Oil Continues Free-fall

[Mean Green 93-98]

I'm a firm believer that some of this ridiculousness was a numbing tactic pushed along by oil speculators. I think the logic was "if we can drive the prices to an average of about $4 a gallon, then $3.25 starts to sound like a bargain". More long-term profit for all.

If oil speculators pushed the profits up by taking long positions in futures, then they killed themselves by holding long positions when the price went back down. You can't make a profit doing that.

[UNTflyer]

I kinda disagree. Speculation serves a purpose. It allows industries heavily dependant on oil, like airlines, to hedge against future price increases. Speculation gives the rest of the world an indication of which way the market is heading.

Also, the speculation market plays out mostly in the London ICE. Really not much we can do about it. The good thing about speculation is that while many become rich, just as many will ge burned when the tide turns.

[BeanCounterGrad'03]

Well, it's a long ass drive to Manhatten, Kansas, so I welcome it. Who's going with me?

Rick

Won't be going WITH you as we are coming from a different direction, but my wife and I (and possibly a coworker friend who's a Kstate fan...BOOOOO!) will be making the 7 hour drive.

See you there!

Yay football!

[SCREAMING EAGLE-66]

I'm a firm believer that some of this ridiculousness was a numbing tactic pushed along by oil speculators. I think the logic was "if we can drive the prices to an average of about $4 a gallon, then $3.25 starts to sound like a bargain". More long-term profit for all.

As much as I would love to blame the Bush Administration entirely for the price of crude...I just can't put it all on them. Congress over the last 20 years has loosened the rules on speculation to the detriment of the country...allowing the rich to get richer at the expense of the average, everyday American. Rampant speculation coupled with some of the mess this administration has gotten us into is what is killing this country, economically.

Do something about it...

---No American politician or political party is to blame.. It is all about increased use worldwide, especially Asia. As for the situation of us not building refineries or drill much during the 90's.... of course there wasn't any. Oil was $13 a barrel and sometimes less. They were not even making enough money to repair refineries or to maintain low producing wells. They were just shut down or closed. We weren't hearing complaints when gasoline was about 80-90 cents (mid 90's) and a lot of the price was state and federal tax used to build and maintain highways. Check the price of oil stock and you will find the were very cheap and not a lot of profits. No politician was the blame for that either... oil is an international commodity but we are are big user but our percentage is shrinking due to international increases.

--20 Years ago oil companies were hurting and merging (Gulf is gone, Exxon-Mobile is merger, Texaco has been sold off, many more). When the wind-fall profit tax was eliminated and then called a tax-cut... no one was paying it anyway...oil prices were too low for it to "kick in". It was as useless as a tax on buggy whips.

Edited August 9, 2008 by SCREAMING EAGLE-66

[SCREAMING EAGLE-66]

How out of touch is Barack Obama? He's so out of touch that he suggested that if all Americans inflated their tires properly and took their cars for regular tune-ups, they could save as much oil as new offshore drilling would produce. Gleeful Republicans have made this their daily talking point; Rush Limbaugh is having a field day; and the Republican National Committee is sending tire gauges labeled "Barack Obama's Energy Plan" to Washington reporters.

But who's really out of touch? The Bush Administration estimates that expanded offshore drilling could increase oil production by 200,000 bbl. per day by 2030. We use about 20 million bbl. per day, so that would meet about 1% of our demand two decades from now. Meanwhile, efficiency experts say that keeping tires inflated can improve gas mileage 3%, and regular maintenance can add another 4%. Many drivers already follow their advice, but if everyone did, we could immediately reduce demand several percentage points. In other words: Obama is right.

http://www.time.com/time/politics/article/...00.html?cnn=yes

--- Most people think more offshore will help greatly... that is nuts... it will help slightly .....eventually. If no one was drilling in the Gulf I would just leave it alone for future use. But since foreign companies are drilling there then that changes things. Of course if you happen to change your mind as conditions change then you are known as a flip-flopper...... by some..... LOL... Maybe QBs should never change the play at the line of scrimmage.... if that is the case P.Manning is the biggest flip-flopper in the history of the NFL....

[Green Gas]

How out of touch is Barack Obama? He's so out of touch that he suggested that if all Americans inflated their tires properly and took their cars for regular tune-ups, they could save as much oil as new offshore drilling would produce. Gleeful Republicans have made this their daily talking point; Rush Limbaugh is having a field day; and the Republican National Committee is sending tire gauges labeled "Barack Obama's Energy Plan" to Washington reporters.

But who's really out of touch? The Bush Administration estimates that expanded offshore drilling could increase oil production by 200,000 bbl. per day by 2030. We use about 20 million bbl. per day, so that would meet about 1% of our demand two decades from now. Meanwhile, efficiency experts say that keeping tires inflated can improve gas mileage 3%, and regular maintenance can add another 4%. Many drivers already follow their advice, but if everyone did, we could immediately reduce demand several percentage points. In other words: Obama is right.

http://www.time.com/time/politics/article/...00.html?cnn=yes

What a sad and bias article, full of untruths and half truths.

Most, if not all modern cars, 20 years old or newer have on-board computers that self correct and keep the car at or near optimal conditions. Most cars now a days you can't tune, spark plugs are good from 30,000-60,000 miles now. Air cleaners are the biggest item you can work on but even then if you air filter is not just completely clogged the computer will adjust the mass air system.

New tires are much better in the last twenty years, they have become more puncture resistant, and self-sealing. They also seal better to the rims so tires maintain their air pressure much longer then ever before. The plan that Obama talks about is silly because it is 30-40 years old developed in the day of carburetors and no on board computers during the Suadi imbargo and is not relevant to modern cars. Next time you talk to a good modern car mechanic just ask.

Edited August 10, 2008 by Green Gas

[FirefightnRick]

PELOSI'S BIG-WIND BOONDOOGLE

Rick

[MeanGreenBuzz]

PELOSI'S BIG-WIND BOONDOOGLE

Rick

Gotta love the Democratic leadership today. Al Gore is making tons championing Global warming, and not just from his speeches and now this from Pelosi (of course we know about her, the woman really does not deserve to be in any position of power yet the fine people of California keep reelecting her and the Democrats made her speaker of the house as a gimick move). I wonder if the Democratic party can hold together at this rate if the best they can offer after 8 years of a Republican in office is Barak Obama and Hillary Clinton. Is that the 2 best people in the whole of the party? Sad... just sad.

More on topic though, I have seen a lot less conservative estimates of the production that would come out of the Gulf not to mention MANY of the other countries of the world already drill there stealing the oil the Democratic party and our eco-morons have been blocking us from drilling for. China is one of the countries already reaping the benefits of oil that should be rightfully ours.

[BeanCounterGrad'03]

PELOSI'S BIG-WIND BOONDOOGLE

Rick

This is not a surprise (to me at least). How is this different from most politicians today? Need we start researching "drill here, drill now" advocates and how much they've received from oil companies? (I'm not a huge fan of Pelosi and how she gets things done, either.)

Personally, I'd like to see all lobbyist greatly limited (if not banned) in their access to public officials. While we're at it, lets make it illegal for an elected official to receive any income from corporate, special interest, or PAC groups (maybe make it illegal for any business a politician owns to receive monies from these organizations while they hold office as well). I think it would help weed out those that are holding public office for reasons other than serving their country and making it better.

Would this work or am I not factoring in something? Would it be an infringement on freedom to do business or is this a right we should expect our elected officials to sacrifice if they want to truely make our country better?

Edited August 14, 2008 by BeanCounterGrad'03

[Censored by Laurie]

It happened again...

I'm calling for the immediate elimination...wait...sorry wrong thread.

Hehe...the New York Post...what a source.

[UNTflyer]

Personally, I'd like to see all lobbyist greatly limited (if not banned) in their access to public officials.

I disagree. lobby groups is what gives the individual a voice in Washington. There are "big oil" lobbyists and "big wind" lobbyists... but there is also the AARP, the National Federation of Independent Businesses, the National Education Association and the American Healthcare Association.

While we're at it, lets make it illegal for an elected official to receive any income from corporate, special interest, or PAC groups

. We can't make it illegal to own stock in companies. We just need better disclosure, and the Internet has helped in a huge way to discover a politicians' interests. Another thing we need... voters who give a crap about these things.

or is this a right we should expect our elected officials to sacrifice if they want to truely make our country better?

Wow. I always believed the People made the country better, not the politicians. Somewhere along the way, the People forgot that we wield the power, not the Reids, Pelosis and Bushes.

[GreenBat]

Somewhere along the way, the People forgot that we wield the power, not the Reids, Pelosis and Bushes.

AMEN!!!!

[HoustonEagle]

Right... and that's why China and Russia are drilling in our backyard.

that's Democratic Talking point number 345. I'd like to see your sources source. ...posting an opinion piece as fact is sorta funny, but I digress.

The myth is that the U.S. only has a small percentage (from 2-6%) of the world’s oil supplies, and since oil is a global commodity, our increased production won’t affect prices much if at all.

The facts remain that this estimate of 2-6% of the world’s oil supplies does not hold up to scrutiny.

In oil shale alone, found in the Green River Formation in parts of Utah, Colorado, and Wyoming, the U.S. has approximately 800 billion barrels of recoverable oil, or over three times the proven reserves of Saudi Arabia. This comes from a midpoint estimate in a 2005 RAND study done at the request of the Department of Energy, and a higher end estimate puts the number at over one trillion barrels.

Furthermore, there are vast areas of the United States and its outer continental shelf where it is illegal to even look for oil. Exploration routinely yields additional resources far larger than initial estimates.

Resources from oil shale and additional oil resources that are likely to be discovered are not included in the estimates of American oil supplies.

You seem to have forgot a little thing like cost of production. There are hydrocarbons to be burned in so many forms and places. How much does it cost to get them is the important thing to keep in mind.

[HoustonEagle]

The problem is not the pumping of oil and gas.....Texas, along with other states, have idle rigs already in place to pump. The problem is with refining the oil and gas. The United States needs to double its oil and gas refineries. About three weeks ago (either South or North Dakota) passed legislation to build one refinery. If all our refineries can produce "X" amount of product and we extract "Y" then that is normal. If we extract Y+1 or Y+25 of product then we still only produce "X."

For anyone who believes it will take 7-10 years for the United States to retrieve the crude then they have been sniffing too much H2S.

Case in point: How long did it take companies like Chesepeak and WXO around the DFW area to set up and drill????not 10 friggin' years! There are homeowners in the DFW area already receiving their residual checks from these companies. Rigs are going up all over the Denton, Wise, Tarrant, Dallas and Johnson counties.....and it aint takin' no friggin' 10 years for 'em to start pumpin'.

Heir Goebbles once said, and I paraphrase, if you tell a lie long enough people will believe it (please, no nazi pictures).

Chesapeak has a slick advertisement showing how oil and gas, now, can be extracted by using ultra sonic technology to retrieve product that could not have been extracted, only, a few years ago.

Refineries don't take 7-10 years to build.....who the heck believes that? American ingenuity and know how can get these structues built in a year or so. Not 10!!

I too am voting independent 3rd party for president (again), but, I do like both of Texas' U.S. Senators (because they do vote for the best interest of the country) and I do like my represenative Kay Granger....who also votes the way I want her to vote, at least 90% of the time.

If Pelosi and the rest of the Democrats refuse to allow an up and down vote on drilling then the US will continue to ship valuable monitary resources overseas and will, in my humble estimation, bankrupt the country enough to make the US subserviant to the whims of other oil producing countries.

As far as the national reserves.....that is for the US military emergency use. By tapping into that will NOT help our current short term needs and will only put our armed forces at danger of running out of gas. Just ask the Germans how valuable gas was in 1944 and 1945. They lost more tanks from fuel shortages than actually lost in battle. (again, please no nazi pictures). I only say this because we have to learn from history & if we don't then we will fall prey to the same mistakes.

Evidentally you do not keep track of refining margins. Nor have you looked at the profitablility of refiners such as Western or Sunco or Valero. The Price spike this year has killed refiners and gives them little reason or money for building new facilities. Its not all about conspiracies or evil liberals people!

[BeanCounterGrad'03]

I disagree. lobby groups is what gives the individual a voice in Washington. There are "big oil" lobbyists and "big wind" lobbyists... but there is also the AARP, the National Federation of Independent Businesses, the National Education Association and the American Healthcare Association.

I thought voting gives the individual a voice. Maybe its the way its portrayed in the media, but it seems that business interests have overshadowed individual interests for the last few decades.

We can't make it illegal to own stock in companies. We just need better disclosure, and the Internet has helped in a huge way to discover a politicians' interests. Another thing we need... voters who give a crap about these things.

I wasn't refering to investment income in my original post (wasn't even thinking of investments as I was writing it). Being a former auditor for a public accounting firm, I can tell you that first statement of this response is not really true cause its been done for many years. As you may know, there is regulation on what an external auditor (heavier regulation on managers and partners) can hold investments in.

Maybe I'm comparing apples and oranges on this point, but why not have some of these same types of restrictions for public officials. I do agree with you on the better disclosure and voter giving crap points.

Wow. I always believed the People made the country better, not the politicians. Somewhere along the way, the People forgot that we wield the power, not the Reids, Pelosis and Bushes.

I think you're twisting the meaning of my words a bit. Of course its the People that make this country better, but as representatives of the people, we, in essence, transfer this power to our elected officials that are suppose to work for the People to make the country better. I agree with the second half of the statement but would also argue that our representatives have forgotten that ALL the people hold the power, not just the ones with deep pockets.

[HoustonEagle]

I kinda disagree. Speculation serves a purpose. It allows industries heavily dependant on oil, like airlines, to hedge against future price increases. Speculation gives the rest of the world an indication of which way the market is heading.

Also, the speculation market plays out mostly in the London ICE. Really not much we can do about it. The good thing about speculation is that while many become rich, just as many will ge burned when the tide turns.

I agree with first point and could certainly expand on it but why repeat myself.

As for ICE that is a moot point. It is an exchange like several others. NYMEX is still the king of commodities.

[DeepGreen]

At 10:53AM, Friday, oil was down another $-3.48 a barrel. Thank you George Bush!

[meangreenacct]

At 10:53AM, Friday, oil was down another $-3.48 a barrel. Thank you George Bush!

So since George Bush was President while the price has gone down you give him credit, then is it ok for me to blame him since he was President when it increased so much?

[DeepGreen]

Evidentally you do not keep track of refining margins. Nor have you looked at the profitablility of refiners such as Western or Sunco or Valero. The Price spike this year has killed refiners and gives them little reason or money for building new facilities. Its not all about conspiracies or evil liberals people!

What?? HoustonEagle, you're only 100 miles from Beaumont-Port Arthur, right? Do you realize that this area is undergoing the largest industrial boom since Spindletop? That's right! Shell/Motiva has started their $7 billion dollar expansion project in Port Arthur; Sunoco Terminals just announced a $50 million expansion to handle the Shell/Motiva expansion; just this week, Valero in Port Arthur broke ground on a new $2.2 billion dollar cracker unit; Total Refinery-Port Arthur will begin a $2 billion+ expansion at their refinery. And the story is, that when the $7 billion Port Arthur expansion is completed in five years, a duplicate expansion will start up at Shell/Motiva in Convent, La.

I'm not a proponent of high gasoline prices. But these refineries have been taped and patched up for too many years. The oil companies are making money and are now willing to spend it on expansion and repairs. Are the obsene profits the reason? That's my "off the cuff" theory. I believe the price of oil is directly tied to the oil companies making these huge profits so that their refineries can be build/repaired, at the same time satisfying the wall street people and the stock/bond investors.

Edited August 15, 2008 by DeepGreen

[HoustonEagle]

What?? HoustonEagle, you're only 100 miles from Beaumont-Port Arthur, right? Do you realize that this area is undergoing the largest industrial boom since Spindletop? That's right! Shell/Motiva has started their $7 billion dollar expansion project in Port Arthur; Sunoco Terminals just announced a $50 million expansion to handle the Shell/Motiva expansion; just this week, Valero in Port Arthur broke ground on a new $2.2 billion dollar cracker unit; Total Refinery-Port Arthur will begin a $2 billion+ expansion at their refinery. And the story is, that when the $7 billion Port Arthur expansion is completed in five years, a duplicate expansion will start up at Shell/Motiva in Convent, La.

I'm not a proponent of high gasoline prices. But these refineries have been taped and patched up for too many years. The oil companies are making money and are now willing to spend it on expansion and repairs. Are the obsene profits the reason? That's my "off the cuff" theory. I believe the price of oil is directly tied to the oil companies making these huge profits so that their refineries can be build/repaired, at the same time satisfying the wall street people and the stock/bond investors.

Oh I know quite well what is happening in my own back yard. Energy trading has kept me employed for over 11 years now and I am thankful to be a part of the boom and this great city. I just find your reasoning behind the need for more refiners to be ill-informed. Let me first say that yes we need new refinery capacity. But we need it for two reasons. One for safety, our refineries are old and unsafe. Two, to refine sour crude which is the majority of all new supplies coming on-line. Still, that will not solve high gas prices. Refining margins have been squeezed tight this year and refiners are hurting. The big conglomerates like Conoco for instance are fine since they have oil and gas production to fill the coffers. Many refiners are one trick ponies though and can only rely on refining margins to ensure profitability. Over the last 6-8 years refining margins have been great due to demand for product exceeding the cost of their input (crude) creating widening crack spreads and profits were solid. Due to these strong years many projects that have been planned over this time are indeed being built. Nevertheless it will not have a great effect on the price you pay at the pump (yes sour crude refining will help) Demand for crude products is falling due to high prices. (love you economics 101!) This slack in demand is keeping refinery utilization rates around 85% or so during this peak gasoline season. So build all the oil refiners you want but you will just lower the utilization rates and further deteriorate refining margins creating further losses and little effect on the price at the pump. You need lower crude prices right now. End of story.

Here is some data you may find interesting:

EIA refinery data

Valero one year chart

Frontier one year chart

Western one year chart

Edited August 18, 2008 by HoustonEagle

[meangreenacct]

Oh I know quite well what is happening in my own back yard. Energy trading has kept me employed for over 11 years now and I am thankful to be a part of the boom and this great city. I just find your reasoning behind the need for more refiners to be ill-informed. Let me first say that yes we need new refinery capacity. But we need it for two reasons. One for safety, our refineries are old and unsafe. Two, to refine sour crude which is the majority of all new supplies coming on-line. Still, that will not solve high gas prices. Refining margins have been squeezed tight this year and refiners are hurting. The big conglomerates like Conoco for instance are fine since they have oil and gas production to fill the coffers. Many refiners are one trick ponies though and can only rely on refining margins to ensure profitability. Over the last 6-8 years refining margins have been great due to demand for product exceeding the cost of their input (crude) creating widening crack spreads and profits were solid. Due to these strong years many projects that have been planned over this time are indeed being built. Nevertheless it will not have a great effect on the price you pay at the pump (yes sour crude refining will help) Demand for crude products is falling due to high prices. (love you economics 101!) This slack in demand is keeping refinery utilization rates around 85% or so during this peak gasoline season. So build all the oil refiners you want but you will just lower the utilization rates and further deteriorate refining margins creating further losses and little effect on the price at the pump. You need lower crude prices right now. End of story.

Here is some data you may find interesting:

EIA refinery data

Valero one year chart

Frontier one year chart

Western one year chart

That's one of the interesting things I've learned in my brief work I've had to do in oil/gas exploration as well as my co-workers work in the refining sector. A client of mine is doing extremely well in the exploration market - they find it, extract it, and sell it - therefore these high prices are great for them. Their stock price has ranged from $30-$60 higher then where they were a year ago (basically double or triple previous price). My good friend however has a client purely in the refining business. Their stock has lost almost $90 during the year and they have had cash flow problem due to high input costs. Clearly not in position to expand capacity!

So long story short, not everyone is making out like bandits. It's all well and good if you think "drill here, drill now" is a great policy. That won't do much good if we can't refine here, refine now as well.

[yyz28]

You seem to have forgot a little thing like cost of production. There are hydrocarbons to be burned in so many forms and places. How much does it cost to get them is the important thing to keep in mind.

Last estimate I heard is around $60 a barrel, which is way under what we're paying today for a barrel.

...at one time it wasn't a good choice as a barrel of oil was $20... but at $120, the $60 starts to look pretty reasonable.

[JesseMartin]

Talk about a need for alternative fuels...geez, I can get a Barrel O' Monkeys for like 5 bucks.

[GoMeanGreen1999]

No free-fall today, oil up $6 today.

[Guest GrayEagleOne]

Yep, thanks to Russia oil is up about $20 in the last few days. Congress could do something about it but you won't see them doing anything until January and then you won't see anything about oil drilling barring a miracle.