US Growth

cells

Generali wrote: »

It's the problem of producing into a market that is basically operating under conditions of perfect competition which is over-supplied.

Game theory explains the problem quite neatly. What is best for everyone in the industry is that supply is reduced. What is best for each member of the industry is that they individually increase supply while others reduce theirs.

As oil supply is no longer a cooperative game, each actor will act in their self interest, that is increase their own output and try to gain market share at all costs.



I can't imagine that pulling oil out of the North Sea is one of the cheaper ways of producing oil.

but this isn't a production line for ipods its a finite resource so there should be some individual restraint. Why sell your finite resource forn $1 in a constrained local market. Stop drilling unless you get at least x dollars a unit where you think x is a satisfactory number to run down your reserves with

but its such a competitive market that doesn't even seem possible with some producers on land with use it or lose it by year x type leases

CLAPTON

cells wrote: »

but this isn't a production line for ipods its a finite resource so there should be some individual restraint. Why sell your finite resource forn $1 in a constrained local market. Stop drilling unless you get at least x dollars a unit where you think x is a satisfactory number to run down your reserves with

but its such a competitive market that doesn't even seem possible with some producers on land with use it or lose it by year x type leases

depending upon where you live, the excellent strategy of waiting say five years would mean ;
-you have died of starvation and your wife/children sold into slavery
or
-your relatives have stabbed you in the back and staged a coup
or
-your shareholders have had you sacked

...........

Thrugelmir

cells wrote: »

but this isn't a production line for ipods its a finite resource so there should be some individual restraint. Why sell your finite resource forn $1 in a constrained local market. Stop drilling unless you get at least x dollars a unit where you think x is a satisfactory number to run down your reserves with

Bills need to be paid. Saudi's defence spending is around $50 billion a year and rising by around 14% a year. Malaysia generates around 30% of it's national income from exporting oil.

The list goes on.

Generali

cells wrote: »

but this isn't a production line for ipods its a finite resource so there should be some individual restraint. Why sell your finite resource forn $1 in a constrained local market. Stop drilling unless you get at least x dollars a unit where you think x is a satisfactory number to run down your reserves with

but its such a competitive market that doesn't even seem possible with some producers on land with use it or lose it by year x type leases

Well as Thrugelmir says, countries like Saudi, Nigeria and Russia simply need to pump oil and gas out of the ground in order to pay the bills. Without a functioning cartel, the cheaper oil gets the more they need to pump.

There is of course an additional confounding factor being climate change. This is starting to have some quite nasty impacts in some places that you might think wouldn't be particularly impacted. Take Canada's drought(!) for example:

http://www.bloomberg.com/news/articles/2015-08-26/snowy-canada-suffers-drought-heat-fires-as-earth-gets-warmer

Canada is maybe one of the last places that come to mind when you think about heat waves and drought. Think again.


With 2015 on pace to break last year’s record for the planet’s hottest year, the snowy Great White North has learned it’s not immune to global warming.


Western Canada, home to glaciers and source of some of the world’s longest rivers, has been hit by wildfires and dry spells from British Columbia’s Pacific Coast to the prairies in Saskatchewan. The thaw in the Rocky Mountains came too early, before enough snow accumulated to feed streams in the summer. Vancouver, known for its rainy weather, has had to restrict water use much like drought-struck California.


“This is what Canada looks like without the cold,” John Pomeroy, a University of Saskatchewan researcher, said in an interview from Canmore, Alberta, where he studies water basins in the Rockies. “We’ve really built our western Canadian society around the water from the snowpack.”

The world needs to burn less fossil fuel and the impact isn't just being felt among the poor and badly governed countries. Burning less fossil fuel is going to mean oil that's currently in the ground staying there in many cases. Better to sell it while you can rather than in 30 years time when you may well be banned from selling most of it.

cells

Generali wrote: »

The world needs to burn less fossil fuel and the impact isn't just being felt among the poor and badly governed countries. Burning less fossil fuel is going to mean oil that's currently in the ground staying there in many cases. Better to sell it while you can rather than in 30 years time when you may well be banned from selling most of it.

the thing is in some local markets in the USA they are almost giving it away for free. Prices got knocked down towards $2 a barrel for NGLs in some cases.......$2..... two dollars.....for 136 litres of high quality fuel.....a bloody big mac costs more

and I know your views on oil we have discussed it before, but really generali there is nil zero nada chance of oil use going the way of the dodo in a 30 year timeframe.

Thrugelmir

cells wrote: »

....a bloody big mac costs more

How much does a Big Mac cost to produce though. My guess would be a few cents. My local chippy buys jumbo sausages in bulk for 6p each.