"We can't just drill our way to lower gas prices"

[GMM]

Said anti-fossil fuel leftist Barack Obama as recently as 2012. Don't think he was the only one either. Yes, there were plenty of "experts" like him who mocked the idea of "Drill, baby, drill". They're smarter than us, you see. We have to listen to them at all times on energy issues.

Sure, they got this spectacularly wrong but it doesn't mean anything. They're smart because they believe in green energy. Doesn't matter that green energy hasn't done squat despite billions of our dollars in "investment" and government laws mandating our purchasing it. They're still smarter than the rest of us.

Good thing we listened to them when it comes to oil and green energy.

 

[kescwi]

You realize this drop is about the Saudi's trying to beat up Russian and US shale producers and has nothing to do with drill baby drill, at least not the way you mean it. I mean you know low oil prices hurt US producers who can't extract as cheaply as the Saudis.

But I was wondering how long it was going to take you folks to start taking credit before Obama got any. You are funny, I remember many of the "conservatives" on this board claiming Obama needed to "own" the bad economy before he even took the oath of office. Now you're frightened of the credit he will get if/when the economy starts humming on low energy costs. What a joke.
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[GMM]

You realize this drop is about the Saudi's trying to beat up Russian and
US shale producers and has nothing to do with drill baby drill, at
least not the way you mean it.

So? What the condescending "experts" said couldn't happen has happened. And, yes, a major part of it was "drill, baby, drill". People like you said "Well, if we increase our oil production then the other low-cost oil producers will just flood the market". As if that's a good point. If increasing our oil production causes them to increase their oil production then good for us.

I mean you know low oil prices hurt US
producers who can't extract as cheaply as the Saudis.

So? Low oil prices are good for us.

But I was wondering how long it was going to take you folks to start
taking credit before Obama got any. You are funny, I remember many of
the "conservatives" on this board claiming Obama needed to "own" the bad
economy before he even took the oath of office. Now you're frightened
of the credit he will get if/when the economy starts humming on low
energy costs. What a joke.

Whatever point you're trying to make is a joke. Obama deserves ZERO credit for this. He didn't do anything to increase oil production. In fact he, along with the rest of the left, has done his best to oppose oil production. As I've stated he laughed at the idea that increasing oil production would lead to lower gas prices. Whatever economic benefits occur because of our increased oil production are a slap in his face.

 

[kescwi]

If it cost $5 to extract a widget and widgets only sell for $5 guess what happens to widget producers? I know your ideology thrives in a vacuum but in the real world they won't lose money for long before they stop producing widgets.

Never said he does deserve credit but then I'm not an insider and have no idea what conversations have taken place. But it's going to be funny as hell watching you neo liberals squirm because y'all really thought you had f'ed up the economy for a good long time and have been beating home the economy since, as I said, before Obama was sworn in an now unexpectedly an oil price war. Too funny.
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[GMM]

If it cost $5 to extract a widget and widgets only sell for $5 guess
what happens to widget producers? I know your ideology thrives in a
vacuum but in the real world they won't lose money for long before they
stop producing widgets.

Apparently to you people who buy gasoline only exist in a vacuum. In the real world low gas prices are good for us. Whether or not its good for oil producers is not my top concern.

 

[kescwi]

Of course it's good for the economy and that's the funny part. If this lasts a couple years the economy will be booming and it's poetic justice I guess, since you neoliberals have spent all these years nonstop blaming the economy he inherited on him, that Obama will get the credit.
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[GMM]

With a lapdog news and entertainment media you're right, he will get the credit. Credit for something he would've shut down if he had the power to do so.

 

[Purdue85]

you're wasting your time.

The laws of supply and demand apply to everything but petroleum and "green" energy (which frequently isn't so "green"). For those, the law of S&D is stood on it's head.

Besides... It's not about low prices. Heck, low price for gas is like the crucifix to Dracula.

 

[Purdue97]

-Unexpectedly an oil price war?

Really? Not even sure where to begin with that. Seems to me OPEC, Europe, the USA, and the different middle east countries, now along with China and India are always trying to game the energy resources available.

Trying to beat up oil shale producers? That might be a part of it. Russia, that might be part of it as well. Saudi deciding to flood the market has much more to do with ISIS and Iran than anything else. Kind of the entire I do not want to be surrounded by my enemies that are well financed theory.

As for the economy being f'ed up as you put it-Time to start taking a look at the levels of derivatives, levarage, and credit default swaps. According to Greenspan and others, they are much higher now than in 2008. In other words, when the bill has to get paid again, the hurt is going to be a lot worse this time around and 1) Remedies are less available now 2) It is going to cut deeper 3) Not going to matter who the President is(Party wise)-it is all but inevitable

 

[kescwi]

Right, he would have shut down US oil production, who's the lapdog?

Again how do you know Obama doesn't get credit for this? US shale will still be here, it isn't gong anywhere so how do you know Obama didn't convince SA to continue drilling, they haven't increased drilling, yet, to help the US and world economy? It's something only SA can do, scream drill baby drill all you want but the US is not capable of drilling itself to and sustaining $50 a barrel.

 

[kescwi]

Taking your last point first, yep, more evidence Obama is a neo liberal, never said he wasn't but that has been the game Republicans have been playing, getting everything they want and complaining all the way. this is a perfect example, Obama makes half heated attempts at regulations, Republicans howls at those feeble attempts but now you come back blaming Obama? What a circle jerk.

Yeah, When SA starts talking $20 a barrel, yep sound like the edge of a price war. Is SA shaking in it's boots over US shale, hell no, are they intentionally attacking it, probably not but they sure are punishing it just the same, Iran and ISIS are likely targets, which I planed to drop on GMM later to show that the US may have played a role in negotiating this, but SA isn't stupid either, a world economic slowdown doesn't help them so I would imagine their real purpose is to get economies moving,

 

[GMM]

Again how do you know Obama doesn't get credit for this?

Name one thing Obama has done to encourage fossil fuel production in this country. He's waged a war on coal. He's refused to build the Keystone pipeline. He's blocked drilling on federal lands. He's shown nothing but hostility to American fossil fuels.

You can go on and on with your conspiracy theories but the reality, for everyone to see, is that the left despises fossil fuels. Meanwhile their adored green energy solutions have failed to solve anything. Except for making a few of their cronies richer.

 

[kescwi]

So US oil production is up something like 80% since 2008 with Obama attempting to destroy it every step of the way,, got it, your "real world" is pretty far out there.

You have this strange ideological view, and you bring into everything from health care to energy, that businesses/people will continue to operate at a loss indefinitely until a consumer nirvana is reached. It doesn't work that way. In reality businesses and people will leave, skills, technology, infrastructure... will sit idle and deteriorate until prices can again produce profits.

SA can sustain what is happening right now but even if every inch of the US was opened up to drilling we would not get to $50 a barrel by our own efforts. Again, this isn't even a product of "drill baby drill" supply increases but of dropping demand due to a slowing world economy, SA hasn't opened the spigot they have just shown a reluctance to close it.

 

[GMM]

So US oil production is up something like 80% since 2008 with Obama attempting to destroy it every step of the way.......

Do you seriously think oil production is up because of Obama? No, its up in spite of Obama. I see you failed to respond to my challenge. I think we all know why.

You have this strange ideological view, and you bring into everything from health care to energy, that businesses/people will continue to operate at a loss indefinitely until a consumer nirvana is reached. It doesn't work that way. In reality businesses and people will leave, skills, technology, infrastructure... will sit idle and deteriorate until prices can again produce profits.

Nothing strange about it. Its called the "free market". It almost always works to decrease prices, increase efficiency and quality, and increase profits at the same time. Too bad there are too many people in power (like Obama) who hate the free market.

Again, this isn't even a product of "drill baby drill" supply increases but of dropping demand due to a slowing world economy, SA hasn't opened the spigot they have just shown a reluctance to close it.

Yeah, sure, its just a total coincidence that US production has skyrocketed while gas prices have fallen. Regardless, there is no justification for the left to deny us the ability to exploit our own fossil fuel resources.

 

[gr8indoorsman]

Obama and Democrats in general shouldn't get any credit for the shale boom because they have and continue to oppose it. Case in point is New York state where citing unspecified environmental concerns, they've outlawed the practice. Meanwhile, right across the border, Pennsylvania is seeing economic benefits but towns in New York decay away due to lack of economic production. This policy was decided upon by a bunch of people living in New York City who are unaffected by the "environmental concerns" but are willing to deny the rest of the state economic benefit in the name of Mother Earth. The left continues to espouse these environmental concerns, but won't put a name to them, only calling them "risks" while having no evidence that any of these risks or concerns are actually founded. It's ridiculous policy.

So while not coming out directly himself and saying "Shale bad", the party Obama represents has taken action time and again in many states to provide headwinds or more to the shale boom, despite the proven economic and job benefits. To wit, Texas has seen unemployment reduced at a faster rate than the rest of the country, and has nearly doubled the economic growth of the rest of the country since 2008 largely due to the shale boom. Other liberal states are lagging, including New York, precisely because they oppose it for these unspecific environmental concerns.

While I agree with the reasoning you state behind the Saudi/OPEC measures, there is evidence that the shale industry remains viable at or below $40/bbl. Conversely, the governments of some smaller OPEC nations, like Venezuela, do not. It is going to be interesting to see who blinks first. My guess is it will be OPEC, and we'll see oil back up above $60-70/bbl before June.

 

[Noodle]

not really

OPEC is pretty much powerless these days, and the drop in prices does not have that much to do with the Saudis. The Saudis have basically just refused to artificially prop up the price of oil by cutting their own production. So to say that the drop in the price of oil is not due to increased U.S. production is simply not true. Were it not for significant increases in domestic production we would still be at $100+ a barrel. The Saudis have essentially just let it happen. Drops in global demand has also played a role.

Of course the Saudis were between a rock and a hard place. As I said from the outset, OPEC does not have the kind of power they once had on the price of oil. Sure they can cut production. But at what cost to themselves? And better yet, at what gain to U.S. producers, who would simply ramp up even more?

Also, most of the shale oil producers can survive just fine under current pricing. They'll get lean and will keep pumping. But can the Saudis survive a more free market approach to oil pricing? The future is even worse for other middle eastern countries who rely on oil to survive. That has me a bit worried, as rapid economic declines can lead to all sorts of bad things.
Not to mention Russia.

 

[SDBoiler1]

I think you are oversimplifying this too much. A decent contribution to the lower oil prices we are seeing is the strengthening of the US$. Many commodity prices are getting slashed right now as the US$ strengthens.

Also, why are the Saudis trying to beat up anyone? Because the Russians and US shale oil producers are competition. In the US, drill baby drill has caused great consternation with the Saudis and OPEC, because their best market is becoming less lucrative quite quickly, as the supply glut continues. You cannot underestimate the contribution of shale oil and fracking to this glut.

As for Obama, he's never owned the bad economy or much of anything he's done. Certainly, he should get no credit for the current oil glut and collapse in prices. Nearly everything he's done is to make fossil fuels more expensive to produce and subsequently to buy for consumers. His policies and regulations certainly have not been helping the people he purports to care so much about - the poor and middle-class.

 

[SDBoiler1]

You can't be this blind. The majority of the supply coming on-line recently started with the work done during the Bush Administration. It takes years to get the infrastructure in place for this industry. Also, Obama and his minions have done nearly everything in their power to slow down fossil fuel development through lawsuits, regulation, and policies. Name one policy of his that has encouraged it? You must be living in an alternate universe to think Obama deserves any credit for the current boom we're seeing.

 

[Noodle]

Originally posted by SDBoiler1:

I think you are oversimplifying this too much. A decent contribution to the lower oil prices we are seeing is the strengthening of the US$. Many commodity prices are getting slashed right now as the US$ strengthens.

Also, why are the Saudis trying to beat up anyone? Because the Russians and US shale oil producers are competition. In the US, drill baby drill has caused great consternation with the Saudis and OPEC, because their best market is becoming less lucrative quite quickly, as the supply glut continues. You cannot underestimate the contribution of shale oil and fracking to this glut.

As for Obama, he's never owned the bad economy or much of anything he's done. Certainly, he should get no credit for the current oil glut and collapse in prices. Nearly everything he's done is to make fossil fuels more expensive to produce and subsequently to buy for consumers. His policies and regulations certainly have not been helping the people he purports to care so much about - the poor and middle-class.

I have not paid much attention to exchange rates, but this morning I had to put together a summary of some upcoming fees due in various countries for a client. In preparing the summary I was very surprised by how much the $ has strengthened over the past 12 months. I knew it had, but did not appreciate how much.

As for the price of oil, there is a bottom to how low we should hope for--for a variety of reasons. While $20 oil would benefit all of us greatly at the pump, there would be a price to pay elsewhere.

 

[kescwi]

Re: not really

I think it's pretty obvious what the OP meant and yes every oil producer in the world has contributed to supply surplus but again it was a global economic slowing that has caused a decrease in demand not US fracking blowing up world supply and if we are being honest drill baby drill would never have achieved current pricing without the Saudis because -$50 a barrel was never the intent, expectations and in fact is a worse case scenario for US shale, yes they can survive but for how long.

I never mentioned OPEC but SA is to OPEC like Germany is to the EU, so okay OPEC doesn't have much pricing power anymore, not on their own at least and this situation has fallen nicely in their lap and they can once again influence pricing while take care of some nagging business at the same time.

It will be interesting to see just how long this lasts, two weeks or two years, more, less, who knows... is it just another step in the peak cheap oil volatility that has been predicted?

 

[kescwi]

I don't think US shale can last long at $40 a barrel, well without taxpayer help, but while SA can endure cheap oil longer than others I don't think it is their ultimate goal to let it stay too low too long and US shale really isn't that much of a threat to them, a world wide recession and +$120 a barrel is. .

 

[qazplm]

ah so NOW we can look towards Bush

we can't look towards Bush for all the weaknesses the economy has had under Obama, that's "blame Bush" thinking. But any strengths? Well, those were all due to the ground-work laid by Bush.

 

[gr8indoorsman]

Originally posted by kescwi:
I don't think US shale can last long at $40 a barrel, well without taxpayer help, but while SA can endure cheap oil longer than others I don't think it is their ultimate goal to let it stay too low too long and US shale really isn't that much of a threat to them, a world wide recession and +$120 a barrel is. .


Which is exactly why we should be encouraging shale production here. It is beyond past time to ditch "Bush doctrine" (as in HW) and start treating OPEC and Saudi Arabia specifically as economic "adversaries" or competitors at least.

 

[gr8indoorsman]

Re: not really

I don't know how anyone can honestly assert that fracking and the shale oil boom hasn't impacted global supply greatly and caused a great deal of the price decline. Global consumption is still rising, but at a slower pace and especially relative to supply growth, specifically from the United States which at the end of 2014 was producing more oil than SA. As Noodle said, SA refused to prop up oil prices at their own expense by refusing to cut production. The price drop started before OPEC discussed action, and deepened when OPEC, and SA specifically, balked at cutting production.

 

[kescwi]

Re: not really

Where exactly have I said it hasn't increased supply? I haven't said that, in fact it is the excess supply that has allowed SA to get some power simply not cutting production..I'm just not buying into this new found idea, and the drill baby drill back slapping, that fracking is healthy and happy at $50 a barrel, it is not and this is not where it wanted to be.

 

[Noodle]

US oil production has absolutely contributed to the decrease in oil prices


I cannot understand how you could suggest otherwise, given that U.S. oil production has increased by over 45% since 2010. In fact, the U.S. is now the largest oil producing country in the world. Bigger than Saudi Arabia; bigger than Russia. Not to mention the U.S. is also the largest producer of natural gas in the world. Those are incontrovertible facts, and without the U.S. production increases there is absolutely no way the price of oil is where it is at now.

And, as a side note, global consumption of oil has increased over that same time period.

And the only thing the Saudis have done is to not cut their own production in the face of declining prices. That is also 100% accurate.

 

[qazplm]

it's a combination of factors

1. increased supply globally
2. reduced demand (or rather lowered increases in demand) and PART of that reduced demand is the growth of alternative fuel as well as standards on MPG and other efficiencies.
3. worldwide economic down-turn

It's also a temporary phenomenon. As the economy picks up, and as demand picks up, the prices will go back up.

 

[Noodle]

Re: it's a combination of factors

Originally posted by qazplm:
1. increased supply globally
2. reduced demand (or rather lowered increases in demand) and PART of that reduced demand is the growth of alternative fuel as well as standards on MPG and other efficiencies.
3. worldwide economic down-turn

It's also a temporary phenomenon. As the economy picks up, and as demand picks up, the prices will go back up.

The largest contributing factor is U.S. oil production--absolutely no question about that. The U.S. is the only major producer with a significant increase in production over the last 4 years, and global oil consumption has increased over that same time period.

 

[kescwi]

Re: US oil production has absolutely contributed to the decrease in oil prices

So the price of oil has been steadily declining as US production increased? No, because global consumption has increased over the same time period? Do I have that right?

Saudi Arabia has not increased production, again, right?

So has US shale production dramatically increased over the past few months to cause this price decline or could it be demand is dropping while production remains the same?

 

[gr8indoorsman]

Re: it's a combination of factors

Reduced demand is a myth. Global consumption has gone up, just not as quickly as global supply. So in that regard, yes, demand is reduced, but not due to a net decrease in global consumption due to alternative fuels or anything else.

 

[gr8indoorsman]

Re: not really

Okay, well then obvious point is obvious. Of course oil producers don't want $50/bbl. They want $1000/bbl if they can get it. GMM's point is that it is a good thing, overall, for our economy that oil prices are down, and that is largely due to "drill baby drill" or the large increase in US oil production, however you want to term it.

 

[SDBoiler1]

Noodle,

I know. This is one of the least-reported parts of the drop. The $ has really strengthened. As it has, the speculators seemed to have turned into "shorts" or gotten out of the oil speculation game altogether, at least for a while.

 

[Noodle]

Re: US oil production has absolutely contributed to the decrease in oil prices

A snippet...Oct production in ND was the same as Sept. No data is available yet for Nov. Total U.S. production increased a Oct over Sept by about 9% (annualized).

 

[SDBoiler1]

Re: ah so NOW we can look towards Bush


Yes, we can! Do you know why? Because it's the truth, at least for oil drilling and exploration. The investments in fracking and shale oil were very high during the last term of GWB.

 

[Noodle]

Re: it's a combination of factors


You forget that Qazplm is a Democrat--to Democrats, a decrease in an expected increase in government spending is really a cut in spending. Apparently that same logic applies to oil.

 

[SDBoiler1]

Becoming much less dependent on OPEC and the Saudis sounds like a good strategy to me. Our dependence on them has been way too much of a one-way street for much too long. We feed them $, and they fund terrorists.

 

[kescwi]

Re: not really

We'll see. If as you predict OPEC will blink and other producers cut production to stabilize over the next year at $80/$90 a barrel it will all be good for the economy. If OPEC decides they really do want to control the market and let this drop to $20 a barrel through the end of the year we can talk again 2016 about how good drill baby drill, which apparently now includes the world, has been for the long term US economy which would then again be dependent on cheap foreign oil IMHO

 

[Noodle]

Re: not really

Originally posted by kescwi:
We'll see. If as you predict OPEC will blink and other producers cut production to stabilize over the next year at $80/$90 a barrel it will all be good for the economy. If OPEC decides they really do want to control the market and let this drop to $20 a barrel through the end of the year we can talk again 2016 about how good drill baby drill, which apparently now includes the world, has been for the long term US economy which would then again be dependent on cheap foreign oil IMHO

I don't think it will stabilize at $80-90 over the next year unless something happens in the Middle East (something modest--not something big). But I also do not see how SA can allow it to go to $20. In fact, the only way it gets that low is if SA actually increases production. That would be a very provocative move that would have serious repercussions for SA, particularly in its own backyard.

Frankly, $65-70 would be a nice balance point for everyone.

And what's wrong with keeping some of our own oil in our back pocket? No one ever talks about that, but isn't it appropriate to consider the benefits of not producing too much so that we have some left over down the road?

 

[kescwi]

Re: not really

Originally posted by Noodle:
And what's wrong with keeping some of our own oil in our back pocket? No one ever talks about that, but isn't it appropriate to consider the benefits of not producing too much so that we have some left over down the road?

I have always felt this way, but I would think it would take US taxpayers subsidizing limited fracking, offshore...so that when prices rise it is there to start buffering the rise.

This post was edited on 1/5 4:16 PM by kescwi

 

[qazplm]

that's why I used the words "lowered increase in demand"

demand has risen, but the pace of the demand has risen more slowly, due in large part to the worldwide economic collapse, and due in smaller, but still significant part to efficiency gains, alternative fuels, etc.

Oil prices are as much about predicting the future as current actual supply/demand issues. When demand doesn't rise as quickly as anticipated over an extended period of time, that's going to affect oil prices.

This post was edited on 1/5 4:19 PM by qazplm