BBC on Oil - are low prices here to stay

onlyroz

An amuzing quote I read was: "The stone age didn't end due to a shortage of stones".

The "oil age" won't end because the oil has run out, but because we'll have found alternate means of meeting our energy needs.

antrobus

ging84 wrote: »

Did you read that article, seem to be fairly spot on to actually happened, saying oil speculators were behind a lot of the rise, but that high oil prices will be with us for a while
and what happened? the prices continued to shoot up for another 6 months or so, while the world economy was starting to look shonky, then had a big crash, then recovered and stayed high for a good 5 years.

I believe that you are missing the point. Which is that the recent BBC piece, Are low oil prices here to stay? should be read in the same light as the 2008 piece Why high oil prices are here to stay. Which is to say, it's as accurate as far as it goes, which isn't very far, as something could happen tommorrow that changes everything.

Thrugelmir

ging84 wrote: »

Did you read that article, seem to be fairly spot on to actually happened, saying oil speculators were behind a lot of the rise, but that high oil prices will be with us for a while
and what happened? the prices continued to shoot up for another 6 months or so, while the world economy was starting to look shonky, then had a big crash, then recovered and stayed high for a good 5 years.

Saudi (in particular) was able to dictate global prices due to the oil demands of the USA , around 2 million barrels a day. Much of what was shipped was sold on 1 year fixed price contracts. Once the USA started fracking. Demand dropped to 500,000 barrels a day. The Saudi's could no longer set their own terms. The oil price will rebalance as supply and demand equalise. In the process there may be a shake out of some producers.

IveSeenTheLight

antrobus wrote: »

Historically speaking, it seems that real price of WTI was about $20 in the years 1946-1973 i.e. right up until OPEC decided to flex its muscles, and traded at around $35-$40 for much of the 80s and 90s.

In that context $50 doesn't seem all that cheap.

http://www.macrotrends.net/1369/crude-oil-price-history-chart

What about factoring in compound interest to evaluate it's long term value.

Of course, were not factoring in the supply and demand.

Certainly the big issue we have is control over our costs to produce, which there is a large industry incentive to cut.

IveSeenTheLight

InvestInPoker wrote: »

Presumably the drop in oil price is Westminster's fault.

There's certainly a slow response to reinvigorating the sector

Scrubber

IveSeenTheLight wrote: »

There's certainly a slow response to reinvigorating the sector

What do you expect them to do chief?

You've got global market participants, competing, not wanting to lose market share. You've got high cost producers and low cost producers.

IveSeenTheLight wrote: »

The industry is predicting a very cool 2015, potentially into 2016.
Into 2017 / 2018, they expect it to be quite manic

How about giving us another of your posts how rising house prices great for advancing up the ladder more quickly. You're a bit of a star on HPC.

IveSeenTheLight

Thrugelmir wrote: »

In the process there may be a shake out of some producers.

This is the crux, the Saudi's want to strangle their competition and drive out the value of fracking

http://www.forbes.com/sites/nathanvardi/2015/01/05/saudi-arabias-750-billion-bet-drives-brent-oil-below-54/

Thrugelmir

IveSeenTheLight wrote: »

This is the crux, the Saudi's want to strangle their competition and drive out the value of fracking

Saudi no longer has control that's whats changed. Saudi production costs are around $6 a barrel. So whatever the selling price they've more money flowing in than they know what to do with.

Thrugelmir

IveSeenTheLight wrote: »

There's certainly a slow response to reinvigorating the sector

Plenty of fat to be cut away first. Oil was at this level not so many years ago. So what's changed in cost base.

IveSeenTheLight

Scrubber wrote: »

What do you expect them to do chief?

You've got global market participants, competing, not wanting to lose market share. You've got high cost producers and low cost producers.

They are planning to provide support, but are delaying to to try and help their political schedule nearer to the General Election.

They cited Sir Ian Wood on a number of occasions last year, but have not reacted to his recommendation mid January that if not implemented within three weeks, it could severely impact the investment decisions

Labour calls for 'urgent action' over oil and gas

The industry is losing jobs, but the UK government are not reacting for their own political benefit

Scrubber wrote: »

How about giving us another of your posts how rising house prices great for advancing up the ladder more quickly. You're a bit of a star on HPC.

2 points.

1) This is not a thread about house prices, so let's not introduce non related topics into the thread

2) My Apologies, I am not aware of who you are, but am sure you can search for the posts where I shared real life examples with the theory of why this occured