Gas prices stay low as Saudis try to "smoke out" US

[RiverLover]

Gas prices stay low as Saudis try to "smoke out" US
12/23/14

...Low oil prices and vast supply could result in gas prices continuing to decline and consumers having extra cash to power the economy. Saudi Arabia’s oil minister, Ali al-Naimi says he doesn’t see OPEC cutting production anytime soon, even if oil drops to $20 a barrel.

“The Saudis seem to be thinking, we’re basically trying to smoke out the American producers. See how low they can go,” says Newman.

Saudi Arabia, the world’s largest oil exporter also has one of the cheapest production costs. This makes it easier for the Saudis to ride out low prices and maintain market share. Newman says this may work against them: “What if the Saudis are saying we’re going to make a big market share play? It could backfire. Other producers could end up producing for cheaper and cheaper.” Lower costs could lead to volatility in the energy sector.

When oil first started its downward trend this year it was met with skepticism. “The markets freaked out for a while. Looked around and said what’s going to blow up? Nothing blew up right away. The longer this goes on the more likely a blow up becomes,” says Newman. If oil prices continue to fall in the New Year and beyond something is going to break. Where the disruption occurs will be the big question. It could be over-leveraged companies in the energy sector, or the banks lending to these businesses, or even oil exporting countries themselves.

http://finance.yahoo.com/news/gas-prices-break-record--opec-won-t-cut-production-173701314.html

[Horse with no Name]

1. What's going to break?

The insane profit margins at the top?

[RiverLover]

3. Fracking operations are incredibly $$$ and many smaller energy companies

are way over-leveraged at the start.

OPEC’s War on Fracking Is Good News for the Rest of Us
http://www.newyorker.com/news/john-cassidy/opecs-holiday-present-helps-everyone-except-frackers

[Horse with no Name]

6. I live in an area where there are a lot of people working on these pipelines

there is currently an internet meme going around that gas prices are destroying their livelihood and how unAmerican it is for oil prices to be this low. REALLY??

As someone who drives an exceedingly large amount (put 15k miles on a rental in 2 months doing my daily normal driving--yeah their eyes were large when I returned it, lol), high gas prices destroy my way of life as well.

The problem is, these guys are making tons of money, hand over fist. The women around here are sporting bumperstickers on their new cars that say stuff like "Living My life as a spoiled oilfield wife" and REALLY meaning that...and not saving a lick of that money for downtime.

This is becoming a classic fight to pit those that need low prices to survive against those that need high prices to work.

But I have to say, I am enjoying the (more than a few) extra bucks it is putting it in my pocket. I am taking a trip in a few days and will enjoy doing it for half as much.

[RiverLover]

7. That is so interesting.

This is becoming a classic fight to pit those that need low prices to survive against those that need high prices to work.

I hadn't thought of looking at it like that.

But it does clarify why this rethug governor had a problem talking about it at an energy conference. This is hilarious~

'I Hate That Oil's Dropping': Why Mississippi Governor Phil Bryant Wants High Oil Prices for Fracking

At the industry-sponsored convening, which I attended on behalf of DeSmogBlog, it was hard to tell the difference between industry lobbyists and regulators. The more money pledged by corporations, the more lobbyists invited into IOGCC's meeting.

Perhaps this is why Bryant framed his presentation around "where we are headed as an industry," even though officially a statesman and not an industrialist, before turning to his more stern remarks.

"I know it's a mixed blessing, but if you look at some of the pumps in Mississippi, gasoline is about $2.68 and people are amazed that it's below $3 per gallon," he said.

"And it's a good thing for industry, it's a good thing for truckers, it's a good thing for those who move goods and services and products across the waters and across the lands and we're excited about where that's headed."

Bryant then discussed the flip side of the "mixed blessing" coin.

"Of course the Tuscaloosa Marine Shale has a little problem with that, so as with most things in life, it's a give and take," Bryant stated. "It's very good at one point and it's helping a lot of people, but on the other side there's a part of me that goes, 'Darn! I hate that oil's dropping, I hate that it's going down.' I don't say that out-loud, but just to those in this room."

http://www.huffingtonpost.com/steve-horn/i-hate-that-oils-dropping_b_6223374.html

[aspirant]

13. Oil, what else does Saudi Arabia have?

If nobody wants to buy their oil, will the Saudi people go back to living in tents and herding camels?

How far are we away from $5000-10,000 basic EV's (not with airplane cockpits), to cater to the masses? Tesla's $80,000 models keeps the Saudi's in business, but a wise entrepreneur could exchange gas stations with battery stations. Wouldn't this be a great opportunity for unions to invest EV production?

The Saudi's see competition coming at them from every direction and they're going to get theirs NOW.

[MannyGoldstein]

2. Thank You, Saudi Arabia!

They my have stopped KXL.

[RiverLover]

4. Merry Christmas!!

[MannyGoldstein]

5. And to you!

(Just don't say that to our new BFFEs ib Saudi Arabia! )

[Hutzpa]

8. Why is Mr Newman looking for something to break?

maybe it's hard for him to accept that the Saudi's have finally woken up to the idea that their oil is providing resources for terrorist organization around the world, but also realizes that sticking it to Russia and Iran is much more important as they are finding out that these two country are the perpetrators of Middle East destabilization.

[Comrade Grumpy]

11. Russia and Iran are "the perpetrators of Middle East destabilization"?

I think that's pretty much backwards. Saudi money and Saudi religious ideology are the biggest perpetrators of destablilization in the Middle East.

Saudi exports jihad along with its oil.

[dawg]

9. And the fact that all this is threatening to collapse the Russian state?

Lucky co-incidence.

[True Blue Door]

10. This is a fascinating subject.

I (and most analysts I've seen who aren't employed by the fossil fuel industry) think the next ten years will be the last decade of oil dominance, and a lot of unprecedented market behavior will occur. The relationship between supply, demand, and anticipated future supply and demand becomes very complex.

We will see both radically low and radically high prices at different points as the industry cycles downward. It's unclear how the cartels will respond to sudden demand collapses, and how consumers would respond to shortages when supply suddenly shrinks. These periods wouldn't behave like those in the past because there will increasingly be viable alternatives.

Here's a fun example: A lot of consumers will likely be using the savings from low gas prices now to help fund the purchase of EVs. Morons will undoubtedly be buying SUVs, counterbalancing the effect, but then they would be instantly screwed the moment prices swing the other way.

[RiverLover]

12. Fascinating post.

Thanks.

That's alot to chew on.