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The Global Effects of Falling [Oil Prices] - OPEC tentatively agreed to cut production

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    joshofalltradesjoshofalltrades Class Traitor Smoke-filled roomRegistered User regular
    Kaputa wrote: »
    Rchanen wrote: »
    Mr Khan wrote: »
    A military disaster in Yemen won't do them any favors either. Though it may not come to that, i'm not optimistic about their chances in a land war.

    Neither is Kaputa

    @Kaputa thought I would call you in.

    So far as I can tell from Kaputa's dispatches in the front lines of sorting bullshit from truth from various Media sources, the war is not going well for the Saudis. At all.

    And this is not the time they can afford it.
    I'll preface this by saying that I'm not an academic or an expert, just a dude who spends too much of his free time reading about Middle Eastern history/conflicts in the MENA. But I'm flattered that you consider me to be a good source for this stuff.

    The Saudi-led coalition's ground invasion quickly pushed their mostly northern Yemeni enemies out of most of their southern territory, though things have been back and forth since then. Foreign troop levels keep escalating - Qatari, Bahrarini, and Sudanese troops are reported to be present, in addition to the Saudi and UAE troops which probably make up the bulk of the force. But they don't seem positioned to take the capital in the imminent future, and the alliance of Yemeni forces that the KSA is relying on is both fractious and largely unwilling to push further north. The Southern Movement, which fought hard to push the Houthis from Aden and other southern areas, is now holding massive protests in southern cities in demand of secession, and has made it clear that they won't fight the Houthis for the north. Meanwhile, as I described in the ME thread, al-Qaeda is taking over parts of southern cities and straining the loose southern alliance. This means that an assault on Sanaa or any serious push northward would require the KSA-led coalition's own troops to be the main ground force, which would be far costlier than supporting an indigenous Yemeni ground force. A stalemate between North and South seems like the best likely option at the moment, while a number of worse scenarios (continued war of attrition, jihadist takeover of parts of the south, more international escalation etc.) seem plausible.

    I don't think the KSA and their allies will suffer a major military defeat at the hands of the northern Yemeni forces, if only because the history of foreign intervention in Yemen is so disastrous that it might dissuade them from making a serious attempt on the north. And if heavy fighting does continue, I think the international nature of the coalition will distribute the economic and human costs to a tolerable extent. I think the primary downsides are political rather than military or economic - being forced to accept a partition of Yemen or making significant concessions to the Houthis will be a bitter pill for this especially bellicose Saudi regime to swallow. AQAP's expansion under the KSA's cover is a very concerning wild card, though; the situation in southern Yemen has become so chaotic that I hesitate to make any predictions as to what will happen now.

    Not sure if this is helpful or not!

    It is!

    I'm going to read it when I can look up all of the things you mentioned though!

    I'm a lot of things, but an expert on Middle Eastern conflicts and politics I am not.

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    Dis'Dis' Registered User regular
    So the yearly reports out of Exxonmobil and Chevron (and presumably the rest soon) have the dividend payouts rising (for the 30th straight year) despite the gutting of staff and capability in the industry.

    The short-termism of the financial markets are going to screw us once again in a few years.

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    joshofalltradesjoshofalltrades Class Traitor Smoke-filled roomRegistered User regular
    Dis' wrote: »
    So the yearly reports out of Exxonmobil and Chevron (and presumably the rest soon) have the dividend payouts rising (for the 30th straight year) despite the gutting of staff and capability in the industry.

    The short-termism of the financial markets are going to screw us once again in a few years.

    A company is paying its stockholders more when they should be tightening their belts instead?

    I am shocked. Shocked, I say.

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    RMS OceanicRMS Oceanic Registered User regular
    Dis' wrote: »
    So the yearly reports out of Exxonmobil and Chevron (and presumably the rest soon) have the dividend payouts rising (for the 30th straight year) despite the gutting of staff and capability in the industry.

    The short-termism of the financial markets are going to screw us once again in a few years.

    A company is paying its stockholders more when they should be tightening their belts instead?

    I am shocked. Shocked, I say.

    Your winnings dividends, sir.

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    joshofalltradesjoshofalltrades Class Traitor Smoke-filled roomRegistered User regular
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

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    XaquinXaquin Right behind you!Registered User regular
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    Prices have gone up a quarter in 2 days at the pumps where I live.

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    RchanenRchanen Registered User regular
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    I don't think Venezuela is going to like that plan.

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    joshofalltradesjoshofalltrades Class Traitor Smoke-filled roomRegistered User regular
    Rchanen wrote: »
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    I don't think Venezuela is going to like that plan.

    Yeah they're hurting in a huge way. Saudi Arabia is too, just more slowly. I have to wonder how pissed the least powerful countries in OPEC are at the Saudis for throwing their weight around at the expense of the nations they're ostensibly supposed to be working together with.

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    Alistair HuttonAlistair Hutton Dr EdinburghRegistered User regular
    Rchanen wrote: »
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    I don't think Venezuela is going to like that plan.

    Venezuela is fucked either way, they blew their oil wealth on subsides petrol and current account spending. The attempt to 'destroy' US Shale oil is doomed. Wells are already sunk but turned off, the technology for sinking shale wells is getting cheaper. Once oil goes over figure x per barrel then those wells will be turned on and new, even cheaper per barrell wells will be sunk. If the company owning the well goes bust in while aiting for the price to rise? Then a bank owns the well untill it makes sensational for a larger more stable oil conglomerate buys it up and turns it on.

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    Dis'Dis' Registered User regular
    Rchanen wrote: »
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    I don't think Venezuela is going to like that plan.

    Venezuela is fucked either way, they blew their oil wealth on subsides petrol and current account spending. The attempt to 'destroy' US Shale oil is doomed. Wells are already sunk but turned off, the technology for sinking shale wells is getting cheaper. Once oil goes over figure x per barrel then those wells will be turned on and new, even cheaper per barrell wells will be sunk.

    You're confusing and skipping over things here - the wells that have been shut down can't just be turned back on easily after years off (as they're drilled through rock under high pressure), which is why many wells are still going even at a loss, you're probably thinking of the wells that haven't been completed and are waiting to start.

    To whit yes there is a massive inventory but completing them will take a pool of skills and equipment that is rapidly degrading - each month the Saudi's can keep this up will add more than that much time to the shale industry recovery on the other side (especially since the banks won't be so willing to lend to shale producers now that its been shown to be risky). This isn't a plan to 'destroy' the US shale industry its "we'll suffer 5 years of pain for 5 years of massive profits while shale recovers, and remind everyone who was mulling that they don't need middle east oil how wrong they are". Now if that's a good plan is another thing entirely.

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    DevoutlyApatheticDevoutlyApathetic Registered User regular
    It seems really weird to try and flood the market and depress prices on something that has a finite supply. If the Saudi's just used their cash reserves to wait out the shale boom, long term they'd be way better off when prices started climbing again. I guess it makes sense on an individual level but as a country it really feels like you'd want to hold on to your petroleum as long as possible to be among the last to sell it off.

    Nod. Get treat. PSN: Quippish
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    AbsalonAbsalon Lands of Always WinterRegistered User regular
    edited November 2015


    Hey lobbyists and co. - geeettt dunked on!!!

    That's what TransCanada gets for trying to make this a 2016 issue.

    Edit: Yes, TC wants to withdraw so they can give republicans a 2016 issue. Now Obama has put a much bigger obstacle down instead of just trying to wait out the whole issue.

    Absalon on
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    Mr KhanMr Khan Not Everyone WAHHHRegistered User regular
    Didn't TransCanada already withdraw their application?

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    kaidkaid Registered User regular
    Mr Khan wrote: »
    Didn't TransCanada already withdraw their application?

    No they asked for it to be put on hold. Basically they wanted to not have what obama just did they wanted it to punt and hope the next president would OK it.

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    shrykeshryke Member of the Beast Registered User regular
    edited November 2015
    Dis' wrote: »
    Rchanen wrote: »
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    I don't think Venezuela is going to like that plan.

    Venezuela is fucked either way, they blew their oil wealth on subsides petrol and current account spending. The attempt to 'destroy' US Shale oil is doomed. Wells are already sunk but turned off, the technology for sinking shale wells is getting cheaper. Once oil goes over figure x per barrel then those wells will be turned on and new, even cheaper per barrell wells will be sunk.

    You're confusing and skipping over things here - the wells that have been shut down can't just be turned back on easily after years off (as they're drilled through rock under high pressure), which is why many wells are still going even at a loss, you're probably thinking of the wells that haven't been completed and are waiting to start.

    To whit yes there is a massive inventory but completing them will take a pool of skills and equipment that is rapidly degrading - each month the Saudi's can keep this up will add more than that much time to the shale industry recovery on the other side (especially since the banks won't be so willing to lend to shale producers now that its been shown to be risky). This isn't a plan to 'destroy' the US shale industry its "we'll suffer 5 years of pain for 5 years of massive profits while shale recovers, and remind everyone who was mulling that they don't need middle east oil how wrong they are". Now if that's a good plan is another thing entirely.

    The problem is they lose money overall by doing this because oil don't come back.

    shryke on
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    chrisnlchrisnl Registered User regular
    Perhaps they believe that oil will lose its value permanently before they run out? I am skeptical that will happen, but it would be kind of nice if it did.

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    MillMill Registered User regular
    One of the theories I've seen floated around, is that Saudis are trying to force prices down, so that they can buy up the remaining uncompleted oil shale wells. Granted, I suspect they wouldn't be able to buy them all up; especially, one on US federal land (Hell, I could see huge push by both US oil companies and environmentalists to shut such a thing down). I also suspect the Saudis are discounting other factors, outside of shale, that are driving oil demand down.

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    PhyphorPhyphor Building Planet Busters Tasting FruitRegistered User regular
    Perhaps they, like most people, arent planning for 30+ years down the road

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    tinwhiskerstinwhiskers Registered User regular
    The attack on shale markets thing really never made much sense. The US still imports tons of oil. Lower oil prices help every other sector of our economy way more that the the shale wells shutting down hurts us. And if the Saudis start to raise the price up enough, the shale will reopen.

    On the other hand this action does help to dick over Iran and Russia, and via them Assad in Syria. And that is something(particularly the dicking over Iran bit) that the Saudi's see some value in, and goals that the US likes as well.

    6ylyzxlir2dz.png
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    milskimilski Poyo! Registered User regular
    The attack on shale markets thing really never made much sense. The US still imports tons of oil. Lower oil prices help every other sector of our economy way more that the the shale wells shutting down hurts us. And if the Saudis start to raise the price up enough, the shale will reopen.

    On the other hand this action does help to dick over Iran and Russia, and via them Assad in Syria. And that is something(particularly the dicking over Iran bit) that the Saudi's see some value in, and goals that the US likes as well.

    The point of dropping prices to shut down shale isn't to destroy our economy, the point is to abuse the weird supply/demand curve for oil and US oil companies unwillingness to run or develop shale at a loss to make a huge amount of money when they spike the prices back up after US shale production halts.

    I ate an engineer
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    HefflingHeffling No Pic EverRegistered User regular
    It's not just shale that is being affected. Cheap oil has put a halt to projects like refinery expansions, improvements in oil transportation, and many other facets of the petroleum industry. In places like Houston, TX that have significant oil industry, the economy is very depressed. The result is that the engineering companies that depend on this projects are suffering, and have or will end up closing up shop. The engineers, construction workers, operators, and others that are employed by this industry will by necessity move to other fields. This will force the US and other countries to depend even more on the Saudis, as we will effectively be losing a generation of petroleum industry growth.

    Another strong factor in the oil prices is that speculation is way down. Prior to the sudden drop in oil prices, there were four to five times as many oil futures traded than were actually being consumed. This has drastically dropped.

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    milskimilski Poyo! Registered User regular
    Oil prices have far less of an effect on refineries than you are stating, since the profit driver is the difference between oil prices and product prices, not the raw price of oil. US refinery margins have likely been affected mostly by growth in competitive Asian/European refineries and more gently by decreases in oil prices and the upcoming Tier 3 gasoline regulations.

    Also I don't think I'd consider refineries petroleum industry, if only because petroleum engineers don't work at refineries. Hard to know what to call, it, though.

    I ate an engineer
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    RchanenRchanen Registered User regular
    milski wrote: »
    The attack on shale markets thing really never made much sense. The US still imports tons of oil. Lower oil prices help every other sector of our economy way more that the the shale wells shutting down hurts us. And if the Saudis start to raise the price up enough, the shale will reopen.

    On the other hand this action does help to dick over Iran and Russia, and via them Assad in Syria. And that is something(particularly the dicking over Iran bit) that the Saudi's see some value in, and goals that the US likes as well.

    The point of dropping prices to shut down shale isn't to destroy our economy, the point is to abuse the weird supply/demand curve for oil and US oil companies unwillingness to run or develop shale at a loss to make a huge amount of money when they spike the prices back up after US shale production halts.

    Though I think they also like dicking over Iran and Russia.

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    joshofalltradesjoshofalltrades Class Traitor Smoke-filled roomRegistered User regular
    milski wrote: »
    The attack on shale markets thing really never made much sense. The US still imports tons of oil. Lower oil prices help every other sector of our economy way more that the the shale wells shutting down hurts us. And if the Saudis start to raise the price up enough, the shale will reopen.

    On the other hand this action does help to dick over Iran and Russia, and via them Assad in Syria. And that is something(particularly the dicking over Iran bit) that the Saudi's see some value in, and goals that the US likes as well.

    The point of dropping prices to shut down shale isn't to destroy our economy, the point is to abuse the weird supply/demand curve for oil and US oil companies unwillingness to run or develop shale at a loss to make a huge amount of money when they spike the prices back up after US shale production halts.

    That's the theory. In practice, US shale has proven ridiculously resilient so far and OPEC's market share has been affected only marginally. In the meantime they're bankrupting their weaker members (and even Saudi Arabia, though 5 years is a long time to pull out of the tailspin by comparison) and really getting Russia's attention.

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    milskimilski Poyo! Registered User regular
    milski wrote: »
    The attack on shale markets thing really never made much sense. The US still imports tons of oil. Lower oil prices help every other sector of our economy way more that the the shale wells shutting down hurts us. And if the Saudis start to raise the price up enough, the shale will reopen.

    On the other hand this action does help to dick over Iran and Russia, and via them Assad in Syria. And that is something(particularly the dicking over Iran bit) that the Saudi's see some value in, and goals that the US likes as well.

    The point of dropping prices to shut down shale isn't to destroy our economy, the point is to abuse the weird supply/demand curve for oil and US oil companies unwillingness to run or develop shale at a loss to make a huge amount of money when they spike the prices back up after US shale production halts.

    That's the theory. In practice, US shale has proven ridiculously resilient so far and OPEC's market share has been affected only marginally. In the meantime they're bankrupting their weaker members (and even Saudi Arabia, though 5 years is a long time to pull out of the tailspin by comparison) and really getting Russia's attention.

    Yeah, I should have been more clear by saying that it wasn't really doing a good job destroying US shale and it's destroying Venezuela in particular. Venezuela sort of had it coming by running a horrible dictatorship based entirely around subsidizing the entire cost of gasoline, though; if you literally cannot make money internally on your only industry, you're going to have a bad time.

    I ate an engineer
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    zakkielzakkiel Registered User regular
    Russia has only stepped up its support of Assad, so if the goal was in any way to affect their behavior high oil production has been a resounding failure. I think the OPEC memo makes it pretty clear that the point was to try to crush shale. This is pretty standard monopolistic behavior when threatened by a competitor: drive prices down until you've exhausted your competition's capital, then make back what you lost with monopoly rents. I wonder whether OPEC will survive five more years of this, though.

    Account not recoverable. So long.
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    V1mV1m Registered User regular
    zakkiel wrote: »
    Russia has only stepped up its support of Assad, so if the goal was in any way to affect their behavior high oil production has been a resounding failure. I think the OPEC memo makes it pretty clear that the point was to try to crush shale. This is pretty standard monopolistic behavior when threatened by a competitor: drive prices down until you've exhausted your competition's capital, then make back what you lost with monopoly rents. I wonder whether OPEC will survive five more years of this, though.

    That memo now being public, wouldn't it be the US & Canadian govt's obvious next move to to secure the future of the shale industry vs what is literally textbook cartel activity.

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    RchanenRchanen Registered User regular
    zakkiel wrote: »
    Russia has only stepped up its support of Assad, so if the goal was in any way to affect their behavior high oil production has been a resounding failure. I think the OPEC memo makes it pretty clear that the point was to try to crush shale. This is pretty standard monopolistic behavior when threatened by a competitor: drive prices down until you've exhausted your competition's capital, then make back what you lost with monopoly rents. I wonder whether OPEC will survive five more years of this, though.

    Absolutely agree with the statement that this is about maintaining Monopoly.

    As far as dicking over Russia, I think that is a bonus for the Saudis.

    And remember they are not thinking of abandoning their influence/plans etc for Syria anytime soon. So what if the Russians are bombing for 1 month. I have heard they may bomb for as long as six (who knows how long the Russians will really gut it out, they are not really a first class superpower, but they are sure as shit stronger than any two or 3 countries in the ME), but the Saudis have been fucking around with Assad for the last 4 years.

    And their ROI is easier too.

    100 Million Dollars buys the Saudis many trained and armed rebels.

    100 Million Dollars buys the Russians how many days of bombing? (I am being serious, my gut says about 10 days with the price of bombs and jet fuel, but that is just gut feeling).

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    zakkielzakkiel Registered User regular
    V1m wrote: »
    zakkiel wrote: »
    Russia has only stepped up its support of Assad, so if the goal was in any way to affect their behavior high oil production has been a resounding failure. I think the OPEC memo makes it pretty clear that the point was to try to crush shale. This is pretty standard monopolistic behavior when threatened by a competitor: drive prices down until you've exhausted your competition's capital, then make back what you lost with monopoly rents. I wonder whether OPEC will survive five more years of this, though.

    That memo now being public, wouldn't it be the US & Canadian govt's obvious next move to to secure the future of the shale industry vs what is literally textbook cartel activity.

    If it were cars, sure. I think any Democrat in office would be extremely hard-pressed to approve public funds for oil interests, and even many Republicans might hesitate when faced with the optics. I suppose we could tariff petroleum imports, but American consumers would crucify anyone who copped to deliberately raising oil prices in this way. Maybe if you sold it as replacing the gasoline tax for highway funding? Also, I don't know the legalities or what relevant trade agreements might come into play.

    Account not recoverable. So long.
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    Mr KhanMr Khan Not Everyone WAHHHRegistered User regular
    Rchanen wrote: »
    milski wrote: »
    The attack on shale markets thing really never made much sense. The US still imports tons of oil. Lower oil prices help every other sector of our economy way more that the the shale wells shutting down hurts us. And if the Saudis start to raise the price up enough, the shale will reopen.

    On the other hand this action does help to dick over Iran and Russia, and via them Assad in Syria. And that is something(particularly the dicking over Iran bit) that the Saudi's see some value in, and goals that the US likes as well.

    The point of dropping prices to shut down shale isn't to destroy our economy, the point is to abuse the weird supply/demand curve for oil and US oil companies unwillingness to run or develop shale at a loss to make a huge amount of money when they spike the prices back up after US shale production halts.

    Though I think they also like dicking over Iran and Russia.

    Thing is Iran actually has a *lower* break-even oil level, if you look at the big picture. I wish i could find the study, but some economists took a look at it from a "national balance sheet" perspective and because of their lack of diversification, Saudi Arabia needs a higher price of oil than other countries in the region to keep their national finances afloat.

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    V1mV1m Registered User regular
    Mr Khan wrote: »
    Rchanen wrote: »
    milski wrote: »
    The attack on shale markets thing really never made much sense. The US still imports tons of oil. Lower oil prices help every other sector of our economy way more that the the shale wells shutting down hurts us. And if the Saudis start to raise the price up enough, the shale will reopen.

    On the other hand this action does help to dick over Iran and Russia, and via them Assad in Syria. And that is something(particularly the dicking over Iran bit) that the Saudi's see some value in, and goals that the US likes as well.

    The point of dropping prices to shut down shale isn't to destroy our economy, the point is to abuse the weird supply/demand curve for oil and US oil companies unwillingness to run or develop shale at a loss to make a huge amount of money when they spike the prices back up after US shale production halts.

    Though I think they also like dicking over Iran and Russia.

    Thing is Iran actually has a *lower* break-even oil level, if you look at the big picture. I wish i could find the study, but some economists took a look at it from a "national balance sheet" perspective and because of their lack of diversification, Saudi Arabia needs a higher price of oil than other countries in the region to keep their national finances afloat.

    One might also mention that Iran, as a culture, is a lot more pro-west than Saudi. Alienating Iran was one of the great geopolitical derps of the 20th century.

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    Alistair HuttonAlistair Hutton Dr EdinburghRegistered User regular
    Dis' wrote: »
    Rchanen wrote: »
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    I don't think Venezuela is going to like that plan.

    Venezuela is fucked either way, they blew their oil wealth on subsides petrol and current account spending. The attempt to 'destroy' US Shale oil is doomed. Wells are already sunk but turned off, the technology for sinking shale wells is getting cheaper. Once oil goes over figure x per barrel then those wells will be turned on and new, even cheaper per barrell wells will be sunk.

    You're confusing and skipping over things here - the wells that have been shut down can't just be turned back on easily after years off (as they're drilled through rock under high pressure), which is why many wells are still going even at a loss, you're probably thinking of the wells that haven't been completed and are waiting to start.

    To whit yes there is a massive inventory but completing them will take a pool of skills and equipment that is rapidly degrading - each month the Saudi's can keep this up will add more than that much time to the shale industry recovery on the other side (especially since the banks won't be so willing to lend to shale producers now that its been shown to be risky). This isn't a plan to 'destroy' the US shale industry its "we'll suffer 5 years of pain for 5 years of massive profits while shale recovers, and remind everyone who was mulling that they don't need middle east oil how wrong they are". Now if that's a good plan is another thing entirely.

    I must be misinformed, I was told that you could partially sunk a well, so you could get the bore to the point of the shale but not actually frack - seal up and then come back at a late point to do the irreversible fracking.

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    Dis'Dis' Registered User regular
    Dis' wrote: »
    Rchanen wrote: »
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    I don't think Venezuela is going to like that plan.

    Venezuela is fucked either way, they blew their oil wealth on subsides petrol and current account spending. The attempt to 'destroy' US Shale oil is doomed. Wells are already sunk but turned off, the technology for sinking shale wells is getting cheaper. Once oil goes over figure x per barrel then those wells will be turned on and new, even cheaper per barrell wells will be sunk.

    You're confusing and skipping over things here - the wells that have been shut down can't just be turned back on easily after years off (as they're drilled through rock under high pressure), which is why many wells are still going even at a loss, you're probably thinking of the wells that haven't been completed and are waiting to start.

    To whit yes there is a massive inventory but completing them will take a pool of skills and equipment that is rapidly degrading - each month the Saudi's can keep this up will add more than that much time to the shale industry recovery on the other side (especially since the banks won't be so willing to lend to shale producers now that its been shown to be risky). This isn't a plan to 'destroy' the US shale industry its "we'll suffer 5 years of pain for 5 years of massive profits while shale recovers, and remind everyone who was mulling that they don't need middle east oil how wrong they are". Now if that's a good plan is another thing entirely.

    I must be misinformed, I was told that you could partially sunk a well, so you could get the bore to the point of the shale but not actually frack - seal up and then come back at a late point to do the irreversible fracking.

    No we're both talking about the same thing, the misunderstanding is coming from the terminology; what you're mentioning is not a well that's been "turned off" (which is a different thing), that's a well that hasn't been "completed". There is a large inventory of uncompleted wells, there are also wells that have been stopped and not coming back.

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    HefflingHeffling No Pic EverRegistered User regular
    milski wrote: »
    Oil prices have far less of an effect on refineries than you are stating, since the profit driver is the difference between oil prices and product prices, not the raw price of oil. US refinery margins have likely been affected mostly by growth in competitive Asian/European refineries and more gently by decreases in oil prices and the upcoming Tier 3 gasoline regulations.

    Also I don't think I'd consider refineries petroleum industry, if only because petroleum engineers don't work at refineries. Hard to know what to call, it, though.

    You wouldn't have a petroleum industry without refineries. Refineries wouldn't exist without the petroleum industry. Therefore, I don't think it's too much of a stretch to state that refineries are part of the petroleum industry. And I know several petroleum engineers that do work at refineries, usually in the projects group heading up expansions.

    The company I work for supplies are large portion of our product to refineries, and the project side of the business has experienced a major downturn in sales and numerous cancellations. Even our aftermarket sales have taken a hit because refineries are attempting to go longer without a turn-around.

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    Dis'Dis' Registered User regular
    milski wrote: »
    Oil prices have far less of an effect on refineries than you are stating, since the profit driver is the difference between oil prices and product prices, not the raw price of oil. US refinery margins have likely been affected mostly by growth in competitive Asian/European refineries and more gently by decreases in oil prices and the upcoming Tier 3 gasoline regulations.

    Also I don't think I'd consider refineries petroleum industry, if only because petroleum engineers don't work at refineries. Hard to know what to call, it, though.

    Upstream Oil & Gas (extraction) and Downstream Oil & Gas (pipelines, refineries, what have you) are common industry terms.

    Also refineries definitely have petroleum engineers working at/for them.

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    Alistair HuttonAlistair Hutton Dr EdinburghRegistered User regular
    edited November 2015
    Dis' wrote: »
    Dis' wrote: »
    Rchanen wrote: »
    OPEC's confidential report leaked, looks like they're planning on continuing the cheap oil strategy until 2019-2020. They'll gradually ease up on production to lift prices up by an average of $5/barrel/year until 2020 when they'll allow it to remain at $80/barrel, unless they drive US shale producers out of business faster or slower than they expected.

    I don't think Venezuela is going to like that plan.

    Venezuela is fucked either way, they blew their oil wealth on subsides petrol and current account spending. The attempt to 'destroy' US Shale oil is doomed. Wells are already sunk but turned off, the technology for sinking shale wells is getting cheaper. Once oil goes over figure x per barrel then those wells will be turned on and new, even cheaper per barrell wells will be sunk.

    You're confusing and skipping over things here - the wells that have been shut down can't just be turned back on easily after years off (as they're drilled through rock under high pressure), which is why many wells are still going even at a loss, you're probably thinking of the wells that haven't been completed and are waiting to start.

    To whit yes there is a massive inventory but completing them will take a pool of skills and equipment that is rapidly degrading - each month the Saudi's can keep this up will add more than that much time to the shale industry recovery on the other side (especially since the banks won't be so willing to lend to shale producers now that its been shown to be risky). This isn't a plan to 'destroy' the US shale industry its "we'll suffer 5 years of pain for 5 years of massive profits while shale recovers, and remind everyone who was mulling that they don't need middle east oil how wrong they are". Now if that's a good plan is another thing entirely.

    I must be misinformed, I was told that you could partially sunk a well, so you could get the bore to the point of the shale but not actually frack - seal up and then come back at a late point to do the irreversible fracking.

    No we're both talking about the same thing, the misunderstanding is coming from the terminology; what you're mentioning is not a well that's been "turned off" (which is a different thing), that's a well that hasn't been "completed". There is a large inventory of uncompleted wells, there are also wells that have been stopped and not coming back.

    Hah! I had initially written "sunk but not turned on" and while editing the text before posting converted that into "turned off". Oh English language once again my nemesis.

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    joshofalltradesjoshofalltrades Class Traitor Smoke-filled roomRegistered User regular
    The situation in Saudi Arabia might be even more dire than expected.
    The rumblings of revolt against Saudi Arabia and the Opec Gulf states are growing louder as half a trillion dollars goes up in smoke, and each month that goes by fails to bring about the long-awaited killer blow against the US shale industry.

    Algeria's former energy minister, Nordine Aït-Laoussine, says the time has come to consider suspending his country's Opec membership if the cartel is unwilling to defend oil prices and merely serves as the tool of a Saudi regime pursuing its own self-interest. "Why remain in an organisation that no longer serves any purpose?" he asked.

    Saudi Arabia can, of course, do whatever it wants at the Opec summit in Vienna on December 4. As the cartel hegemon, it can continue to flood the global market with crude oil and hold prices below $50.

    It can ignore desperate pleas from Venezuela, Ecuador and Algeria, among others, for concerted cuts in output in order to soak the world glut of 2m barrels a day, and lift prices to around $75. But to do so is to violate the Opec charter safeguarding the welfare of all member states.

    "Saudi Arabia is acting directly against the interests of half the cartel and is running Opec over a cliff. There could be a total blow-out in Vienna," said Helima Croft, a former oil analyst at the US Central Intelligence Agency and now at RBC Capital Markets.

    On top of effectively setting half a trillion dollars for the cartel on fire and possible mutiny in the organization they have a hegemony in (which is a big part of how they wield any global influence), the world continues to move towards oil independence and clean energy, and they do not appear to be bothering shale producers at all with this strategy. Oil is down at almost $41/barrel and continuing to drop, yet production remains high. They're basically throwing money away now for market share that may not effectively exist 10 years from now.

    On top of that, Saudi Arabia has an ISIS/ISIL problem. Their pipelines are prime targets for sabotage, and they've had 5 ISIL-linked terrorist acts on their soil since May already.

    On top of that, Saudi Arabia is having to deal with unrest in their own country due finally to the arrival of austerity as their cash reserves get flushed down the toilet.

    One has to wonder what the hell they're thinking.

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    CorehealerCorehealer The Apothecary The softer edge of the universe.Registered User regular
    Saudi Arabia isn't exactly the most efficient bureaucracy when it comes to recognizing the rapidly changing situation surrounding their attempt to avoid loss of US influence by killing, at least as they see it, the US energy independence which emerges from things like shale exploitation (to say nothing of their ignoring of alternative renewables). The monarchy is too corrupt and bloated with incompetent sycophants to respond meaningfully to complex modern issues like maintaining long term energy resource superiority beyond oil, which is what OPEC should be investing in to stay relevant.

    SA cares about that to the exclusion of a lot of other things because they can't manage in a lot of ways without US goodwill towards them, bought with oil, and now that their monarchy is muddled in Syria, Yemen, proxy battles with Iran, bad press abroad and increasing domestic troubles at home, they need that goodwill now more then ever and they aren't focused as much on their cartel or its concerns right now, to the detriment of everyone involved. Maybe this will help to break up the cartel in the coming years.

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    SmrtnikSmrtnik job boli zub Registered User regular
    brassassin wrote: »
    hi guys,
    Oil prices broke through a pivotal barrier several times this week, as crude oil briefly sunk below $40.00 per barrel. With a variety of negative factors heavily weighing down on the oil price forecast, it looks as if things will get worse before they get better.In perhaps the best indication of widespread bearishness towards the oil price forecast, WTI for December delivery went for as low as $39.89 on the NYMEX. This is the biggest dip since August, when WTI oil prices was also tanking. Brent crude, the global oil benchmark, settled at $44.18 per barrel on ICE Futures Europe.And if the situations still continues to be the same US economy will be hampered badly and soon their would come a point where oil prices will be popped up artifically.


    http://www.profitconfidential.com/oil/oil-prices-could-oil-prices-hit-20-its-possible/

    How is this bad for US economy given how small oil sector is as part of whole economy, and how beneficial cheap gas is for a lot of other industries? Bad for Venezuela, Russia, KSA, etc... sure, but US?

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