Why is oil price dropping?

Discussion in 'Business & Economics' started by Saint, Dec 9, 2014.

  1. wellwisher Banned Banned

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    The price of oil is coming down because America is producing more oil. This is causing the supply of OPEC oil to rise due to less American demand. The laws of supply and demand require that the price needs to drop to reduce the excess supply. that OPEC has. This is what we seeing.

    The Democratic policy of tax and regulating was in place to lower supply to help to raise price. The propaganda of the evil oil companies was due to government, who steals more in taxes that oil companies make. If the price is really high a few more cents tax is less visible so one does not feel the pick pocket stealing and blaming big oil. Big oil is allowing the price to drop so I hope the liberals sing the praise and not just the one sided gloom.
     
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  3. exchemist Valued Senior Member

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    BINGO!
     
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  5. joepistole Deacon Blues Valued Senior Member

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    Well, only a partial bingo.
     
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  7. exchemist Valued Senior Member

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    True, but even Wellwisher would be hard put to work water, entropy and hydrogen bonds into a thread on the oil price.

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    But let's see: he may now try…………………..
     
  8. joepistole Deacon Blues Valued Senior Member

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    Well it’s a little bit more complicated than that, but you have the general gist of it. It is a supply and demand issue as I and others have repeatedly written in this thread.
    And this is where you retreat back into la la land. Do you have any evidence to support your claims? No you never have evidence to support your bizarre partisan beliefs. Big Oil isn’t allowing oil prices to drop. Oil is dropping because of that supply and demand thingy…remember? As far as taxes, the oil and gas industry receives an abundance of tax breaks. The US corporate tax rate is 34%. The average tax paid by the oil and gas industry for the last 5 years is 11.7%. That is significantly less that what the average middle class tax payer pays in income and payroll taxes (25%-30%) every year. I own several oil and gas partnerships which are very profitable. Do you know how much I paid on income from those properties last year? I paid zero federal income tax on the income from those properties, because the tax law treats that partnership income as return of my invested capital. The oil and gas industry receives plenty of tax breaks from the federal government.

    One more point, corporate income taxes only account for 9% of federal tax revenues. Income and payroll taxes comprise the vast majority of federal tax receipts.
     
    Last edited: Dec 10, 2014
  9. Saint Valued Senior Member

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    Oil price drop is good or bad to US's economy?
     
  10. exchemist Valued Senior Member

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    That is not straight forward, in my view.

    I think of course that lower energy costs in principle benefit any energy-intensive economy. However, wild and unpredictable swings in the price of important commodities are BAD for economies in general, as they make it impossible to plan or optimise. While it seems reasonable to expect energy prices to moderate, due to the shale revolution and the Chinese slowdown, the magnitude of the current sudden drop seems unlikely to reflect fundamentals in the industry, so it is not a good number on which businesses can make plans.
     
  11. joepistole Deacon Blues Valued Senior Member

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    Well it is good and potentially bad. It is good because the US is a consumption driven economy with consumption accounting for 70% of GDP. It has been estimated that currently a billion dollars a day are being pumped into the economy because of the drop in oil prices. That is a pretty significant stimulus considering the stimulus of 2009 was only 750 billion dollars.

    Now here is the bad side or potentially bad side. A lot of oil producing countries and companies have gone out and borrowed significant sums of money (e.g. Venezuela, Nigeria, Iraq) and oil drillers like Petrobas. Some of them will default. And when they default, it could cause another banking crisis and an economic slow down. That is the source of current market angst.
     
  12. sculptor Valued Senior Member

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    Perhaps, the drop in oil price is political in nature. Perhaps we are using our influence with opec to cripple the russian economy by lowering the value of their main export?
     
  13. Russ_Watters Not a Trump supporter... Valued Senior Member

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    Why not just believe what OPEC is telling you? We've never been allies, so such collusion wouldn't even make sense even if OPEC weren't telling us what they were doing.
     
  14. sculptor Valued Senior Member

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    What, exactly, is OPEC telling us?
     
  15. joepistole Deacon Blues Valued Senior Member

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    Perhaps, perhaps not. OPEC has in the past used oil as a weapon to advance their political interests. But there is no reason to disbelieve the Arab states. And it's not like Arab oil producers have any love for Mother Russia. After all, Mother Russia has and continues to support Mother Iran, the arch nemesis of Arab oil producing states. Arab oil producers do not have much love for Putin's Russia. So it is completely plausible that Arab oil producing states would go out of their way to hurt Mother Russia all on their own without US intervention. But then again, it is equally plausible that Arab oil producers are just being honest. They are defending market share. It wouldn't be the first time they did that either.

    But then you have to ask, why would the US or the Arab oil producers invoke a sanction without telling anyone? It kind of defeats the purpose of invoking a sanction. In short, it doesn't make sense. Therefore the far more reasoned conclusion is there is that there is no conspiracy here. Arab oil producers are just acting to protect market share. Arab oil producers are low cost producers. They are trying to drive out and keep out competitors as they have always done...so no conspiracy. It's just another case of an oligopoly trying to protect its interests by keeping the competition out.
     
    Last edited: Dec 16, 2014
  16. youreyes amorphous ocean Valued Senior Member

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    that they dont want to lower the oil production.
     
  17. Russ_Watters Not a Trump supporter... Valued Senior Member

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    That they don't want to lose any more market share to American shale oil and want to slow the US shale boom by keeping prices low.
    http://www.businessinsider.com/opec...ng-the-market-take-care-of-oil-prices-2014-12
    http://www.reuters.com/article/2014/11/27/us-opec-meeting-idUSKCN0JA0O320141127
    http://rt.com/business/214427-opec-unchanged-below-40/
    From the last one:
    Now, there was a little gamesmanship in there:
    That is a contradiction of the previous statements though. And analysts are pretty clear that this is an unambiguous tactic:
    http://www.theadvertiser.com/story/...6/opecs-bad-bet-new-us-oil-business/19933619/
     
  18. sculptor Valued Senior Member

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    If memory serves:Breakeven price for bakken oil s about $60/bbl?

    How long can opec afford to sell heap oil?
    Is USA refilling the strategic reserves with cheap oil?
     
  19. cosmictraveler Be kind to yourself always. Valued Senior Member

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    We are nearing the time which I said was coming, January , that prices will start to climb. Prices could be allot less but because oil companies only want to see profits the prices won't ever go below 30.00US a barrel again.
     
  20. joepistole Deacon Blues Valued Senior Member

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    You don't really have a very good track record on the predictions friend. And truthfully, no one knows with certitude how low oil prices will go. The Arab oil producers are the lowest cost oil producers in the world with an estimated cost of around $15-$16/barrel. Average cost of US oil production is around $34/barrel. Saudi's are about half that. There is plenty of room for oil prices to fall even with Brent Crude now trading just under $60/barrel and WTI trading at $55/barrels. Even at these prices Arab oil producers have shown no interest in stabilizing oil prices much less increase them. Arab oil producers are trying to force out higher cost oil producers using their key strength, low production costs. And I think they will succeed. Oil prices will continue to fall and probably stabilize sometime in the first half of next year but at lower price levels.

    Two things need to happen in order for oil prices to rise, oil supply needs to stabilize and oil demand needs to increase. That doesn't happen overnight. Lower oil prices should be a boom to the US, China, and Europe which should bring demand back. But the US has just brought a lot of supply on line. It is going to take some time. And before that happens, we are going to see some oil companies default, some oil producing countries default (e.g. Venezuela) and we are going to see some companies default and there will be some industry consolidation.

    http://www.eia.gov/tools/faqs/faq.cfm?id=367&t=6
     
  21. cosmictraveler Be kind to yourself always. Valued Senior Member

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    I don't make "predictions" very often but when I do whether I'm right or wrong really doesn't mean much as far as the world continuing to travel on its merry way. I'm just a digital internet avatar and so is everyone else which means there input is about as good as everyone else's more or less.

    There has been a spike in auto sales for bigger gas guzzling cars and more vehicle travel as well during the holiday season this year. People don't think this is a short term situation as many do like myself. If I recall in the past when oil prices declined they also rose back up and many times higher than they were before the decline.

    Until an alternative fuel, like hydrogen Natural gas or electric, is being used we will continue to see spikes up and down with oil. I still believe that hydrogen is the only good solution to this dilemma for it is clean, renewable and can give the same amount of power that regular gas gives. It will just take time to implement hydrogen mainly because the oil companies prevent it from getting a better foothold.
     
  22. joepistole Deacon Blues Valued Senior Member

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    Here is the deal Cosmic, you don't understand the fundamentals...the drivers of various events. You just look back on your perceptions, which are often wrong (e.g. oil price manipulation around election cycles) and make prognostications based on those erroneous perceptions.
     
  23. billvon Valued Senior Member

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    20,574
    I think it's taken so long because it's a terrible fuel. It's unsafe, gives you far less range with gasoline, it leaks through everything - and most importantly, we don't have any, or any way to make it easily.
     

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