Topic: The reason that crude oil price crashed - page 7. (Read 12509 times)

This is the opposite of the truth.
Look at the data.

There is MORE global usage of oil, not less.
In fact, demand is accelerating!
With lower prices, you should expect usage will increase further and more swiftly.

This is really basic economics.  It is almost surprising to see such confusion on these things in a Bitcoin forum.

You guys keep saying its just simple supply and demand.....that's like saying you just buy low and sell high.

There are a multitude of complex interactions going on.

With some numbers to compare we might have a better idea of what is happening...

What is the current global demand in bbls?
What is the Saudi output in barrels vs last year?
What is current global demand in barrels?
What is the change in total world production?
What percentage of world supply is US shale production?
What is the current rate of oil field decline globally?
And many others...

Once we have some actual numbers you can see where the changes are taking place.

Some say the Saudis are attempting a price war on US shale production since shale drilling is relatively expensive and they can't weather a price drop for long. This will allow the middle east to raise prices in the future without competition from the US.

I'm no expert but speculation without facts is no way to go if you are trying to make an investment decision.

Demand is still increasing, but at a bit slower pace.

And how would sanctions on Russia lower oil prices? Conspiracy theories apart.

this could be due to the use of oil declined for each country, this is due to the price of oil is too high in a country, thus making the purchasing power of oil decreases, the use of natural gas and LPG to be one alternative for the community to replace the use of petroleum , its price is cheaper than the price of petroleum ... 

There is less global demand for oil.

It also potentially has to do with the fact that sanctions have been put on Russia which is a major oil exporter

Yep and when demand picks up there will be a shortage of supply causing a large price gap and a new surge for oil and gas because the price makes it attractive plus a lag period of course.
(New economic entrants taking a lot of oil after a recession is what caused oil to spike last time, when China started to grow their economy rapidly)

(All the reserve barrels got eaten short term and there was a lack of new production since they were still reeling over from the shortage of demand from the last recession and fired a ton of people, so slow to start up again.)
In not so many words we did the whole life cycle of the oil and gas market, prices drop investment falls, new economic shift causes a shortage and prices to rise rapidly, causing a new influx of investment till the price is to low again and we go with current supply till it reaches a new crest.

Did the whole oil and gas cycle without even needing to read Daniel Yergins the Quest or the Prize 

The oil from some of the new projects cost 60 to 90$/barrel to get.
There will be no more projects like this as long as the oil stays under 60$

Yep as new liberty implied price forecasting is difficult to do.

If there was no US fracking to account for or (less than what was expected) companies who spent significant amounts of money developing North Sea oil and looking for new supplies would have made greater returns on their investments.

Inversely if there was no fracking (due to environmental concerns flaming faucets anyone https://www.youtube.com/watch?v=4LBjSXWQRV8) the moves they made in that area can become profitable to them and worth the returns. It just goes to show that the market is in turmoil and has volatility.

Although if the Saudis wanted to stop/slow down the pace of new reserves and discoveries for a few years they just need to push the price down so that the industry stagnates since new development would be too costly/make them eat losses.

Perversely, if they did foresee the price and didn't spend a penny, the price would still be over $100 because no supply increases would have occurred.  So what was done made sense.

At the lower prices, consumption will increase and then demand will rise as well.  Until then it will overcorrect and maybe whipsaw a few times.

Well North Sea oil has been around since the days of the last fuel crisis.
Aka the Saudi era but true enough if they calculated fracking they would have just moved their dollars to the lowest cost area and get the gas out of there to maximize profits and keep the price down.

Once we run out of the cheap stuff then we have to go get the more expensive stuff.

NO

You are looking at the wrong numbers.

The USE of oil has risen, not fallen, so this would suggest economic expansion not contraction.  The price indicates supply and demand.  Supply has surged more than demand, so price falls.

This cheaper price should be expected FURTHER INCREASE USE, and also increase economic expansion with the exception of oil extraction (oil refining and delivery/transport/pipeline operations will expand though).

This is really very basic market economics.  Maybe many people are accustomed to "government managed" economies and so it is confusing?


If you factor in the commodities futures markets, it explains it perfectly.

Most of the big oil consumer industries hedge their profitability using futures contracts.  This includes all the transport industries, and most utilities that are oil consumers.  Many of these contracts are several years out in expiration which can delay price movements and also make price move swiftly.

No strange explanations are needed beyond market economics.   Whilst it is true that some production capacity is in the direct control of some royal family and heads of state, a vast amount is simply companies doing business and not political at all.

Obama for example has very little control on price.  He can bully pulpit.  He can buy/sell from Strategic Oil Reserve (which is almost full already).  He can start wars police actions.  He can influence congress on approval/disapprovals of extraction operations in lands usurped by previous presidents as "National Parks".  None of this directly affects price or production.
He can do some really radical things like claiming imminent domain, but this would do massive damage to the American Economy as most foreign and domestic investment that can flee would do so.

So even if there is a conspiracy, who is conspiring and what can they do anyway?

The cost of some US shale producers is below $50. The cost of UK North Sea oil is about $70. These are profitable if  the oil price is over $100. A few years ago, it was expected that oil price would be over $100. There were lots of investments into oil sector. if those investors foresaw the oil price would be $70 now, they would not spend a penny into US shale or North Sea oil.

the shale supply has been going on for a few years, that doesn't explain why the price suddenly collapsed almost 50% in 4 months.
most shale oil production is not even profitable below 70$

something else is going on...

There is over supply of oil. US is producing over 9 million barrels of oil, which is much larger than it used to produce.

I meant that China was doing great, I just meant they went from 12-15% growth a year or double digit growth, to a more relaxed pace of 5-8%.
Of course that is still a heck of a lot better than the USA and Europe which are already developed countries with their 1-3% growth rates
(But just saying if the whale (China) doesn't want to buy a ton of cement (Housing market bubble) aka those giant abandoned cities and does not want a lot of crude oil to grow the economy (Using Coal) since its cheaper, or LNG less energy per barrel but its a cleaner solution to coal. (Air quality concerns in Beijing) Then the price is going down for certain.

The oil crash is also due to a lack of demand but China is doing great, the USA and Europe are going bankrupt. China is the first world economy now.

The oil crash is simply due to an increased supply that is not related to the demand, China is scaling back on its economy with a change in leaders and this is leading to a decreasing demand for crude oil and LNG by extension.

In addition the USA has a Glut of oil from all the fracking going on over there and for once is nearing exporting status instead of importing oil from up North in Canada leading towards a decrease in North American prices, these factors together are helping to keep the price low and will likely not change for the next while.

Couldn't happen to a nicer set of banksters....

http://www.silverdoctors.com/plummeting-oil-prices-could-destroy-the-banks-that-are-holding-trillions-in-commodity-derivatives/

The price of Oil going down is the sign that the USA and Europe economies are slowing down despite all the debt they are accumulating to buy some time before they fail terribly.

So by not doing something it is a conspiracy... or by doing something it is a conspiracy?

Even if there is no conspiracy, there must be a conspiracy not to conspire about the conspiracy.
It probably has a lot to do with Nostradamus and the trilateral commission, because oil.


Or.... maybe OPEC know that the dropping price will cut production because all these new shale sources will no longer be economical?  Market forces will take care of it for them?
They don't really have to do anything and they get everything they want anyhow.
No conspiracy is needed when the information is public and easy to find: