Oil Prices

[jocoshock]

Strength in the dollar and slowdown in China will continue to keep downward pressure on oil prices (all commodities). Unless we see something come from the Saudis or any of our OPEC friends vis a vis cutting production (real or perceived), prices will remain low.

Heard last week that the Saudis are INCREASING production to keep Iran from making more money...

[wu_shizzle]

It must feel like being bipolar to be a liberal.

On one hand, you have to praise the work of the President and spin that low oil prices are because of this totally awesome, peace-in-our-time deal with Iran.

And then in the same breath, claim that lower oil prices are going to ruin public education in rural Kansas.

I don't know how they do it.

[shocka khan]

The same way as one of our presidential candidates, who touts himself as a fiscal conservative, presided over a government shutdown that cost taxpayers an estimated $24 billion dollars and gained nothing. Note I voted for this person, I am very dissapointed at their poor performance and I will not vote for them again (but it probably will not make much difference).

Liberals and conservatives alike do this and come up with some of the most cockamamie reasons to excuse their behavior.

Very few of our politicians are honest and transparent these days.

[ShockerEngineer]

Very few of our politicians are honest and transparent these days.

The whole political system just seems to attract this kind of people to it. I'm sure a lot of it is that an honest, transparent person would be eaten alive.

[SPEShockAlum]

Heard last week that the Saudis are INCREASING production to keep Iran from making more money...

And shale producers here in the U.S. who are overlevered. Similar to Warren Buffett's old saying about the ocean tide, when prices are high, everyone's in good shape; however, when they're low, you can see who's been swimming naked.

[_kai_]

And shale producers here in the U.S. who are overlevered. Similar to Warren Buffett's old saying about the ocean tide, when prices are high, everyone's in good shape; however, when they're low, you can see who's been swimming naked.

Saggy ballsacks everywhere.

[SHOCKvalue]

I'm guessing the "obscene profits" (to quote the libtards) have moved on from the oil producers over to the refiners. The spread between crude and pump prices is huge right now, even discounting off the newest BS about a refinery that had a wet fart in the midwest somewhere recently.

I'm a conservative capitalist generally, but the ridiculous joke that is the crude/gas market has put a pretty big hit on the "free market" idealism and naiveté that I left b-school with some years back.

[shocka khan]

I'm guessing the "obscene profits" (to quote the libtards) have moved on from the oil producers over to the refiners. The spread between crude and pump prices is huge right now, even discounting off the newest BS about a refinery that had a wet fart in the midwest somewhere recently.

I'm a conservative capitalist generally, but the ridiculous joke that is the crude/gas market has put a pretty big hit on the "free market" idealism and naiveté that I left b-school with some years back.

If you have a vertical monopoly like the big boys do, you can manipulate the supply chain and make sure you make lots of $$$$. Refiners are making big bucks right now, but lose their shirt in a market with tight supplies and high prices (think Tesoro petroleum).

Presently, I think big oil is squeezing prices on premium gas to maintain their margins. In that way, they protect their profits. Their supposed excuse is that the shale oil is 'too light' to make much premium gas (I always associated light crude with higher quality and, perhaps mistakenly, believed that light crude would produce a good amount of gas).

One of the more interesting developments I've noted is that the big players in shale/fracking are introducing technology so quickly that they will be able to drill in Bakken (and I'm guessing other shale fields) with prices in the $40's and still make money.

If someone on here is a chemical engineer/petroleum geologist, I'd like to hear some background on why shale oil is so poor for refining into premium gasoline or whether this is a hoax started by big oil.

[pinstripers]

If refineries are making so much money, why doesn't somebody but another one to compete?

[SHOCKvalue]

If you have a vertical monopoly like the big boys do, you can manipulate the supply chain and make sure you make lots of $$$$. Refiners are making big bucks right now, but lose their shirt in a market with tight supplies and high prices (think Tesoro petroleum).

Presently, I think big oil is squeezing prices on premium gas to maintain their margins. In that way, they protect their profits. Their supposed excuse is that the shale oil is 'too light' to make much premium gas (I always associated light crude with higher quality and, perhaps mistakenly, believed that light crude would produce a good amount of gas).

One of the more interesting developments I've noted is that the big players in shale/fracking are introducing technology so quickly that they will be able to drill in Bakken (and I'm guessing other shale fields) with prices in the $40's and still make money.

If someone on here is a chemical engineer/petroleum geologist, I'd like to hear some background on why shale oil is so poor for refining into premium gasoline or whether this is a hoax started by big oil.

Premium in the Wichita area is still within a typical range of $.25-$.30 over regular, but it is ridiculous in certain other areas of the country. I just got back from a 2500 mile motorcycle trip and a $.50-$.75+ margin for premium over regular was commonplace.

[SHOCKvalue]

If refineries are making so much money, why doesn't somebody but another one to compete?

Same reason why stakeholders can't get a coal-fired power plant built in western Kansas, no matter how clean it is engineered: Irrational nincompoops - both public sector employee and private citizen activist. The minions have seen fit to essentially close down any and all building of power plants and refineries in the US for a good many years now. Miles and miles of legal roadblocks based on anything they can come up with - the more subjective the better - much like what is currently being done to the Keystone Pipeline project.

Oh... and the ones that own existing said facilities are keen to keep the supply constrictions in place. Crony capitalism and such.

[Kung Wu]

Same reason why stakeholders can't get a coal-fired power plant built in western Kansas, no matter how clean it is engineered: Irrational nincompoops - both public sector employee and private citizen activist. The minions have seen fit to essentially close down any and all building of power plants and refineries in the US for a good many years now. Miles and miles of legal roadblocks based on anything they can come up with - the more subjective the better - much like what is currently being done to the Keystone Pipeline project.

Oh... and the ones that own existing said facilities are keen to keep the supply constrictions in place. Crony capitalism and such.

None of that describes any free market system that I am familiar with.

[SHOCKvalue]

None of that describes any free market system that I am familiar with.

It is not suppose to.

[Aargh]

The energy industry is far removed from a free market system . It would be difficult to find any market further removed from a free market form. The barriers to entering that market are HUGE. Start with a few billion dollars and the ability to have that kind of cash on the line during an extended construction period.

Then there are supply issues. The major players have their supply chains locked up for years on end. If you've got to buy on the spot market at those prices, you would get buried.

Then there are government regulations that make it almost impossible to build a new refinery. Do you think current owners of refineries are pressuring their Congressional reps to eliminate those regs? Not on your life - unless it's for the refurbishing or upgrading of a current refinery. That way the existing refineries get basically rebuilt and become "new" refineries, but probably operate under a different set of regs than would apply to a startup refinery.

The only free market the energy guys want is on the side where they sell. They've got production absolutely controlled. The free market talk is to get rid of regs that limit profitability of existing refineries - not to get the government out of the business of burdening startups.

A free market model works quite well with laundromats, tree trimmers, grass cutters. If someone is making $50K a year running a crew of lawn trimmers, and someone else is willing to do the same thing for $40K, then you have a free market model.

I think Mobil/Exxon posted somethin like $10 billion profit a few years back. If a group of investors was willing to do the same thing and willing to accept $9 billion for that, you would think they would enter the market and put Mobil/Exxon out of business like an overpriced lawn trimmer.

Look at the obstacles. You need a massive pool of investors. Many potential investors are probably already invested in the industry and would work long and hard to prevent investors from joining a startup. Then there are major issues with supply.

The absolute lack of anything resembling a free market model in energy extends all the way to gas stations. Try to set up an independent station next to an existing Mobil station. Doesn't matter if you are more efficient and can provide equal service at a lower price. The Mobil station will just drop their price below yours. Mobil can afford to take a loss on one station to prevent competition from entering the market.

I'm just using Mobil as an example of how the market works. I'm certain they are no worse (or better) than any of the players in that industry.

[Dan]

Barriers may be huge to compete at the top but there are thousands of private oil companies of all shapes and sizes. I guess it depends on your expectations. Do you think all industries should have barriers low enough to allow anyone off the street to compete with the biggest companies in the business? I have a friend, for example, that started investing in oil properties 10 years ago and sold his company last year for $500 Million. Not a bad deal for a guy that started with a 2 man shop.