true is that OPEC is lowering the price of a barrel to lower the profit per barrel. Several of the big production shales in the US are still expensive, comparatively so, to drill and maintain wells in. OPEC's goal is to lower the profit margin to a point that these expensive US wells are not profitable enough to have American companies continue drilling them.

[dodint]

Yours sounds more like conspiracy, but this isn't an issue I'm close to so I'll consider it until something more plausible than both of ours comes to light.

[meow]

It sounds like a conspiracy because it is OPEC and conspiracy is in the first line of their doctrine.

[Grunthy]

Meow is right.

http://money.cnn.com/2014/11/28/investi ... -us-shale/

[slappybrown]

Why do you think it sounds conspiratorial? Lower profit margins in the short term to ensure reduced competition over the long term and higher profit margins once the US manufacturer balk at the costs to expand operations and construct extraction infrastructure. Seems like exactly the type of economically rational business risk a cartel would take.

[dodint]

Nysveen said the breakeven crude oil price for U.S. shale producers is around $50 or $55. Despite the recent plunge, oil is still well above that at the $70 range.

OPEC would really have to cut off its nose to spite its face. Not only do they have to cut more, but they'd have to get below the breakeven, not meet it. And do so long enough for NA oil producers to feel the effects. If that's their plan it's pretty poor since shale producers will likely only get better and more efficient in the meantime.

[dodint]

Why do you think it sounds conspiratorial? Lower profit margins in the short term to ensure reduced competition over the long term and higher profit margins once the US manufacturer balk at the costs to expand operations and construct extraction infrastructure. Seems like exactly the type of economically rational business risk a cartel would take.

I know you couldn't see my last post, but I don't think the 'short term' will be short enough without the cartel hurting itself too much in the process.

[Grunthy]

Good thing I heard recently that most of our producers can handle all the way down to 40 dollars a barrel.

[slappybrown]

Why do you think it sounds conspiratorial? Lower profit margins in the short term to ensure reduced competition over the long term and higher profit margins once the US manufacturer balk at the costs to expand operations and construct extraction infrastructure. Seems like exactly the type of economically rational business risk a cartel would take.

I know you couldn't see my last post, but I don't think the 'short term' will be short enough without the cartel hurting itself too much in the process.

Right -- definitely a risk, but I could see it being the play.

[dodint]

I'll grab some popcorn. Like I noted before, as a consumer this is gangbusters.

[meow]

Nysveen said the breakeven crude oil price for U.S. shale producers is around $50 or $55. Despite the recent plunge, oil is still well above that at the $70 range.

OPEC would really have to cut off its nose to spite its face. Not only do they have to cut more, but they'd have to get below the breakeven, not meet it. And do so long enough for NA oil producers to feel the effects. If that's their plan it's pretty poor since shale producers will likely only get better and more efficient in the meantime.

What other options do they have? They have to try to stymie the competition somehow. The US oil and gas industry is on an absolute rocket up. The more powerful OPEC nations have enough money in their coffers for 5 generations to not even have to think about money. Do you think they care about losing their shorts for a few months?

[dodint]

Isn't that a self-defeating premise? They care enough about money because they don't have to care about money?

Maybe the cartel will fold and each country will try and be competitive alone, who knows. I don't have the answer.

[meow]

They can easily survive a temporary price cut if it snuff outs future competition is what I am saying.

[Troy Loney]

The prolonged high Oil prices have finally gotten to where there has been enough entrants into the market to cur the demand on OPEC's supplies enough for them to do this. It seems to me to be OPEC trying to prevent more supply creation so that they're position can be reestablished in the future when the production from the new sites fall.

[BuckintheLou]

Still $3.69 in my part of Illinois today.
Probably close to $3.30 something across the river in Mo.
Thanks Obama.

[meow]

The prolonged high Oil prices have finally gotten to where there has been enough entrants into the market to cur the demand on OPEC's supplies enough for them to do this. It seems to me to be OPEC trying to prevent more supply creation so that they're position can be reestablished in the future when the production from the new sites fall.

Precisely.

[meow]

Still $3.69 in my part of Illinois today.
Probably close to $3.30 something across the river in Mo.
Thanks Obama.

Illinois has a fairly high state tax on gasoline if I recall correctly.

[BuckintheLou]

Still $3.69 in my part of Illinois today.
Probably close to $3.30 something across the river in Mo.
Thanks Obama.

Illinois has a fairly high state tax on gasoline if I recall correctly.

It does. I thought taxes were tough in Pa. while growing up.
FOR SALE: 4 Bdrm ranch, 3 baths, (half of basement finished w/fireplace)
6' privacy fence, 2 car garage in quiet neighborhood
built: 1997 Appliances included
Will trade for a nice Gibson Les Paul. Anything to get me out of ILLINOIS!

[BigMcK]

Also set to lose are purchasing managers that speculate fuel costs for the transportation industry if they overshot the market not seeing a downturn.

If rates do remain low, expect to see some type of political pressure to increase rates in an effort to recoup taxes that are not being collected on the reduced consumer price.

[columbia]

The production costs vary quite a bit across the US....

http://www.bloomberg.com/news/2014-12-0 ... costs.html

[Kaizer]

Its been hovering around 2.90 around Seattle, except at shell stations, who are still charging 3.35

[Grunthy]

Tulsa, OK 2.41! WOO!