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Topic: The reason that crude oil price crashed - page 4. (Read 12509 times)

legendary
Activity: 1204
Merit: 1002
Gresham's Lawyer
December 28, 2014, 02:26:22 PM
A significant increase in the use of nuclear power in Japan (and more importantly elsewhere) will likely lead to long term lower oil prices. It remains that nuclear energy is much safer and much cleaner then other types of energy (including 'green' energy like solar and wind)
Because windmills also sometimes create superfund radioactive sites where human life is impossible for generations?
Nuclear is safer and cleaner, except when it isn't.  Fusion reactors please.  These fission fails are for the lose.
It is very rare that nuclear reactors meltdown. The last time this happened was in Japan in 2011 and the time before that was in the mid 1980's.

It was also estimated that there would have been few deaths of people who were living in the evacuated areas in the 2011 incident, although people who would have stayed and continued to live would have had a higher risks of certain cancers, although still overall low risk.

http://en.wikipedia.org/wiki/Fukushima_Daiichi_nuclear_disaster
http://en.wikipedia.org/wiki/Nuclear_and_radiation_accidents_and_incidents#Nuclear_meltdown

Yes I am aware that there are more nuclear reactors that haven't had catastrophic failures that have resulted in massive and unresolvable pollution effects that have damaged those that were completely unrelated to the reactor and derived none of its benefits while running.
So how rare are these windmill meltdowns?

You brought up the comparison, claiming the fission reactors are cleaner and safer.  Maybe you are right, but just how did you come to this assessment?
hero member
Activity: 686
Merit: 500
December 28, 2014, 12:53:50 PM
A significant increase in the use of nuclear power in Japan (and more importantly elsewhere) will likely lead to long term lower oil prices. It remains that nuclear energy is much safer and much cleaner then other types of energy (including 'green' energy like solar and wind)
Because windmills also sometimes create superfund radioactive sites where human life is impossible for generations?
Nuclear is safer and cleaner, except when it isn't.  Fusion reactors please.  These fission fails are for the lose.
It is very rare that nuclear reactors meltdown. The last time this happened was in Japan in 2011 and the time before that was in the mid 1980's.

It was also estimated that there would have been few deaths of people who were living in the evacuated areas in the 2011 incident, although people who would have stayed and continued to live would have had a higher risks of certain cancers, although still overall low risk.

http://en.wikipedia.org/wiki/Fukushima_Daiichi_nuclear_disaster
http://en.wikipedia.org/wiki/Nuclear_and_radiation_accidents_and_incidents#Nuclear_meltdown
legendary
Activity: 1204
Merit: 1002
Gresham's Lawyer
December 28, 2014, 10:31:14 AM
It will over-correct, and then come up from that, irrespective of central banking influences (which effect everything priced, and also oil).
Usage will increase due to the lower price.  Some of that will be price dependent uses (some things are economical at a lower price but not at a higher price).  Those will trail off when price climbs again.
hero member
Activity: 1022
Merit: 500
December 28, 2014, 08:49:51 AM
simultaneously with the Japanese bringing nuclear back online

Reasonable explanation especially since Abe, who is conspicuously pro nuclear reopening, won a decisive election victory a few weeks ago. While only one (or possibly zero, I'm not sure) Japanese nuclear plant has literally reopened so far, the market may be responding to expectations they will reopen.

There was a large run up in oil prices from about 80 USD to 120 USD in 2011 after Fukushima.



Decreasing demand and increasing supply is the reason oil crashed.

You should understand that "demand" and "usage" are not the same thing here.  USAGE increased, DEMAND (at a given price) decreased because of expectations of increasing SUPPLY.

The suppliers then rush to get the oil sold asap so they can get ahead of a price drop, which drives it lower still.  So it over-corrects.  It happens on the rises too.

Usage is also a measure of economic activity.  Globally usage is increasing, it will likely increase more swiftly with the lower prices.

Global usage is increasing and the price will likely go up as more inflation is created by central banks
legendary
Activity: 1204
Merit: 1002
Gresham's Lawyer
December 28, 2014, 08:01:57 AM
simultaneously with the Japanese bringing nuclear back online

Reasonable explanation especially since Abe, who is conspicuously pro nuclear reopening, won a decisive election victory a few weeks ago. While only one (or possibly zero, I'm not sure) Japanese nuclear plant has literally reopened so far, the market may be responding to expectations they will reopen.

There was a large run up in oil prices from about 80 USD to 120 USD in 2011 after Fukushima.



Decreasing demand and increasing supply is the reason oil crashed.

You should understand that "demand" and "usage" are not the same thing here.  USAGE increased, DEMAND (at a given price) decreased because of expectations of increasing SUPPLY.

The suppliers then rush to get the oil sold asap so they can get ahead of a price drop, which drives it lower still.  So it over-corrects.  It happens on the rises too.

Usage is also a measure of economic activity.  Globally usage is increasing, it will likely increase more swiftly with the lower prices.
legendary
Activity: 1204
Merit: 1002
Gresham's Lawyer
December 28, 2014, 07:56:48 AM
A significant increase in the use of nuclear power in Japan (and more importantly elsewhere) will likely lead to long term lower oil prices. It remains that nuclear energy is much safer and much cleaner then other types of energy (including 'green' energy like solar and wind)
Because windmills also sometimes create superfund radioactive sites where human life is impossible for generations?
Nuclear is safer and cleaner, except when it isn't.  Fusion reactors please.  These fission fails are for the lose.
hero member
Activity: 1022
Merit: 500
December 28, 2014, 05:46:59 AM
simultaneously with the Japanese bringing nuclear back online

Reasonable explanation especially since Abe, who is conspicuously pro nuclear reopening, won a decisive election victory a few weeks ago. While only one (or possibly zero, I'm not sure) Japanese nuclear plant has literally reopened so far, the market may be responding to expectations they will reopen.

There was a large run up in oil prices from about 80 USD to 120 USD in 2011 after Fukushima.



Decreasing demand and increasing supply is the reason oil crashed.
hero member
Activity: 686
Merit: 500
December 27, 2014, 11:26:02 PM
simultaneously with the Japanese bringing nuclear back online

Reasonable explanation especially since Abe, who is conspicuously pro nuclear reopening, won a decisive election victory a few weeks ago. While only one (or possibly zero, I'm not sure) Japanese nuclear plant has literally reopened so far, the market may be responding to expectations they will reopen.

There was a large run up in oil prices from about 80 USD to 120 USD in 2011 after Fukushima.


A significant increase in the use of nuclear power in Japan (and more importantly elsewhere) will likely lead to long term lower oil prices. It remains that nuclear energy is much safer and much cleaner then other types of energy (including 'green' energy like solar and wind)
legendary
Activity: 1246
Merit: 1000
December 27, 2014, 09:12:33 PM
We should all listen to what the experts say.  Tongue


In 2008 Goldman Sachs warned of oil at $200. Now it says below $80
http://www.biznews.com/video/2014/10/28/in-2008-goldman-sachs-warned-of-oil-at-200-now-it-says-below-80/
legendary
Activity: 2968
Merit: 1198
December 26, 2014, 11:12:53 PM
simultaneously with the Japanese bringing nuclear back online

Reasonable explanation especially since Abe, who is conspicuously pro nuclear reopening, won a decisive election victory a few weeks ago. While only one (or possibly zero, I'm not sure) Japanese nuclear plant has literally reopened so far, the market may be responding to expectations they will reopen.

There was a large run up in oil prices from about 80 USD to 120 USD in 2011 after Fukushima.

legendary
Activity: 1204
Merit: 1002
Gresham's Lawyer
December 26, 2014, 08:30:43 PM
#99
Post-Fukushima, oil went on a tear, as the Japanese (and, by self-infliction, the Germans) needed gas and oil to replace off-lined nuclear.  The single largest consumer of petroleum on the planet is the U.S. military.  When they were fully stocked and reduced operations, simultaneously with the expansion of tight oil production, simultaneously with the Japanese bringing nuclear back online, a crash became inevitable.  It won't last long, but it can go very deep:  Qatar and the Saudis can operate existing wells on a $20 marginal barrel price, or less.
 

It will also over-correct (and may be doing so now) because with the expectation of lower prices in the future, there will be a rush to fill the market at the current price ahead of competition which will drive prices lower than the market-clearing rate.
legendary
Activity: 1596
Merit: 1030
Sine secretum non libertas
December 26, 2014, 08:00:30 PM
#98
Post-Fukushima, oil went on a tear, as the Japanese (and, by self-infliction, the Germans) needed gas and oil to replace off-lined nuclear.  The single largest consumer of petroleum on the planet is the U.S. military.  When they were fully stocked and reduced operations, simultaneously with the expansion of tight oil production, simultaneously with the Japanese bringing nuclear back online, a crash became inevitable.  It won't last long, but it can go very deep:  Qatar and the Saudis can operate existing wells on a $20 marginal barrel price, or less.
 
legendary
Activity: 2968
Merit: 1198
December 25, 2014, 02:06:46 PM
#97
Your analysis seems correct it will get worse before it pops. The sooner the bubble pops the better because the damage will be smaller than if the bubble gets even bigger.

The problem is that the smaller damage just leads to another bubble (because the damage isn't great enough to lead to real change). But you never know, the last bubble did give us bitcoin, which at the time was only a small change, but has over time gotten slightly less small. So you never know.

hero member
Activity: 1022
Merit: 500
December 25, 2014, 07:02:39 AM
#96
Recent discussion of value in another forum proved again: supply and demand analysis only works when currency supply does not change. Now when currency supply suddenly changes (QE stopped), the total effect on the market is dominant, outweighs small change in supply and demand

The liquidity crisis will be first felt in oil, then cost of everything will go down, creating a race to the bottom price war, then mass firing of labor force...

The QE has barely made it out of the banks and into industry in the USA, and pretty much all the other central banks are just cranking it up.  Those currency supply effects are a bit further downstream, money supply is still growing just slower in the USA and faster elsewhere.

QE did not flow into US economy, since the return is bad there. But after banks get rid of bad assets, their extra liquidity went into middle east and those shale companies

I wish you were right and that the bubble would pop and get a little bit of fiscal and monetary sanity back, but look at the numbers.  The Fed created over 4 Trillion of new money on its balance sheet in the last QE.  (The UCP, China, BOE and others are still pumping strong yet so we won't even start adding those.)
Globally 550 Billion of new bond debt issues in oil and gas total globally since 2010 were issued.
Most estimates are that this can get up to maybe 10% default rate.  The magnitude of the issue is dwarfed by new money creation which is still ongoing.

The point here is that it doesn't pop the bubble, its just froth.  Its still getting worse and will likely continue to do so with the QE being considered a "success" until it is much worse than this.

Your analysis seems correct it will get worse before it pops. The sooner the bubble pops the better because the damage will be smaller than if the bubble gets even bigger.
hero member
Activity: 686
Merit: 500
December 25, 2014, 06:30:11 AM
#95
Recent discussion of value in another forum proved again: supply and demand analysis only works when currency supply does not change. Now when currency supply suddenly changes (QE stopped), the total effect on the market is dominant, outweighs small change in supply and demand

The liquidity crisis will be first felt in oil, then cost of everything will go down, creating a race to the bottom price war, then mass firing of labor force...

The QE has barely made it out of the banks and into industry in the USA, and pretty much all the other central banks are just cranking it up.  Those currency supply effects are a bit further downstream, money supply is still growing just slower in the USA and faster elsewhere.

QE did not flow into US economy, since the return is bad there. But after banks get rid of bad assets, their extra liquidity went into middle east and those shale companies
Overall consumer interest rates declined in the US which means that QE did flow to the economy. I think the problem was that consumers generally did not take out more loans (and spend the lending proceeds) due to these lower interest rates
legendary
Activity: 1204
Merit: 1002
Gresham's Lawyer
December 24, 2014, 05:15:18 AM
#94
Recent discussion of value in another forum proved again: supply and demand analysis only works when currency supply does not change. Now when currency supply suddenly changes (QE stopped), the total effect on the market is dominant, outweighs small change in supply and demand

The liquidity crisis will be first felt in oil, then cost of everything will go down, creating a race to the bottom price war, then mass firing of labor force...

The QE has barely made it out of the banks and into industry in the USA, and pretty much all the other central banks are just cranking it up.  Those currency supply effects are a bit further downstream, money supply is still growing just slower in the USA and faster elsewhere.

QE did not flow into US economy, since the return is bad there. But after banks get rid of bad assets, their extra liquidity went into middle east and those shale companies

I wish you were right and that the bubble would pop and get a little bit of fiscal and monetary sanity back, but look at the numbers.  The Fed created over 4 Trillion of new money on its balance sheet in the last QE.  (The UCB, China, BOE and others are still pumping strong yet so we won't even start adding those.)
Globally 550 Billion of new bond debt issues in oil and gas total globally since 2010 were issued.
Most estimates are that this can get up to maybe 10% default rate.  The magnitude of the issue is dwarfed by new money creation which is still ongoing.

The point here is that it doesn't pop the bubble, its just froth.  Its still getting worse and will likely continue to do so with the QE being considered a "success" until it is much worse than this.
hero member
Activity: 1022
Merit: 500
December 24, 2014, 05:12:37 AM
#93
Recent discussion of value in another forum proved again: supply and demand analysis only works when currency supply does not change. Now when currency supply suddenly changes (QE stopped), the total effect on the market is dominant, outweighs small change in supply and demand

The liquidity crisis will be first felt in oil, then cost of everything will go down, creating a race to the bottom price war, then mass firing of labor force...

The QE has barely made it out of the banks and into industry in the USA, and pretty much all the other central banks are just cranking it up.  Those currency supply effects are a bit further downstream, money supply is still growing just slower in the USA and faster elsewhere.

You can bet that the US will grow the money supply faster sooner than later because they will need cash.
legendary
Activity: 1988
Merit: 1012
Beyond Imagination
December 24, 2014, 03:22:16 AM
#92
Recent discussion of value in another forum proved again: supply and demand analysis only works when currency supply does not change. Now when currency supply suddenly changes (QE stopped), the total effect on the market is dominant, outweighs small change in supply and demand

The liquidity crisis will be first felt in oil, then cost of everything will go down, creating a race to the bottom price war, then mass firing of labor force...

The QE has barely made it out of the banks and into industry in the USA, and pretty much all the other central banks are just cranking it up.  Those currency supply effects are a bit further downstream, money supply is still growing just slower in the USA and faster elsewhere.

QE did not flow into US economy, since the return is bad there. But after banks get rid of bad assets, their extra liquidity went into middle east and those shale companies
legendary
Activity: 1204
Merit: 1002
Gresham's Lawyer
December 24, 2014, 01:51:45 AM
#91
Recent discussion of value in another forum proved again: supply and demand analysis only works when currency supply does not change. Now when currency supply suddenly changes (QE stopped), the total effect on the market is dominant, outweighs small change in supply and demand

The liquidity crisis will be first felt in oil, then cost of everything will go down, creating a race to the bottom price war, then mass firing of labor force...

The QE has barely made it out of the banks and into industry in the USA, and pretty much all the other central banks are just cranking it up.  Those currency supply effects are a bit further downstream, money supply is still growing just slower in the USA and faster elsewhere.
legendary
Activity: 1988
Merit: 1012
Beyond Imagination
December 24, 2014, 01:05:24 AM
#90
Recent discussion of value in another forum proved again: supply and demand analysis only works when currency supply does not change. Now when currency supply suddenly changes (QE stopped), the total effect on the market is dominant, outweighs small change in supply and demand

The liquidity crisis will be first felt in oil, then cost of everything will go down, creating a race to the bottom price war, then mass firing of labor force...

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