Who is selling for $25 a barrel and why would they?
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2020 Apr 2, 8:39am 2,519 views 31 comments
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Why can't they leave it in the ground....why isn't it already sold under contract for a set price?
Because when you run out of room to store the Gasoline, a byproduct of refining Oil. Gasoline isn't something you convert a drum Oil into. It's just one of the substances made from the refining process. We have Gasoline Combustion engines all due to this inconvenience. J. D Rockefeller went to Henry Ford and told him, that he has a problem with a volatile substance, that doesn't have much industrial use. He didn't want to just burn it and waste it, and dumping it was too toxic.
If not for that problem Rockefeller was having, cars would be Steam, Wood Burning, and Electric today.
When the Gasoline Storage is topped off, all refinement stops.
So you see it is connected.
The Value of Crude Oil is not in the commodity itself, it's in the value it creates by being the life giving blood to modern humanity.
It needs to be under $50 a barrel, and transportation needs to be cheap, so that all of the other things Oil contributes to, can be realized.
When Gas it expensive to consume, people stop driving, and the production of Oil stops.
If china made a deal with the Saudis for example or any major producer for that matter, to buy 2 million barrels a day for $50 a barrel and now china's consumption is way down and they have no place to store it..........what happens next.....does china default on their contracts? Does china try to resell its surplus? Does china keep paying the saudis and beg them to deliver the oil at a later date?
No, that doesn't work for several reasons.
1. As a producer, why in the world would you lock yourself into a commitment to produce something at a loss in the future?
2. Why would the businesses that use oil lock themselves into a price that is still likely to fall? And for the bulls out there, the fact that people aren't locking in low prices for the long term indicates where the major players' views of future growth and demand lie.
Oil prices are largely determined by those types of contracts. It is funny, when prices are high and threatening to go higher is when airlines and other large players try to lock in prices. Oil is one of those funny things that sometimes seems to defy economic theory, because of its inelastic demand nature, its high cost to pump out of the ground with all of the infrastructure and financial instruments needed. And what I mean by that is the answer to the post, which is when people are in the oil business, you can't just stop producing it. All of that overhead still continues, so the dilemma is produce for less money, or don't produce and let your competitor fill the market at a higher profit margin.
That's why consortiums and cartels are the only ways to keep profits stable in commodities.
Don't you mean the moon?
That works ;) Fine with me
And when a Windfall Profits Tax was levied on the oil companies in the late 70's because of the "obscene" profits they were making at people's expense. Never mind that over the long run the oil industry is a huge crap shoot as to whether or not you're going to drill a producer even when all the indications seem to be favorable geologically. That tax lasted until August, 1988, well into the collapse of oil prices, so obviously there were no windfall profits to tax anymore and was repealed by Reagan. It would have only seemed fair if some of those taxes could have been recycled back to struggling firms in the late 80's, but it was perfectly acceptable for oil workers to loose their jobs wholesale.
I did not know about that. Very interesting. I'll look into it further.
There's ten times the amount of cars on the road today than there was at the time this thread was started.
Also OIl production has been stopped for over a month now.
Also $32 is still mighty low. Don't forget the idea price the peak Oil cheerleaders would like to see it as is well over $75 a barrel and not a penny less.
There's a perfectly good reason why even Blue states allowed people to drive all over hell if they wanted to. But they couldn't stop at the beach, parks, and other usual destinations to enjoy them. The Liberals were welcoming any and all wasted fruitless trips, to consume as much gas as you could. While not letting them get out of the car.
Seems to me if people are locked down and not supposed to go anywhere other than the store. Then cops would have been pulling over people for being out after curfew.
Broward had a 10, then 11 and even 12 oclock curfew. My band mates came over and we played music until 1 or 2 oclock in the morning. They said they passed lots of cops and other cars out on the road, nobody got pulled over.
What percentage of the population works at home now and no longer drive into work ? How many miles did they commute by car each day ?
I would say if 1/2 the white collar working population will work from home now that it will reduce gas demand by at least 25% from its peak consumption level.
From what I've read, US oil drillers need at least $45 a barrel for West Texas Intermediate in order to break even.
Ah it wont matter much as long as gas is cheap, people are going to make more frivolous trips they would put off otherwise.
More frivolous trips, more domestic spending on other goods.
When people are taxed by over paying for gas, they drive less, and spend less, less GDP growth.
Besides shipping and teenagers, who really cares about the price of gas though? Is it really that big a part of someone's monthly budget to make ends meet? If it is, maybe stop the Starbucks in the morning, eating out for lunch, clothing, etc. Even with a shitty milage vehicle, gas during the highest prices shouldn't be much more than $300/mo for one vehicle. Most people in the last year are probably $100/mo. Are people really that broke where $100-$300 is a big deal?
That's really disconnected. I had a buddy that was working a call center job for Mercedes, he had to drive from Ft. Lauderdale all the way up to West Palm Beach a 45 minute ride each way.
$300 - Gas
$400 - Car Payment
$200 - Insurance Payment.
People are out $900 a month just for transportation. Car and Insurance payments probably got so out of hand, because sitting at the board meetings discussing how boost profits.
Probably thought the same as you. "Well if they can't afford $1200 a month just to drive to the store, then Fuck 'em! I mean do we really want these people driving around being a menace to society? Amerite!?!?! Amerite..."(Left hanging with Hi5's all around the table.)
He finally had to quit, because more than a 1/2 of what he made went to his car, and the train was $20 a day, $10 each way.
$200/mo for an adult over the age of 25 is kind of high for insurance. My wife and I are $1,600/yr with full collision coverage and I think $500 deductible. Might be higher on the deductible, but we save a lot monthly and haven't had accidents, so deductible is a moot point and we have cash to cover it. That's like $66/mo/vehicle. Your buddy is getting fleeced there. Bigly.
$400 for a car payment is also nuts. Get a different car. Learn a new skill and fix your own car. We haven't had a car payment in two years and no major auto repairs with 2 cars. Unless you're doing sales and customers are going to see your car, getting an expensive car is pure stupidity. It's A to B and that's it. A call center job employee doesn't need or should want a nice car. It gets you nothing in return.
$300/mo for gas is also high, unless again, you bought a stupid car for the circumstances like an F-250, Suburban or other gas guzzler. Gas for the drive you mention would cost me $8/day in my car. Get a Prius or similar and it's even lower. Should be closer to $160-$200/mo even with high gas prices of say $3.50/gal.
I'm going to be blunt, your buddy is likely an idiot for dropping $900/mo on a vehicle. He's doing it wrong and is likely a status thing for him. Basically if you're in over $500/mo/vehicle, you're likely doing it wrong or you have the $$$$ to blow on it. Which is fine if people want to blow cash on a car, but it's likely the expense causing most Americans to be broke and most don't understand that.
I agree as far as that since it is a matter of disposable income and cost to travel (ie.., gas prices).
Lower gas prices can encourage more car traveling.
It goes by credit score as well, my friends who don't have a good Credit Score or make good money, all have higher insurance rates than I do.
They pay about 600 every 6 months. $200 a month. They have to pay it in three monthly installments. While they don't pay $200 every month. the months, they have to they may as well.