View Full Version : Crude oil, low price

Richard Taylor
19th Dec 2008, 08:29
$147 prices were always ridiculous, & mostly as a result of speculators trying to find a "safe haven" in the earlier days of the Credit Crunch.

But it was always likely that as the crisis bit & demand for goods & services fell off a cliff, that prices would follow suit. Perhaps not to the extent everyone thought, but to be honest I always had the feeling they would collapse, they were not sustainable where they were as the world headed towards meltdown.

But whilst we all benefit from lower petrol & diesel prices (well lower than where they were!!) perhaps a note of caution.

The reason I say low oil prices benefits nobody is that as the taps are turned off, budgets slashed by the oil companies & new developments put on hold, a time will come where the economy & demand will pick up again. When that time comes, there is a realistic chance that a supply crunch will ensue, with not enough oil around to meet demand - part of the alleged reasoning that sent the price up in the first place!

Whatever people think of Big Oil - profiteering, polluting & so forth - we still need the stuff, & may do so for years to come. And we need nations & companies to continue producing it.

Do we really revel in seeing oil producing nations struggling with unsustainable low oil prices? Remember the UK is still an oil producing nation, & the last thing that the UK oil industry & the Govt needs is oil prices that are so low that future development of remaining reserves is compromised.

A realistic oil price is what is required, but in a free market, very difficult to achieve. A realistic price that we can all live with, as members of the public & industry...but also a realistic price that means oil producing nations continue to develop remaining reserves.

Don't get me wrong, there are certain Arab skeikhs & nations that I also don't mind seeing taking a reality check, but at the end of the day, like it or not, OPEC exists & they (up until recently anyway!) in effect had a bearing in influencing the oil price...which also benefitted non-OPEC nations like USA & UK.

19th Dec 2008, 10:09
Away and boil yer head!

$0.95 per litre and dropping - and that's higher than it should be. I'm quite happy with low petrol prices thank you very much.

Richard Taylor
19th Dec 2008, 10:13
I was expecting a lively discussion, but not an insult! :bored:

It's open to debate, which is why I put it up.

But keep any insults or mudslinging to yourself sunshine.

19th Dec 2008, 12:16
I take your point - in an ideal World we would have have a fixed price (say, 75$ a barrel fixed for a year) and all those thieving intermediaries and speculators who contribute only to themselves would be out of the equation.

In an ideal World............

Flap 5
19th Dec 2008, 12:39
The only problem I have with low oil prices is that it discourages research into alternative fuels and encourages the increased use of a finite resource. Otherwise I have no problem with it.

The Arab states have been quite happily using the oil revenues to diversify into other areas, especially the UAE. You only have to visit Dubai to see the evidence. Countries like Nigeria have never used their oil to benefit the ordinary person. So much so that people will often damage pipelines to steal oil, with dangerous consequences. We are all aware of the way oil revenues have been wasted in Britain with the 'good times' of the last twenty years being wasted away to the extent that we are now in debt.

The price connot stay low for long anyway. Oil is a finite resource and it will run out. As it starts to run out the price will rise again and future development of less accessible reserves will occur.

So don't worry Richard your wish will come true.

Brewster Buffalo
19th Dec 2008, 12:53
How you establish a realistic price when the consumer wants its cheap and the producer wants it expensive.

You have to leave it to the market.

Just as fuel prices are going lower now so, when the recession is over, the prices will increase with demand and we will back as before. :*

19th Dec 2008, 13:57
A realistic oil price is what is required, but in a free market, very difficult to achieve.In a truly free market, the price is always a realistic price. It occurs where the price the producer is willing to accept matches the price the consumer is willing to pay and supplies a quantity that matches supply to the demand.

A market where intemerdiaries seperate the producer from the consumer is not a free market.

A market where the supplier is a cartel and the buyers are speculators is no kind of market at all.

All this nonsense about "world markets" is stuff and nonsense. At a worldwide level where uncontrolled predatory speculators are free to act, there can be no such thing and "market economics" is meaningless drivel. What the above quote ought to read is:

A realistic oil price is what is required, but in world conditions, a free market is impossible to achieve.

19th Dec 2008, 14:35
So what's the problem Richard?? Did you take a grumpy pill or are you unaware of the definition of humour/irony? :=

If you don't want insults (occasionally) then best to stay away from Jet Blast - you'll only get hurt.

19th Dec 2008, 15:26
I disagree the low prices are "just as bad" as high. Higher oil prices mean higher transportation costs for anything transported, higher food production costs, higher costs for anything using petrochemicals, higher energy bills for those living in extreme climates. It inflates the price of so many basic things and it's the lower income bracket that suffers disproportionally from it.

It's all well and good to sit back when you're comfortable and can manage these higher costs into your household budget and wax philosophical regarding higher prices forcing accelerated R&D into alternative sources, how it's "greener" because people use less of it, etc. etc., but there's multi-millions of people out there who can't afford sky high prices and worry about paying for heating oil in the winter or filling the car to get to work now to buy the higher priced groceries.

Oil is finite, and the prices will rise in accordance with it's limit running ahead of new technologies designed to extract it. That's inevitable, so there's no reason to artificially keep prices higher based on Ivory Tower attitudes, so-called "forward thinking", or planned social behavior engineering. It's the poor, especially the working poor, who feel the pinch most and they usually get left out of the debate.

763 jock
19th Dec 2008, 21:15
So this summer's madness appears to be over. Any thoughts?

Oil below $34 as Brown warns on volatility - Times Online (http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5370400.ece)

19th Dec 2008, 22:03
I would like it to be

one barrel=one sheep

19th Dec 2008, 22:52
oil price is a complex issue....as for dubai,the ruling family are 55 billion dollars in debt,abu dhabi are bankrolling the current developments,most of which will probably remain unsold as the market has collapsed.i spoke recently with a senior oil company executive who told me that to finance deep water and arctic oil exploration,the price of oil has to be around $130 per barrel before the oil companies can justify the huge financial investments to extract oil from these enviroments.the technology is available,but is extremely expensive.once the current reserves near exhaustion,we will have to brace ourselves for higher prices.in the meantime,the global recession will keep prices lower.developing countries are unable to buy at high prices and countries like china,who's major cities are already gridlocked with traffic,cannot see significant traffic growth,as the roads are already nearly impassable,usually much easier to take short journeys by bicycle rather than by car.

Scumbag O'Riley
20th Dec 2008, 01:12
Wasn't crude about $35 a barrel back in 2004 when airlines started charging a couple of quid fuel surcharge? How much are they charging now when crude is again $35 a barrel?

20th Dec 2008, 15:47
Blacksheep saith:
A market where intemerdiaries seperate the producer from the consumer is not a free market.

A market where the supplier is a cartel and the buyers are speculators is no kind of market at all.

All this nonsense about "world markets" is stuff and nonsense. At a worldwide level where uncontrolled predatory speculators are free to act, there can be no such thing and "market economics" is meaningless drivel.

An element of truth, to be sure, but what goes up must come down. Weren't as many speculators hurt by the crude price collapse as benefited by the absurd rise?

Same can be said of currency trading (i.e. speculation), or speculation in other commodities (U.S. housing).

But government intervention will make things worse more often than not. :uhoh:

21st Dec 2008, 10:15
All this nonsense about "world markets" is stuff and nonsense. At a worldwide level where uncontrolled predatory speculators are free to act, there can be no such thing and "market economics" is meaningless drivel.

Hear hear. I'm looking forward to the day the Arabs come begging to buy our water. $200 a barrel sounds fair to me.

BTW, 'tis cold and dark in Pomgolia. :{

Lance Murdoch
21st Dec 2008, 15:39
I would agree with Flap 5, the one benefit of the high oil prices we saw in the summer was that governments and industry all over the world were starting to make a serious effort to find alternatives and improve efficiency. I expect that alot of these schemes will be quietly dropped in these straightened economic times. Oil is the lynchpin of industrial civilization. It is not going to run out tomorrow or any time soon however as a society we would be very foolish not to be slowly moving over to alternatives. My suggestion is that as a nation we should be aiming to reduce oil consumption by 1% annually of the2008 consumption level. How to achieve that is another question.

Another disadvantage of low oil prices is that whatever instability there is in the Middle East now Im willing to bet that it would become alot worse if the oil price collapsed and with it the economies of Saudi Arabia, the UAE, Iraq? and Iran etc.

Bluewolf, your comment about Arabs buying water for $200 per barrel reminds me of a quote made by Henry Kissinger during the 1973 oil embargo i.e. 'you may control the oil supply but weve got all the food'.

21st Dec 2008, 23:54
Just the other day, I imagined I was having a drink with my good friend (single malt for me, orange juice for him) HRH Prince Al-Waleed bin Talal bin Abdul Aziz Al Saud.

We were talking about boats and planes, as we often do. In the warmth of a grand open fire amidst the sand dunes, watching the last glow from the setting sun, with only the occasional sounds of the helicopter's twin-turbines cooling down and camels farting (I think) in the distance. For at least the last 2 or 3 years, rumours have been rife that a new yacht to replace his current 86m Kingdom 5KR were either in the final planning stages, construction well in progress or even that the 160m+ yacht had already in fact been launched, but was so full of the latest stealth-technologies' that noone had yet noticed it gracing the Riviera's harbours and bays this summer. So I asked him about that (mentioning that Peter Evans his skipper (and mine in years past) had not been very forthcoming, and the discussion slowly drifted to current events including the credit crunch, his investments in Citibank (which was rescued recently BTW) and oil prices. This is what he replied:

"At heart, at the centre of our beings, you and I, we're both very simple people, which is why I like you. You feed stray cats regularly, I (by way of my numerous programs), ensure the survival of species. Everyone should act according to the means available at their disposal...", before going into an extremely long and technically detailed discourse on the subject of oil pricing that I admit I almost fell asleep.

Almost. And that is when the brainwave hit me! Usually, great ideas only come to me in the 10 minutes after I've just woken up and I'm sitting on the toilet, sipping a mug of PG Tips and smoking a Cafe Creme mini-cigarillo...?!

"Hear me out", I said. "I might just have a solution (to oil pricing)":

$35 oil is probably too low for most of OPEC (and definitely more marginal producers), $140+ oil surely hurts everyone (except the profiteers). The idea that OPEC somehow truly controls the price of oil should obviously be debunk. I mean, how can anyone reclaim (with a straight face) that it's OPEC that has voluntarily varied the price of oil as has been seen on the markets over the past 12 months...?! :ugh: Unless I'm mistaken, many governments including the UK and France, make much more out of just taxing the oil you produce from sales to consumers, than it costs you to produce the stuff in the first place...?! And nowadays, all these governments also want to introduce additional green COČ taxes, on the principle that 'the polluter pays'.

Why should it be European governments that recover all these additional green taxes, ostensibly destined to reduce COČ emissions over there? In Europe today, whenever anyone buys an electrical appliance, like a washing machine etc., they pay 'up front' an additional charge that's supposed to cover the eventual costs of the disposal of said appliance. IMHO, that's just the way they provide for 'future pensioners'. That is to say, it's just another method to increase taxation whilst doing little or nothing in real terms.

So why allow all these oil-consuming countries the monopoly on 'green taxes' that are probably integrated into general tax revenue and won't actually have any truly 'green' effects anyway?

"Prince Al-Waleed bin Talal bin Abdul Aziz Al Saud", I said (actually there's a shorter name, but since we're in a public forum...), "OPEC members simply have to agree to impose their own 'green tax'". I suggested a rate of 20% applicable immediately to all oil exports from OPEC members which would be affected to a general OPEC fund. This 'green fund' would be used by OPEC members to invest in the research and development of alternative energy sources. Some OPEC members have already heard the message. They've already invested huge resources to developing 'green technologies' for their own uses. Most 1st world governments have at best, an irresponsible attitude when it comes to assuring their nations' future energy requirements. Which mostly consists of more taxes under the simple guise of 'greener initiatives' which will never see the light of day...?!

I said, "OPEC should change its name to OEEC (Organisation of Energy Exporting Countries) and use the supplementary income from their own 20% 'green tax' to convert their oil producing activities to become general energy producers. Become the leading manufacturers and suppliers of 'green technologies' worldwide, managing the demise of oil."

"Have another Scotch...?!" And I did.

22nd Dec 2008, 00:41
airship is levitating again.

You see, OPEC sets not the price of crude, but rather the quantity (and the allocation of that quantity among member states).

They may have a target price in mind, but inasmuch as they can only control half of the supply-demand equations, the actual price remains a function of demand - as has been amply demonstrated within the last six months. Right now there are huge unsold crude inventories in storage in the only available containers (oil megatankers), and the under-$40 crude price reflects this glut!