whatever happened to 200/barrel oil?

[MrFun]

Originally posted by Japher
$1.56 here, I'm rushing out to buy a Hummer. It's so cheap that I sometimes spray gas all over the pump when I'm done, just for fun!

[Flubber]

Originally posted by Vanguard
We could still get $200 a barrel oil next year. The Treasury and the Fed may have just enough oomph left for one more commodity spike.

Longer term, it makes sense that oil has to go up well above the 50-60 range. There is far too much of the marginal potential production that requires prices in the 70s and 80s to be economic.


Recession and recession fears are leading to this downturn in oil prices but unless there is a fundamental long term change in consumption that survives the recession, the prices can and will go back up

[chequita guevara]

A lot of the price hike was speculation, but with the economy busting worldwide . . .

[TCO]

Long term contracts are in the 80 range. I wonder if you could construct some sort of arbitrage based on that much delta.

[DanS]

Folks outside the oil patch often forget that the business has been boom-bust from the first day of its existence. In my rather short lifetime there have been several severe, protracted busts. The bad times have overwhelmed the good times.

I'll admit that this last boom was much bigger than expected. All sorts of ill-considered notions about why this boom was different gained much more prevalence than we would wish.

[TCO]

I beleive that a LARGE component in oil pricing is the cartel, OPEC. To the extent that it functions well...prices go up...and the converse. Even, future expectations of how it will function affect the price. This is why the extreme volatility (our understanding of the geology is not as changeable as political factors). Thus, the apparently clear implication that the US WILL drill all over the East Coast if prices gets high, creates an expectation of future supply (or even the option of future supply) that has implications on OPECs ability to price, to enforce non-cheating, etc. This despite, the relatively small amounts...but because it is seen as the threat of production at the margin.

[DanS]

Before OPEC, the oil business was boom-bust. So I have a healthy dose of skepticism about OPEC's pricing power, although admittedly OPEC's weakness may be a result of the factors that you list. I noticed that there were significant non-OPEC finds as well.

At heart, I think the bubble burst because (1) demand contracted despite what was believed about price inelasticity of demand and (2) people woke up from the dream that we were running out of oil. There's so little to support this market from a fundamental viewpoint after these items have been set aside.

[TCO]

perhaps a lot of the boom/bust in the past is related to cartels as well. Remember what Rockefeller said to his competitors, "You're not my enemy. The customer is my enemy."

[DanS]

Before Rockefeller, before any cartels, the oil business was boom-bust. God decreed it on the 8th day.

One thing I know about oil is that there has always been more of it than people think. Saudi Arabia always has a tough time fighting off marginal producers because of this fact. Not three years ago everybody would have laughed if they were told that Brazil and Cuba will be oil powers in the future. Or that we would be having a scrum over arctic oil and that the scrum had some real consequence.

What Flubber says about a long-term price floor based upon the price needed by marginal producers makes a lot of sense to me, especially since the capital expenditures are so large and the lead-time so long. But it seems that he's also wrong, at least until we get into the very long term. There has never been a price floor that I have observed except the cost of production in Saudi Arabia. I don't know why this is.

[onodera]

Originally posted by notyoueither
I'm really quite upset about this business, by the way.

Word is some of the gold may have to be removed from the pavement to continue funding day centres for poodles in Montreal.

What? Why do you have gold-encrusted pavements in montreal?

[Asher]

Alberta

[TCO]

We want that.

[Dinner]

And the day centers for poodles.

[Barnabas]

Having a province named Alberta is like having a province named Gertrude.

[Asher]

Originally posted by Barnabas
Having a province named Alberta is like having a province named Gertrude.

It was named after one of Queen Victoria's daughters.