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 Googly Goo
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| Bear - 2015-12-18 3:45 PMThis makes a ton of sense, Jim. What is your opinion of the lifting of the ban on oil exports and while you are at it, what is your position on Keystone and it's impact, assuming it ever comes to fruition? I'm ok with it, Doc, but I'd really like to see domestic production exceed consumption before it happens. It's possible that exporting American crude could pizz off OPEC and cause prices to drop more. Our refining is at capacity so at some point you either have to increase refining capacity or export crud. I'd certainly prefer that refining capacity were increased domestically.
Keystone is a no brainer and should have been done years ago. Many permanent jobs and increased refining production in US. Crude coming from a neighbor country that doesn't hate us. Impact is significant long term but I haven't read the numbers in a while. I live in Baytown, TX in the heart of gas and oil. Keystone would be just one of several booms to our economy.
Edited by TXBO 2015-12-18 4:03 PM
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 Elite Veteran
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Location: West Texas | This has very little to do with OPEC. They do not control prices and have lost market share, due to increase US production. The low prices are hurting them more than us. OPEC cannot increase production anymore than they are doing. When oil was at $100, OPEC was producing as much as they possibly could, every quarter loosing market share to increased US gains. The price fell when China and Europe's economy tanked, leaving more oil on the market than demand. Previous to this tanking, there was less oil than demand and OPEC was a full steam. |
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Googly Goo
Posts: 7053
| Tdove - 2015-12-18 4:04 PM This has very little to do with OPEC. They do not control prices and have lost market share, due to increase US production. The low prices are hurting them more than us. OPEC cannot increase production anymore than they are doing. When oil was at $100, OPEC was producing as much as they possibly could, every quarter loosing market share to increased US gains. The price fell when China and Europe's economy tanked, leaving more oil on the market than demand. Previous to this tanking, there was less oil than demand and OPEC was a full steam. OPEC control aproximately 75% to 80% of current crude reserves.
Worldwide production of crude is about 88M barrels per day.
OPEC produces 33.87M barrels per day.... about 40%.
As everyone else has cut back on production, OPEC has increased over the last two years.
Aug 2013 32.84M BPD
Aug 2015 33.87M BPD
If you think that a cartel that holds 80% of the oil reserves and produces 40% of the daily barrels of crude in the world doesn't control prices, you're just wrong.
I'll make it as simple as I possibly can. OPEC is certainly not making the same money that they were when crude was at $100. However, they aren't hurting and they could be making more but they don't want to. They could cut production, increasing prices and generate more revenue than they currently are..... much more. They are strategically producing beyond the point of marginal utility in order to keep prices low, discourage exploration, and backrupt competition. It's predatory pricing. If the drop in prices is due to a poor economy and decreased demand, why would OPEC be producing roughly a million more barrels per day than they where a year ago?
Edited by TXBO 2015-12-18 4:36 PM
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 BHW Resident Surgeon
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Location: Bastrop, Texas | You two fellas are good to have around here. I hope others appreciate it as much as I do. It's nice to get information from trustworthy sources, even if it conflicts a bit. |
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Googly Goo
Posts: 7053
| Tdove - 2015-12-18 4:04 PM This has very little to do with OPEC. They do not control prices and have lost market share, due to increase US production. The low prices are hurting them more than us. OPEC cannot increase production anymore than they are doing. When oil was at $100, OPEC was producing as much as they possibly could, every quarter loosing market share to increased US gains. The price fell when China and Europe's economy tanked, leaving more oil on the market than demand. Previous to this tanking, there was less oil than demand and OPEC was a full steam.
BTW.... I think your basic premise is that the main issue is supply and demand.
While that is quite true, you're focused solely on the demand side of the equation and assuming a purely competitive market without monoply or oligopy. OPEC is certainly an oligopy making the equation not as simple. Oligopies can control supply and manipulate prices for reasons other than marginal utility to maximize profit. |
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Googly Goo
Posts: 7053
| I'm getting ready to take my family to a Christmas play but let me give you some numbers to contemplate.
I'm going to round them off so don't get pedantic on me.
OPEC current production 34M BPD
Crude at $40 = $1.36B per day in revenue
If OPEC cut production in half that would take 20% of current world crude production off the market sending prices sky rocketing.
But assume it only raised crude prices back to $100.
17M BPD x $100 = $1.7B per day in revenue.
Why would OPEC want to sacrifice $340 million dollars per day?
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 Proud to be Deplorable
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| Can one of the oil guys answer a question for me. What if the USA,Canada an Mexico formed their own cartel. Would there be enough oil reverses to compete with OPEC? |
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Elite Veteran
Posts: 851
Location: West Texas | Well I will make it simple as well. Increasing production by 1 million barrels a day will not send crude prices down from $100 to $35. So OPEC increased oil production by 1 mil barrels in 2 years. Just the U.S. increased by 1.4 mil in 2014 alone and 2 mil in the in the same time period. Like I said OPEC was pretty much maxed out.
OPEC increase 3% increase in production
Just USA alone 25% increase
I am not focusing on demand alone. Read back in an earlier post, I have said the increase in U.S. production coupled with the worldwide recession.
Edited by Tdove 2015-12-18 6:45 PM
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Elite Veteran
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Location: West Texas | jbhoot - 2015-12-18 5:27 PM
Can one of the oil guys answer a question for me. What if the USA,Canada an Mexico formed their own cartel. Would there be enough oil reverses to compete with OPEC?
Cartels are illegal in U.S. law. Here is an article supporting what I am saying.
http://www.nytimes.com/interactive/2015/business/energy-environment... |
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Elite Veteran
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Location: Arkansas | TXBO - 2015-12-18 5:10 PM
I'm getting ready to take my family to a Christmas play but let me give you some numbers to contemplate.
I'm going to round them off so don't get pedantic on me.
OPEC current production 34M BPD
Crude at $40 = $1.36B per day in revenue
If OPEC cut production in half that would take 20% of current world crude production off the market sending prices sky rocketing.
But assume it only raised crude prices back to $100.
17M BPD x $100 = $1.7B per day in revenue.
Why would OPEC want to sacrifice $340 million dollars per day?
This is true. I worked in the Treasury dept. of a major oil company up until mid July when i was one of the 7% worldwide layoff. A few months before being laid off i attended a meeting where the CEO spoke and the Director of Planning, who i knew personally, also spoke and what TXBO said is what we were told the problem is and they can't forecast when it will get better because no one knows the mind of OPEC.....i was fortunate and found another job in a month. |
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Elite Veteran
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Location: West Texas | TXBO - 2015-12-18 5:10 PM
I'm getting ready to take my family to a Christmas play but let me give you some numbers to contemplate.
I'm going to round them off so don't get pedantic on me.
OPEC current production 34M BPD
Crude at $40 = $1.36B per day in revenue
If OPEC cut production in half that would take 20% of current world crude production off the market sending prices sky rocketing.
But assume it only raised crude prices back to $100.
17M BPD x $100 = $1.7B per day in revenue.
Why would OPEC want to sacrifice $340 million dollars per day?
What kind of math is this. Oil prices drop from $100 to $35 dollars with only a 1 mil/barrel/day increase in production but a 17 mil/barrel/day cut would only send prices back to $100 again? What! What alternate universe does economics and math do this? If OPEC cut by 17 million barrels a day, even the king of Saudi Arabia wouldn't be able to afford to drive accoss town! I am trying to bring real world sense to this.
OPEC had little to do with oil prices falling. Since they are a loose cartel, they can bring it back up. Several of the OPEC nations want to cut production, BUT the Saudis mainly don't want to. They are afraid if they agree to cut that Venezuela and others would secretly not abide by the agreement and Saudi's would loose revenue and market share. They don't trust one another enough to cut. That is exactly what happened in 1985. The only difference from then and today is Saudi Arabia had the ability to flood the market, today they don't. Simple as that. Everyone is hoping OPEC will cut production to help the situation. No one else has the ability to do that legally. But in no way is the oversupply caused by OPEC in the 1st place. Is anyone following me? I am oversimplifying it, sure, but it is the factual truth of what has happened.
One other thing to keep in mind is the market is short term sensitive and over reactive. In the short term OPEC can effect things some, but long term, the market will correct itself because of the hard supply/demand facts. The price is lower than it should be now and was higher than it should have been before. This is how stock and contract trading works.
Edited by Tdove 2015-12-19 1:03 PM
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Googly Goo
Posts: 7053
| Tdove - 2015-12-18 8:19 PM
What kind of math is this. Oil prices drop from $100 to $35 dollars with only a 1 mil/barrel/day increase in production but a 17 mil/barrel/day cut would only send prices back to $100 again? What! What alternate universe does economics and math do this? If OPEC cut by 17 million barrels a day, even the king of Saudi Arabia wouldn't be able to afford to drive accoss town! LMAO. Read my post closer and you'll see that I state that crude prices would sky rocket and not to get pedantic. The math was a ridiculous exaggeration with assumptions so absurd that nobody could challenge it. Let's use your numbers instead. They make my point even stronger.
OPEC current production 34 mil BPD x $35 = $1.19 Billion per day in revenue.
1 M drop in OPEC production equals 33 mil BPD x $100 = $3.3 Billion per day in revenue.
According to your numbers, OPEC revenues almost triple with a 3% decrease in production.
Now just to prove how accurate your numbers and assumptions are, Tdove, lets look at some historical facts:
Aug 2013 OPEC produced 32.84 BPD.
Aug 2013 ave crude prices $106 per barrel.
Aug 2015 OPEC produced 33.87 BPD.
Aug 2015 ave price $42 per barrel.
By the way, suggesting that OPEC's 3% increase or decrease in production would triple market prices and then say that OPEC has nothing to do with the current prices is completely contradictory. So which is it?
Edited by TXBO 2015-12-19 11:46 AM
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Googly Goo
Posts: 7053
| Tdove - 2015-12-18 4:04 PM ...OPEC cannot increase production anymore than they are doing. When oil was at $100, OPEC was producing as much as they possibly could, every quarter loosing market share to increased US gains. ....
OPEC currently has capacity to produce an additional 1.48 million barrels per day.
In the first quarter of 2008, crude was $100.56 and OPEC had an excess capacity of 1.36 million barrels per day.
In the 3rd quarter of 2008, crude jumped to $120.20 and OPEC had an excess capacity of .99 million barrels per day. |
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Elite Veteran
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Location: West Texas | You should read all my posts again and reread yours, and see if you can comprehend any better a second time. You have really misunderstood the simple economics of what I have put forth. Where did I say 1 million or 3% decrease would triple prices? You can LMAO all you want.
What is your involvemebt in the oil industry?
Edited by Tdove 2015-12-19 12:02 PM
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 Hog Tie My Mojo
Posts: 4847
Location: Opelousas, LA | Just curious, what would happen to the market if all the ISIS held oil/oil production capabilities were wiped out? What would the impact be now and in the future? Is there a good reason we (or Russia) are not doing this, does it have anything to do with who is buying the black market oil? |
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Elite Veteran
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Location: West Texas | Barnmom - 2015-12-19 12:01 PM
Just curious, what would happen to the market if all the ISIS held oil/oil production capabilities were wiped out? What would the impact be now and in the future? Is there a good reason we (or Russia) are not doing this, does it have anything to do with who is buying the black market oil?
It would likely send prices up. How much is hard to say. Generally uncertainty and unrest, causes the market to over react in an upwards price move. If anyone ever says they can predict oil prices they just lied to you. It is pretty hard to ever know what it will do or where it will go. |
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Googly Goo
Posts: 7053
| Tdove - 2015-12-18 4:04 PM This has very little to do with OPEC. They do not control prices .......
LOL. You lose all credibility after this. |
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Googly Goo
Posts: 7053
| Tdove - 2015-12-19 12:00 PM You should read all my posts again and reread yours, and see if you can comprehend any better a second time. You have really misunderstood the simple economics of what I have put forth. Where did I say 1 million or 3% decrease would triple prices? You can LMAO all you want. What is your involvemebt in the oil industry?
Yea ok. I'll take a few econ classes and work on my comprehension. LOL
In the mean time challenge my numbers or change the assumptions. Let's see how you do. |
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Elite Veteran
Posts: 851
Location: West Texas | TXBO - 2015-12-19 12:26 PM
Tdove - 2015-12-18 4:04 PM This has very little to do with OPEC. They do not control prices .......
LOL. You lose all credibility after this.
Here you go, from a real expert and market watch article.
"In recent years, the shale boom and increased production from the U.S. has “greatly reduced OPEC’s [ability to dominate] world oil markets,” said Charles Perry, chief executive officer of energy-consulting firm Perry Management."
The fall had little to do with OPEC. They can cut production to try to help increase prices. But infighting has not allowed that. Just facts.
Edited by Tdove 2015-12-19 12:46 PM
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Googly Goo
Posts: 7053
| Tdove - 2015-12-18 6:47 PM jbhoot - 2015-12-18 5:27 PM Can one of the oil guys answer a question for me. What if the USA,Canada an Mexico formed their own cartel. Would there be enough oil reverses to compete with OPEC? Cartels are illegal in U.S. law. Here is an article supporting what I am saying. http://www.nytimes.com/interactive/2015/business/energy-environment...
You're article supports exactly what I've said. Here's a snippet:
What happened to OPEC? A central factor in the sharp price drops, analysts say, is the continuing unwillingness of OPEC, a cartel of oil producers, to intervene to stabilize markets that are widely viewed as oversupplied. Prices of OPEC’s benchmark crude oil have fallen about 50 percent since the organization declined to cut production at a 2014 meeting in Vienna.
Iran, Venezuela, Ecuador and Algeria have been pressing the cartel to cut production to firm up prices, but Saudi Arabia, the United Arab Emirates and other gulf allies are refusing to do so. At the same time, Iraq is actually pumping more, and Iran is expected to become a major exporter again under the recent nuclear deal.
Saudi officials have said that if they cut production and prices go up, they will lose market share and merely benefit their competitors. They say they are willing to see oil prices go much lower, but some oil analysts think they are merely bluffing. |
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Folks on-line