FriendlyFire
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Trump feels the heat on rising gas prices, demands oil cartel do more to 'reduce pricing now'
- Thread starter FriendlyFire
- Start date
Also Trump cannot whip the oil price really down.
The political makeability of oil prices has become lower and lower over the past decades.
The drive from the West (and for example China, SE Asia) for relatively low and stable oil price is high because shortage & high price affect the holy shrine of GDP growth.
(The higher gasoline price in the US a domestic political US issue ofc, whereby noted that $3 per gallon is still low compared to for example European prices of ~6 $ per gallon (1.30 Euro per litre))
The issue with oil is that the production cost are high in many of the newer oil fields, and more so with shale oil. Much higher than in for example the Middle East.
And we need still more and more oil for many years to come with so many lesser developed economies growing in size and prosperity.
And importantly: the bottom oil price goes by marginal pricing !
If relatively cheaper produced oil can deliver 95% of the demand, the production cost of the last 5% will determine the bottom price for all the oil.
Just some figures how little room Trump has, the world has, to encourage lower oil pricing.
Oil price was around $100 between the crisis and end 2014, was arounf $50 until a year ago and grew to over $70 recently.
Rough oil production cost:
Saudi Arabia: $10
Other Middle East: $20
Other locations: $30-$40
Shale oil (US): $40-$90 (meaning that too many shale oil sources are sitting idle at an oil price of $50, and are only switched on and/or developed at higher prices, $60 more likely to be an effective price to secure enough volumes)
So you can only increase the supply & decrease the selling price of oil, as long as the cost effective sources can cover the demand.
Saudi Arabia most easily put under pressure because revenue almost equals profit (besides the geopolitical buttons).
But on the short term Saudi Arabia cannot increase her production to cover everything. A new harbor being build should however deliver a substantial capacity increase because getting oil out of Saudi Arabia is the bottleneck there.
And there is ofc Venezuela, where oil production collapsed. Also because Venezuela squandered the oil profits in empty consumption, instead of using them to invest in their own country or in foreign securities, when the oil price was $100.
And ofc the US sanctions on Iran and Venezuela.
Refineries in the US also at max utilisation.
Will be interesting to see how Trump is going to handle that complex juggling act. A lot of balls in the air.
The political makeability of oil prices has become lower and lower over the past decades.
The drive from the West (and for example China, SE Asia) for relatively low and stable oil price is high because shortage & high price affect the holy shrine of GDP growth.
(The higher gasoline price in the US a domestic political US issue ofc, whereby noted that $3 per gallon is still low compared to for example European prices of ~6 $ per gallon (1.30 Euro per litre))
The issue with oil is that the production cost are high in many of the newer oil fields, and more so with shale oil. Much higher than in for example the Middle East.
And we need still more and more oil for many years to come with so many lesser developed economies growing in size and prosperity.
And importantly: the bottom oil price goes by marginal pricing !
If relatively cheaper produced oil can deliver 95% of the demand, the production cost of the last 5% will determine the bottom price for all the oil.
Just some figures how little room Trump has, the world has, to encourage lower oil pricing.
Oil price was around $100 between the crisis and end 2014, was arounf $50 until a year ago and grew to over $70 recently.
Rough oil production cost:
Saudi Arabia: $10
Other Middle East: $20
Other locations: $30-$40
Shale oil (US): $40-$90 (meaning that too many shale oil sources are sitting idle at an oil price of $50, and are only switched on and/or developed at higher prices, $60 more likely to be an effective price to secure enough volumes)
So you can only increase the supply & decrease the selling price of oil, as long as the cost effective sources can cover the demand.
Saudi Arabia most easily put under pressure because revenue almost equals profit (besides the geopolitical buttons).
But on the short term Saudi Arabia cannot increase her production to cover everything. A new harbor being build should however deliver a substantial capacity increase because getting oil out of Saudi Arabia is the bottleneck there.
And there is ofc Venezuela, where oil production collapsed. Also because Venezuela squandered the oil profits in empty consumption, instead of using them to invest in their own country or in foreign securities, when the oil price was $100.
And ofc the US sanctions on Iran and Venezuela.
Refineries in the US also at max utilisation.
Will be interesting to see how Trump is going to handle that complex juggling act. A lot of balls in the air.
Last edited:
hobbsyoyo
Deity
- Joined
- Jul 13, 2012
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- 26,575
At this point, oil prices are almost as much in the hands of stateside frackers as it is in OPEC's hands, at least in the US. Everyone thought lower prices would wipe out the frackers as their technology re-opened marginal oil and gas fields and was expensive to implement. Instead they have proven pretty resilient to the low costs as once that technology and methodology was learned it spread like wildfire and these operators have managed to hang on and continue pressuring OPEC's position in the US domestic market.
Of course there has been a major (and mainly hidden) cost to the environment for fracking that society is paying but that's a separate issue.
Of course there has been a major (and mainly hidden) cost to the environment for fracking that society is paying but that's a separate issue.
Hygro
soundcloud.com/hygro/
This is not a model.
Oerdin
Deity
Trump caused the recent price run up when he outlawed buying Iranian crude. That hurt US consumers and really only helped Russia and western oil companies (who are two main groups Trump aims to please).
Hygro
soundcloud.com/hygro/
I was wondering why I saw gas hit $4.45 a week ago...
sophie
Break My Heart
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