DailyDirt: Who Doesn't Like Cheap Oil?

from the urls-we-dig-up dept

Wed, Feb 3rd 2016 5:00pm — Michael Ho

For a pretty good stretch, the price of a barrel of oil was about $90-$100, but now the price is around $35 or so. That's a good bargain for some consumers, but on the other hand, thousands of oil workers aren't working and plenty of companies that bet on oil prices staying high are going out of business. The simplified explanation is that the current oil supply exceeds the demand for it -- and it takes some time/politics for oil production to adapt. Oil prices might start to go back up significantly in 2017, but in the meantime, there are about 68 oil projects around the world worth about $380 billion that are on hold for a while.

The price of oil has dropped dramatically over the last year or so, and for certain low-grade crude oil, the price can be as low as negative $0.50 per barrel. Take away this toxic waste that could also be turned into fuel, please.... [url]
The Kashagan oil field has sucked in about $50 billion (and counting) from companies trying to tap into this enormous reservoir of oil (estimates say 16 billion barrels). However, some folks refer to it as "cash all gone" because after a couple decades of work, there have been a few major setbacks and engineering challenges -- and there's a chance that the oil might start pumping regularly in 2017. [url]
The US spent about half a billion dollars in Afghanistan to develop oil, gas and minerals industries, but there's not much to show for it. Drilling and mining ain't easy, but it's even harder when armed militias are actively trying to destroy everything. Still, a hydrocarbon industry worth many billions (even with low oil prices) could potentially exist -- but there are just a few enormous problems to overcome first. [url]

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Filed Under: crude oil, energy, fossil fuels, hydrocarbon fuel, kashagan oil field, oil, oil prices

17 Comments

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Anonymous Coward, 3 Feb 2016 @ 5:36pm

Afghan oil and gas?
I wonder how they expect the oil and gas industry in Afghanistan to be profitable? After all, Afghanistan is landlocked which makes it very difficult for them to get their oil to the world market.

Sure, maybe they can export some oil to neighboring countries, but I have trouble picturing enough production to be net profitable. But I'm not an expert.

To me, it sounds like one of those projects that looks good on paper to bureaucrats, but can only exist as long they're willing to pour money into it.
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Anonymous Coward, 3 Feb 2016 @ 5:46pm

um...
Pipelines? Surely, you know that people have transported oil over thousands of miles, right?

https://en.wikipedia.org/wiki/Druzhba_pipeline
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Anonymous Coward, 3 Feb 2016 @ 5:50pm

Re: Afghan oil and gas?
With pipelines, Afghanistan could send out petroleum in much the same way Kazakhstan does.

The only problem is ... the Afghans.... But then, that's not been a NEW problem since the 1500s...
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drjimmy (profile), 3 Feb 2016 @ 6:39pm

Re: Afghan oil and gas?
Look at Afghanistan on a map. Pipelines were planned to run through Afghanistan well before 9/11. All the XXX-stans north of Afghanistan are already being or have been developed. Afghanistan is in the direct path of pipelines to get the product to where the demand is; India and Pakistan. Do you really think we invaded Afghanistan to get terrorists?
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shawn, 3 Feb 2016 @ 7:29pm

cheap oil
So who's getting hurt here. In the Dakotas I heard some truckers were making six figures transporting energy products. My feeling is they should have saved for the inevitable rainy day.

As for the oil exporting countries now burning through cash reserves because of the low price.
Awesome!

As for the hedge fund managers and the traders who bet wrong.
Tough shit!

As for the average consumer.
Enjoy while it lasts, because it won't.
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@b, 3 Feb 2016 @ 7:44pm

An ad or an article?

They're for realz piratez, brah.

If we want to move to renewables we have to assume oil prices will be *artificially* lowered by such easy methods as "accidentally" sucking up too much.

Billionaire investors in oil will insist their risks be taken out of their gamble. They use the State to RIG the oil corp regulations in their favour. Our planet is a victim of a sunken cost fallacy. They are chasing lost gains down deep drains.

I find out hard to attribute to oops that which we can attribute to billions of $$$.
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Vladlagg, 3 Feb 2016 @ 9:57pm

Wealth Transfer
I read a report last week stating that the low oil prices amount to an annual 3 Trillion dollar wealth transfer from sovereign states to individuals and consumers. One of the largest in modern history. Kinda puts perspective on low prices.
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Anonymous Coward, 3 Feb 2016 @ 11:42pm

I remember a decade or so ago when oil prices started rising past the levels they've been falling past for the past few months. I don't feel any sympathy for those who are now shocked and appalled that oil priced are now so "low". As far as I'm concerned, this is a long overdue correction in the price after years of it being artificially inflated by market speculation, and production cuts aimed at creating an artificial scarcity.
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Anonymous Coward, 4 Feb 2016 @ 2:31am

Re:
Yep, artificial scarcity is the exact way to explain it.

There is a backstory to this current situation that will likely only come out years from now. Saudi Arabia does not benefit from the US being oil independent; thus they are happy to keep the price of oil low and help contribute to the imminent bankruptcy of the Dakota shale boomers.

The interesting thing is that last week, the US said to Iran, "yes please, c'mon in and sell us some oil now" after decades of embargo.

Someone in the US is pulling strings for an outcome that we consumers are yet to be enlightened about.

Oil has been the driving force force behind U.S. foreign policy since the 1970s.
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Richard (profile), 4 Feb 2016 @ 3:00am

Re: Re:
Saudi Arabia does not benefit from the US being oil independent; thus they are happy to keep the price of oil low and help contribute to the imminent bankruptcy of the Dakota shale boomers.

This started because the Saudis wanted to drive the shale producers out of the market. Unfortunately (for them) they miscalculated the level of price drop that would be necessary to do this (partly because the US has a preference for US sourced oil - even at a slightly higher price). Hence they are now hurting - and unlike other large oil producers - their economy has little else to fall back on.
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Richard (profile), 4 Feb 2016 @ 3:16am

Re: Re: Re:
As a rider to this I would say that the world is transitioning from oil to gas - which is a more environmentally acceptable fuel (generates more water - less CO2) and is also more convenient for all non-transport uses. I believe the switch away from oil will be accompanied not by shortage and high prices - but by glut and low prices.

The politicians may think that they are manipulating the market - but in reality it is driven by factors well beyond their control.
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Anonymous Coward, 4 Feb 2016 @ 4:25am

Re: Afghan oil and gas?
A pipeline! Of course! Easy-peasy.

I wonder what's taking them so long.
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annonymouse, 4 Feb 2016 @ 4:35am

low prices?
I remember back when the price of fuel was in lockstep with that of oil.
Then people started driving more efficient diesel cars and the cheaper to produce fuels price jumped to and even passed that of gasoline.
Over the last decade or so the price of oil went up and fuel went up in lockstep.
Yet now oil has drastically dropped yet fuel has barely budged down. Hucksters for big oil whine that it's the taxes but anyone with a basic grasp of math and taxes know that the tax is a fixed percentage of the price. So even though oil has dropped the only ones getting less are the producers ie oil field rights holders be they private or public.
Why no crying from government? Same as always. ... money!
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Richard (profile), 4 Feb 2016 @ 5:13am

Re: low prices?
anyone with a basic grasp of math and taxes know that the tax is a fixed percentage of the price.

Not really true for fuel - in many places this tax is tied to the quantity of fuel not the price.

https://en.wikipedia.org/wiki/Hydrocarbon_oil_duty
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nasch (profile), 4 Feb 2016 @ 8:45am

Re: low prices?
Yet now oil has drastically dropped yet fuel has barely budged down.

Within the last year or two I was paying $3.50 or $3.75 a gallon, and now it's $1.90. Your local prices may vary but for me at least it has been a drastic drop. And incidentally I have seen diesel prices even lower than gas, which I hadn't seen in many years. I don't know the explanation for that.
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Anonymous Anonymous Coward, 4 Feb 2016 @ 1:22pm

Re: cheap oil
May I suggest some fact checking. Were those truckers self employed? Were the figures gross or net? If the truckers were self employed then they are responsible for buying the truck, paying for fuel, lubricants, tires, maintenance, insurance, room and board on the road, etc. I have talked with some who had a high gross pay, but were having a hard time feeding their families.
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mb (profile), 5 Feb 2016 @ 8:43am

Re: cheap oil
I hope those truckers are using the money to buy bottled water 'cuz they're going to need it in a few years.
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