Why is oil price dropping?

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.
 
wellwisher said:
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.
Click to expand...

BINGO!
 
wellwisher said:
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.
Click to expand...
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.
wellwisher said:
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.
Click to expand...
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:
Saint said:
Oil price drop is good or bad to US's economy?
Click to expand...

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.
 
Saint said:
Oil price drop is good or bad to US's economy?
Click to expand...
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.
 
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?
 
sculptor said:
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?
Click to expand...
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.
 
sculptor said:
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?
Click to expand...
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:
sculptor said:
What, exactly, is OPEC telling us?
Click to expand...
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:
“We are not going to change our minds because the prices went to $60 or to $40,” Mazrouei told Bloomberg on Sunday at a conference in Dubai.

“We’re not targeting a price; the market will stabilize itself,” he said commenting on a statement by a Venezuelan official on Friday who said the country may propose convening an extraordinary meeting of the cartel.

Mazrouei said an emergency OPEC meeting under current conditions isn’t justified. “We need to wait for at least a quarter” to consider an urgent session, he said.
Click to expand...
Now, there was a little gamesmanship in there:
“Some people say this decision was directed at the United States and shale oil. All of this is incorrect.
Click to expand...
That is a contradiction of the previous statements though. And analysts are pretty clear that this is an unambiguous tactic:
Simply put, OPEC has declared war on U.S. shale play production. The shale plays are a direct threat to the market share that countries like Saudi Arabia have enjoyed dominating for decades on end. However, while OPEC as a whole is taking a large gamble that the U.S. will buckle under pressure and that shale play production will be cut, not all OPEC countries have this ability to take such a large risk of waiting out American production....

How do OPEC's decisions affect us at home? Again, OPEC will literally try to drive U.S. companies out of business.
Click to expand...
http://www.theadvertiser.com/story/...6/opecs-bad-bet-new-us-oil-business/19933619/
 
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?
 
sculptor said:
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?
Click to expand...


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.
 
cosmictraveler said:
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.
Click to expand...
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
 
joepistole said:
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
Click to expand...

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.
 
cosmictraveler said:
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.
Click to expand...
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.
 
cosmictraveler said:
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.
Click to expand...
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.
 
You must log in or register to reply here.
Back
Top