Home Forums Hunting & Shooting Hunter's Campfire Interesting article--oil to stay at/below $80 permanently

This short article is an interesting discussion of oil prices. It also has a chart showing what other countries need per barrel to make money on oil.

Our shale oil plays make money from $60 (maybe) to around $80 per barrel. Even the lowest OPEC country needs $80 minimum, and it goes up quickly from there.

Our ability to drill for cheap oil gives us the most political leverage of any country in the world.

http://www.businessweek.com/articles/2014-10-30/it-looks-like-80-oil-is-here-to-stay#r=read

In June of 2008 oil topped out at 147.11 and it fell from there. A year later I was meeting with the chief economist from BP and he boldly proclaimed that the 147.11 is a high that will never be repeated. I stopped and asked him to clarify his definition of "never" and he said "never" was forever. I still have a hard time swallowing that. In a century we should get to just twice that by currency devaluation and inflation.

Anyone know what the price of gas was the last time that oil was steady at below $80?

If oil topped out at $147....lets say gas topped out at $4


Oil is at $80 now...54% of its high.


Gas is at, lets say $3....75% of its high.


I think maybe we are still getting 'lubed' by the oil companies.....

Ya think?

The price of oil ain't the only cost in a gallon of gas. Go look up how the share value of the oil majors have performed this year.

You have both fixed and variable costs in the production of gasoline. Oil is a variable cost, where the cost of operating the refinery is a fixed cost.

They haven't been around the oil business very long to even say that in passing, or they would know better...

You also have to figure in how much Federal and state sales and highway taxes have increased over the years. Those taxes have added greatly to the cost of a gallon of gas.

Oil might have been at a price peak, but gas at the time of the election win November, was about $1.89 gallon.

yep, "permanent" has a shelf life shorter than commonly believed.

Imagine that once those pesky Ruskies and the ISIS have learned their lessons, oil could head north some...

Maybe that's the chart for Brent, not WTI which peaked at 147.11 on a single day in July of 2008; but some reports say it was 145.00. If you go to the DOE EIA web site you can download a spreadsheet with the closing prices each week for the past 50 or so years.

By the election in November we had a near complete collapse of the economy. The fall was fast and far.

Stock market investors have a saying. �The bull climbs the stairs, but the bear jumps out the window�.

Just to say it, WTI will not forever remain under $80 per barrel.

$4.00/gal was the tipping point in the U.S. Economy.

The ceiling was found, it was painful for all, and a realization that the whole economy would crumble if something didn't change.

Credit and mortgage failures were the first big indicators, followed by production drawdowns and higher unemployment.

The ripple effect is hitting China and the other low price labor markets now too, decreasing their demands for oil as well.

Everything gets rebalanced in time.

Right on rockinbbar. In the oil patch you never say "never" or "forever".

I have heard that stuff for 40 years,,,,, and I'm only 51. When it hit $1.00 they said it would never be less. That was around 1975. In 1999 it was $ .87 cents. Goes to $4.00 and would never be less than $3.00. That was Sept . 2005 after Katrina. I payed $ 2.96 today... My mutaul fund with 30% oil stocks did ok the last 2 weeks. Never know guys...... I hope it goes up some and then I might get out. If Israel gets in a cat fight with Iran or starts a good pissin match with Hamas instead of titt for tat it may go up again. Or another tough winter and walla.

Extraction and refining cost in the US are higher than they ever have been due to what we are drilling for etc...

Currently it cost approximately $60/barrel to extract and refine a barrel of oil in the US.

Already seeing a pullback on the extraction side.

Of course this has all been in the short term.

Nah...competition is fierce in the oil industry, but they are going to make their profit. No matter what the government stacks on top of what the consumer has to pay.

I heard something interesting on the radio.

It took more than 100 years for a gallon of gas to get to $1.50 a gallon. It took less than 10 years for it to go to $4 gallon.

Think we are getting [bleep]?

Dink

The only guarantee is that the boom/bust cycle will continue.

Whether it's in increase in demand, reduced supply, fear from political instability or inflation finally catching up with our crazy Fed policy, I expect oil to go over $100/bbl sooner or later.

Same can be said for a pound of ground beef and a gallon of milk. I don't see anybody wanting to lynch cattle ranchers. Put the blame where it belongs...government.

Very interesting.

most people have no idea what it takes to get that oil out of the ground.

Now there's something we can agree on.

I think a lot of the taxes on gasoline have been jacked up too, and you know they will never go down.

Lets not forget that "gas" is the bi-product of the toxic refuse that comes out the back end of the cracking process. Big oil makes hundreds of $'s off each barrel of oil from a whole host of petroleum products long before they get to the gasoline.

so this is all a coincidence that the falling fuel prices coincide with the upcoming mid term elections?

how convenient...

It's simple supply and demand guys.

They aren't falling here; they went up eighteen cents last week.

just indicative that the DFL isn't that worried back there is all...

Consult the chart. It shows how screwy the gasoline market is.
Pay attention to the lite green area of Phx......matches the same pricing color as eastern NM and west Texas.
AZ has zero petroleum resources and has zero refineries.....everything has to be piped/trucked in. AZ refined gasoline comes from a pipeline/truck from southern Calif or a pipeline from El Paso.
Eastern NM and west TX are part of the " U.S. West Texas Intermediate" oil field that determines pricing for North American crude. There are numerous refineries.
Yet the price of gasoline is the same....and it's virtually tha same raw gasoline.

Spot on. We "run" the government, no matter the country.

Yep. There are the simple methods (hence risk) in Texas and the more complex such as this in Kazakhstan, my last oil extraction project sixty miles offshore in the Caspian Sea. Night and day do not remotely describe it. It is a world market, something too many folks do not grasp.

The "drilling rig".



The living quarters.



The wildlife.

No, actually gasoline is one of the first groups of hydrocarbons that come out of the refining process. The heavier ends is where the variety comes from.

Sitka is correct. I'm an old gasoline blender that made zillions of gallons of gasoline, of which 99.8% or more was on-spec. Gasoline isn't a liquid stream that comes from crude as such. It's a blend of several gasoline blending materials that are combined in varying proportions to produce a gasoline that is acceptable for use in the regions of the country. Gasoline for Denver isn't the same as gasoline for Florida, and then there are summer grades and winter grades. And then, and always, Uncle Sam is watching and testing to make sure we aren't making off-spec gas and cheating the public. Big trouble if you knowingly market bad gas.

Refining crude to make gasoline, LPG, heating oil, diesel, 2 Oil, 6 Fuel, various chemicals, and this and that is a very interesting process. Pretty much every drop of crude oil winds up being used. The term "toxic Byproducts" really doesn't apply, though I suppose you could call all types of petroleum products toxic, in that if you swallowed them they would do you harm and might kill you - depending on how much you ingested.

But, back years ago, prior to a lot of materials (benzene for instance) being found to be carcinogenic, we didn't worry about getting it on us or breathing the fumes. And oddly enough, as we aged I lost several former friends and coworkers to cancers and other things.

How much does $3-4 gal gas play a roll in oil production as compared to $2-3 gal? There is a major cost saving in production isn't there?

$2.68 at the Kmart pumps this morn.

Get the V-10 out, it's time to kill some baby seals and squash some puppies.

No, it's not.

Supply/Demand, and whole lotta speculation. The majority of the world's crude oil is owned by narcissitic, evil, semi retarded dictators. I would submit we are closer to $150 crude than $50 crude.

Kashagan?

Can't believe it's taken so long for that project to production. I was involved with the Parker Rig when they were drilling the first hole, 15 years ago. But considering what a cluster that was, I'm not surprised at the delays, and the cluster was on the part of the expats not the Kazakhs.

So is the field as nasty as predicted with high H2S, CO2 and pressures?

I stand corrected, I shouldn't have used the wording "..out the back end..". Point being that Oil co.s make big bucks off the other stuff too, whether gas comes out of the process or not. I have no problem with this, just get a little rankled when some oil execs. whine about the cost of production of gas when they know full well they're making a lot of money off the other stuff.

We all bitch about the price of gas, but it is like 22 ammunition. It hasn't gone up with the cost of everything else, when we see $3.50/gal when we used to buy it at $.32/gal. If you figure out how much time you had to work to buy a gallon of gas in 1970 when it was $.32 vs how much time it takes now at $3.50. you had better be getting at least the same value or you are sweeping floors at McDonald's and that's nobodies fault but your own...

As much as people complain about the price of gas, I don't see them moving close enough to their jobs to walk, or trading in their cars for bicycles or horses. Relatively inexpensive hydrocarbons have been the biggest boon to the quality of life we enjoy.

Big business makes something everyone wants or needs and hence make a profit, I don't see how that is a crime? BTW, if you look at the Forbes 400, You'll find few of those listed made their fortunes from oil and gas, most from technology, investments, or food.

The book 'The Prize' by Daniel Yergen is a history of the oil industry. I recommend it.

Yes it is. Demand has fallen. Guess what the price of oil did? If the Saudi's had cut production, guess what the price will do?

I'm sure it's better to stomp your feet and claim it's the mid term elections, etc.

word

I wish I could give tours to refineries and the shops that keep them running. Then you'll ask why gas isn't $7.00 gallon all the time.

It is a bit more complex as it's not as simple as a factory producing widgets where the factory can simple crank up or throttle back the factory.

Every field has a few years were production peaks, then it starts a decline for the next 20, 30 or however many years it continues to produce. As a field ages it's more expensive to produce the oil, same number of workers, equipment that is wearing out and lower production.

If oil companies don't continually invest in new exploration, then they'll soon not be selling enough oil to cover their costs, but if they invest too much too soon they cut themselves off by putting too much oil on the market. Don't invest enough and they won't produce enough to keep the lights on no matter what the price of crude. Then you through in countries using oil as a political tool or weapon, traders and speculators and it's much more complex than simple supply and demand.

I wasn't around in 1970.....,,


In 2000 gas was 1.25ish in the Midwest. It's now three times that on average. Very few people (outside the oil field or health care) can say their wages are triple what the were in 2000.

Dink

All this discussion on who makes how much, and why prices vary so much, and who's fault is the price of gasoline mandated by is WAY over what my poor thought process can comprehend. What I do know is that I'm headed for central South Dakota early Sunday morning, and would be both happy and surprised if prices are the same a week later as they are going out. I can't help myself for thinking the elections are more of an influence on current oil prices than anything else. Prices have dropped in NE Wisconsin around 50 cents/gal in the past month, a steady decline of 10 or more cents/week. Election coming Tuesday; yes I cast an absentee ballot.