boots11234
Footballguy
Besides our fracking and the damage lower prices do to that business, how is lower prices from OPEC bad for our economy? Seems this is a concern for the markets and I dont understand. Educate me on this.
Fantasy Football - Footballguys Forums
This is a sample guest message. Register a free account today to become a member! Once signed in, you'll be able to participate on this site by adding your own topics and posts, as well as connect with other members through your own private inbox!
Oil Prices Crash, help me understand. (1 Viewer)
- Thread starter boots11234
- Start date
Long Ball Larry
Footballguy
Bad for all oil producers, who employ a lot of people, for one.
Jobber
Footballguy
Just thinking out loud, the goal of Saudi Arabia is to eventually jack up oil prices again right? If all the frackers and others are out of business, they can run amok and we will see $100+ barrel prices. And by that time, given gas is cheap for a few years, all the short sighted Americans will be buying up even more gas guzzlers, only to start bawling once prices reach $4.00/gallon again.
imo, yes. They are short the stock market and short oil. Since they can manipulate prices freely outside the regulations of the USA, it's like stealing without penalty. Once this completes and the market starts back up, they will flip and start raising prices.
jvdesigns2002
Footballguy
We don’t buy much of our oil from other countries anymore—we’re relatively more independent than we used to be when it comes to oil We drill and frack for our own. At the prices the Saudi’s are offering oil—we cannot compete—as that’s cheaper than our cost to drill our own. If prices stay this low—lots of our dollars and jobs will be going elsewhere. Also—if you look at the economic impact it would have on states like North Dakota and Texas (if prices stayed at these levels or any substantial length of time) could be catastrophic.
I wondered about this too.
It seems a little like one of those things where one can spin things negatively if they try.
Are we saying OPEC raising oil prices rising significantly is a good thing?
It seems a little like one of those things where one can spin things negatively if they try.
Are we saying OPEC raising oil prices rising significantly is a good thing?
Last edited by a moderator:
boots11234
Footballguy
Sounds like there is a sweet spot for price and this battle will lower it beyond that. I would think however that once the price rises production will start back up here again.
jvdesigns2002
Footballguy
No—but there is a sweet spot for oil pricing—where both the supply and demand makes sense—and there is profit to be shared across the board. If it gets too low—it because economically impossible for many of those drillers/producers too stay around. If it gets too expensive—the demand falls and people drive less, spend less—and the need for it falls. I’m not an expert on oil pricing—but my guess is that the sweet spot for oil is probably in the $45-60 a barrel range.
This was the thought a few years ago in that the Saudis would flood the market with cheap oil and domestic US frackers that need oil closer to $50/barrel to just make a bit of a profit would all go bankrupt.
However, since that time, a bit has changed in that the US has found quite a bit of oil easier to extract and at lower break even points so that most midstreams can make money even at $40/barrel level. Further our production has ramped up, as it has globally, while demand hasn't really gotten higher, with the exception of China I believe. EV's, higher fuel economies, etc... so really this is no longer as viable option for OPEC.
Lower gas prices does help the consumer nominally with their vehicles, as well as transportation costs for consumer good. But really, lower oil is going to be a bigger burden to domestic oil producers that are not government run.
Ron Swanson
Footballguy
beer 30
Footballguy
The economies that have built up around oil will suffer but the even the Saudi's can't sustain $20/barrel oil for long. It will suck, people will lose their jobs but it will come back. At some point the Saudi's will raise prices again and when it hits a certain number, the Us will fire back up again. Simplistic view yes, much more complicated than that but it is the boom & bust of oil. You have to be ready to deal with it.
As a ancillary supplier to the fracking industry, we've always used $50/barrel as the guidance but as the esteemed Mr. Swanson points out, it's not that easy to stop & start. The one thing we do have in our favor that we didn't in 2014 is more/better infrastructure. You don't have to build it twice.
zamboni
Footballguy
With oil prices, markets tend to be more concerned about the volatility of prices and underlying geopolitical/cross-border trade concerns than the actual level of prices. Oil prices have been much lower than in the past, but when the outlook is clearer, markets and companies can largely navigate around price levels.
Even as the global economy continues to move towards a service economy than a manufacturing economy, a lot of US business - and entire countries - are dependent on it. Hence the market trepidation.
Even as the global economy continues to move towards a service economy than a manufacturing economy, a lot of US business - and entire countries - are dependent on it. Hence the market trepidation.
Last edited by a moderator:
boots11234
Footballguy
thanks all for sharing. I understand a bit more now.
Adding on, there are still a lot of non-US countries that are extremely dependent on oil for most of their economy. For example, if you thought things were bad in Venezuela before, I shudder to think what happens now. Oil is something like 96% of their exports and where 40% of their government revenue comes from.
For as big as Russia is, it is still not a very diverse economy and largely dependent on oil. They are getting crushed by low oil prices and foreign sanctions, who knows how they might react.
For as big as Russia is, it is still not a very diverse economy and largely dependent on oil. They are getting crushed by low oil prices and foreign sanctions, who knows how they might react.
