Topic: The reason that crude oil price crashed - page 8. (Read 12519 times)

But then we should throw this question around. How come Opec does not react to cut down the oil production. They could easily bring up the price if they want to and that is a big IF. It's a matter whether they want to do it or not. Is there some kind of agreement going on?

Indeed it must. Without conspiracy theories, life would be so much less exciting.

Re fracking. No one can deny that fracking has had an effect on global oil and gas prices. If I remember correctly, between a quarter and a third of U.S. oil and gas supply are now generated from shale drilling. However, there are legitimate concerns over the short term and long term effects of the 100+ chemicals and radioactive tracers used in modern fracking methods. There are fears that many of these chemicals (which fracking companies are not required by law to disclose) are making their way into aquifers and drinking water supply and increasing ground-level ozone.

A fiery water video proving methane migration into homes: https://www.youtube.com/watch?v=4LBjSXWQRV8

OPEC decided not to cut production because they would rather weather the storm now and take short term losses (which only means less profit and aren't actually losses), in order to hold their marker dominance. The USA has started pumping oil at an alarming rate, to the point to where we were rivaling Saudi Arabia.

It costs us about 65$ a barrel to pump it via fracking. OPEC knows this. All they had to do was cut supply and oil would be 105$ a barrel again. They would rather charge less for their oil and hold their market dominance.

Why should we care? Give them the worthless paper for the oil, send it on over! Save our oil for times of need? Very capitalistic of me but its the truth.

Plus, it helps along our agenda with Russia, and increases profit margins in alot of oil burning industries.

OPEC knows that this is their only way of holding market dominance for now. It means much more profit for them to pump oil at 50$ a barrel for the next 5 years, than pump oil at 105$ a barrel and sell not as much of it and slowly lose their dominance for the next upcoming decade.

OPEC does not set the price of Oil, the market does via supply and demand. The price has gone down due to lack of demand while supply has increased (due to previously high prices).

The price of oil has nothing to do with Russia as, again the market sets the price (although Russia is suffering from lower prices).

It is possible to speculate that QE caused oil prices to be artificially high, however I would doubt this happened because it is expensive to store oil and there is only a small amount of oil actually stored at any time.

Imo don't sell buddy. Oil will be 95/barrel by end of year. Great time to buy more if anything.

Not company but banks. That never happened in past?

yes, its financial war.

Interesting to note;

- new UKR finance minister is US citizen who formerly worked at state dept.
- US VP Biden's son is now on the board of UKR's biggest gas producer.


feels like another chapter of the shock doctrine.

That thread would likely be more interesting.  It may have some science, chemistry, math.

I still can't figure out what this thread is doing on BitcoinTalk anyway.  Instead it belongs on WaPo's: Volokh Conspiracy.


There is no bitcoin discussion here, move along.

Russia may suffer from lower oil prices, but why do you think that is a reason for them?

If it were political (US vs Russia), wouldn't you expect to see ANWR exploration and drilling started?
The US's largest oil fields are NOT being drilled, primarily because of Democrat (the party in power) opposition.

Or maybe your hypothesis is that OPEC nations have an interest in Ukraine?
Who is "punishing" Russia, and by what mechanism?   Prices do not move magically in globally traded commodities, there is some elasticity in supply and demand.

Was the high oil prices over the last few years because the US or OPEC was "rewarding" Russia?

There are many factors affecting oil prices. Generally the demand is the dominant factor, other times political too. I believe the reasons for current low oil prices are:

This is a strange discussion.  Must oil prices be a grand conspiracy that is only about some politics?
Is it impossible that there are new oil extraction methods that have become cheaper with technical advancements.
No one has heard of "fracking"?
(It is very controversial, possibly polluting ground water, but it produces oil where it was previously impossible.)

Commodities markets tend to over-react before they balance out.

Or maybe it is all just a few people playing global chess over some imagined strange excuses that make everything happen?
People look for complex excuses instead of looking at simple data.

The conspiracy is the market conspiring to find the clearing price.
Today Saudi announced it is reducing deliveries, the fracking is not economical at prices below the $60 barrels. 
At this price, new demand will arise and price will rise, then Saudi may increase delivery (or not).

Maybe many people assume that governments control everything always.  Does it feel helpless to live in such a world?

People were less shocked when prices soared for the last few years then when they fall.  They went up from war and rumors of war which are certainly political.  (Or a failure of politics)  But now it is a conspiracy when they come down?  Maybe there is a conspiracy for peace?

For once, non oil producing companies will be supported by moderate crude oil prices.
Until now, oil producing countries exhibited typical oligopolistic behaviour - jacking up prices and constraining production.
Now the tables have been turned. There are some countries whose break even price is higher than the current market price. These countries will have to curtail production.

This is def happening...
Obama is steadily playing the Long Game with Russia...
And the Saudis helped out by flooding the market with oil (on top of an existing glut).

This also caused Alternative Energy companies to collapse in value (see PBW).

And since energy issues are 20% of the Bond Market...
You will soon see a wave of high yield defaults that could cascade and become destabilizing.

Could be the start of what Central Banks feared while printing trillions... unmanagable DEFLATION.

"Peak oil" theory is unproven, and some parts of the world still have a truly Huge amount of oil in the ground.
We are not running out of oil in the near future.

Oil prices are falling because oil producing nations are not cutting supply. Supply is rising with demand remaining stagnant, and even dropping off some.

This has nothing to do with QE. Can you substantiate that claim with any evidence? Is there any hard numerical data to support your claim?

oil demand is increasing, just in india and china alone are around atleast 1 billion people who cant wait to live like we do in the western hemisphere.

higher oil prices will push people to invent and invest in alternate technologies, lower prices can and probaly will therefore push the demand.

As long as OIL is denominated in USD, the oil price is determined by the OPEC countries as well as the USG!!!
Why it is crashing so badly, and more importantly why now?
Because the USG was the one inflating the price at will, in the last decades, as a way to 'export inflation' (also, sometimes, for geopolitical reasons).
And now this machine is slowing down, the clunks fading away, the masters getting sloppy and the mastered getting smarter.

Now how does the "peak oil" theory fit in here? Lowering prices to push up the demand makes no sense at all...

This is the opposite of the truth.  Demand is not falling, supply is increased.  Demand ALSO is increased, but the balance is shifted to supply.
This depresses the price, which then INCREASES demand (because some uses of the oil are suddenly profitable now).
When demand at the lower price increases, price will rise, and there will be more consumption.

Econ 101 anyone?





You should expect increased use, and increased demand.  New car sales will rise also.  Airlines will do well.

If oil price is going down, that means that someone start to deliver oil in a market in big quantity or demand go down for oil. But just think - how can oil demand go down ? May be big wholasalers have some oil reserves, and then oil price for limited time go down and then go up.