Oil falls again: Is the bubble bursting?

[paul8488]

I love how we're so addicted to oil that when it drops a penny a barrel we sigh a huge sigh of relief and go out and buy Hummers.

[44 mpg by 2010]

Originally Posted by ChevyRacing48

I'm an engineer at a very large multi national oil company IE. multi multi billion dollar net profits (not going to state which one) and there is somewhat of an oil shortage - just look at the new drilling stats. Also, the Saudi's don't have as much oil as they lead you on to believe and want the price of oil high to top of their slush funds as much as possible. This is where speculation helps them out - which they are no doubt probally behind. ...

I don't think oil needs to be this high, but I wouldn't bet on it going down. The more India and China get introduced to the western way of life, the more demand for oil there will be. Almost everything is derived from petroleum.

I agree!

I think the slip in pricing this week is mostly related to the approximately 2% reduction in US oil consumption and the "unexpected rapid rise in US stockpiles".

It makes one wonder what would happen to world oil price IF ... the Det3 announced an aggressive plan to put 10 to 20 million 50 mpg(US) combined average vehicles on the road annually starting in 2010.

Ford and GM/Vauxhall, alone, are already selling 70 or more machines in Europe rated between 42 and 58 mpg(US) [51 to 69 mpg(imperial)] combined cycle by VCA. By the way, a number of those are "midsized" machines and some are gasoline.
http://www.vcacarfueldata.org.uk/sea...lConSearch.asp

Do you think that would influence speculation?

One thing I did not know is that China only became a net importer of oil for the first time in May 2008. This will probably play "large" in future oil prices.

It seems to me the only solution for the US is eliminate dependence on foreign oil ... there are only two ways and both will be needed!

1) REDUCE DEMAND: lower fuel consumption vehicles ... lots of them ... BUT NOT ALL!

2) ALTERNATIVE/RENEWABLE FUEL SUPPLIES: non-food based bio fuels; petro recycling where possible; Syn-fuels: solar/wind/nuclear

3) Off Shore/Wild Life AREAS: hold oil in reserve for OUR great great grandkids

*** SAVE the US ... ONE GALLON ... at a TIME ***

[zabolots]

If you peruse the financial headlines you'll see a bunch of these "has the oil bubble popped?" and "has the stock market bottomed?" articles. Generally speaking, when so many people are calling for the top or bottom of an investment, it is not likely to occur. Tops/Bottoms generally happen when everybody assumes the current trend (up or down) will continue indefinitely.

Of course, oil isn't strictly an investment vehicle (though many see it that way currently) and it's vulnerable to many outside pricing influences as people here have noted.

[dindak]

Gas prices will come down just don't expect $2 / gallon.

I can see $100-110 / bbl again in the near future.

[ChevyRacing48]

There is crude, sweet synthetic crude and refined "pump gas". What inventory is going up because of the lower demand? Well that is refined pump gas, don't get that confused with crude. Crude inventories are declining at the fastest pace ever - this is the oil actually in the ground. There is a trickle down effect from a lower "pump gas" demand to sweet synthetic crude demand, therefore lowering the price as demand decreases. But these all come from the same supply, and that is crude oil from the earth.

The demand for "pump gas" has declined for numerous reasons, some of them being the poor economic situation in the US, the shift towards more fuel efficient vehicles and the fact that some people just simply can't afford to drive unless they absolutely have to.

As a result, the local gas station goes through less "pump gas" which consequently raises tankage levels at the refinery and even more in a trickle down effect therefore lowering the price because demand is lower.

However, this pump gas all comes from crude, in which inventories are declining rapidly.

The main questions are: Was the implied tight supply a result of the chance we are actually running out of crude, or was it because we just can't keep up with demand due to the emergence of China and India and the remaining crude investories are fine? Even further, was it a combination of both? Or how about the remaining crude inventories are fine and we do have the ability to easily meet demand and this talk of a tight supply is just a way to rapidly increase the price of oil meaning big profits for some?

The answers to these questions for an everyday citizen like me is anyone's guess, and depending on who I talk to, I get a variety of answers.

Some argue that speculators like to parallel it with the diamond industry - make it exclusive and therefore raise the price and cash in. Others want to believe there is lots left, we can easily meet demand and that we are getting ripped off and the price should be much lower while others believe we are simply, "running out".

What it actually is, well who knows really, like I said, we all hear different views and if someone knows, they aren't really saying.

All we can go by is stats, and there are a few things that really stand out. One, drilling is going down. Two, when was the last time you heard of a huge crude discovery? And three, why are some big oil companies buying up their own stock?

My opinion is supply is slowly but surely tightening and these supply options are becoming fewer and fewer. The talk of Alberta, Canada dirty oil is likely just election political posturing that will fade once the election is complete. Dirty oil is better than no oil.

A sign to prove my stance is TransCanada Corp. and ConocoPhillips announced it will be expanding its pipeline between Fort McMurray (Alberta, Canada) and refineries in Houston to basically double it's output. Does that sound like a country opposed to dirty oil?

Like I said, it is better than no oil. Also, there is no choice. As the conventional reserves dry up in Mexico and Venezuela, the oil has to come from somewhere and with no significant findings in years, this is the only choice.

Until there is either energy independence, fleet's with an average of 60mpg, bio-fuels, energy alternatives etc. which all take major cash, funding and time, we need oil to get to that point in time and it has to come from somewhere and what we have seen lately, supply choices are limited.

I believe oil will have a price adjustment correction (like what is happening now), maybe down to 100 to 110 dollars a barrell. What I don't believe is that it is going to 'bust' down much lower than that. I still wouldn't even be surprised to see 200 dollars a barrell some time in 2009.

[johnny smallblock]

Originally Posted by steinravnik

Oil falls again: Is the bubble bursting?

No. The bubble is not bursting. Unless by bursting you mean staying at $4 a gallon. How can the writer be so stupid as to suggest the bubble is busting if this line is in his own article:

Originally Posted by steinravnik

Some analysts said a nationwide average of $4 or even lower could be in the offing -- almost unthinkable in a summer when there has seemed to be no relief at the pump -- although they cautioned that there is no guarantee prices will stay low.

There you have it folks: $4 a gallon is now cheap for gas.

And what made everyone so excited? Well, after a 7 years of skyrocketing prices which left gas almost triple what it was in 2001 we get this great news:

Originally Posted by steinravnik

The average price of a gallon of regular gas fell about a penny for the day, to $4.105, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel prices dipped three-tenths of a cent to $4.842 a gallon.

3/10 of a cent drop in diesel. A 1 cent drop in gas. Wow. The sky is falling.

[TruckMan]

Originally Posted by johnny smallblock

No. The bubble is not bursting. Unless by bursting you mean staying at $4 a gallon. How can the writer be so stupid as to suggest the bubble is busting if this line is in his own article:


There you have it folks: $4 a gallon is now cheap for gas.

And what made everyone so excited? Well, after a 7 years of skyrocketing prices which left gas almost triple what it was in 2001 we get this great news:



3/10 of a cent drop in diesel. A 1 cent drop in gas. Wow. The sky is falling.

It usually takes 3 to 5 weeks to see a corresponding price drop at the pumps when crude prices drop. Manufacturers are still trying to sell the gas they paid $145 for before they start selling the $130.

And as far as crude oil reserves are concerned, there's a lot more out there than people think. It's just expensive (or illegal) to get to. But as prices continue to increase, these expensive fields will become more profitable. Look up the Bakken oil field in Montana. They think that field has more oil than all of Saudi Arabia. It's just been too cost-prohibitive in the past. With the high cost of crude oil today, those farmers are becoming overnight millionaires.

And I think Brazil just found another huge field right off their coastline that they claim might be the largest oil field in the world. Imagine what we might find if we were allowed to explore and drill off our own coasts.

And as far as claims of Saudi Arabia drying up, I think that's BS. I lived with my folks in SA for 11 years. My dad was a manager at one of the largest oil refineries in the world. The last project my dad oversaw was the tripling of capacity at that refinery because the Saudis were finding more and more oil. The Saudis are secretive about their reserves because speculation drives prices up, not because they're running out.

[johnny smallblock]

Originally Posted by TruckMan

And I think Brazil just found another huge field right off their coastline that they claim might be the largest oil field in the world. Imagine what we might find if we were allowed to explore and drill off our own coasts.

So because Brazil found oil off their coast we must have some off ours?

Maybe if we're really lucky we can find enough oil so prices come down, everyone starts buying SUVs again and we go back to destroying the planet in high gear. Yeah!

[ChevyRacing48]

Originally Posted by TruckMan

And as far as crude oil reserves are concerned, there's a lot more out there than people think. It's just expensive (or illegal) to get to.

I guess I should have said "proven" reserves are getting fewer and further in between. There may be crude supplies in numerous locations as you state, but how are they going to get at it? If it takes more energy to get it out, than it will actually produce, it is not a viable well. SAGD (steam assisted gravity drainage) technology is only so good right now. It will get better, but if you need to burn more fuel to make the steam to get at the oil than the energy the oil actually produces, is it really worth it?

Originally Posted by TruckMan

The last project my dad oversaw was the tripling of capacity at that refinery because the Saudis were finding more and more oil.

That or the demand increased so much that the price sky-rocketed and they wanted to profit as much as they could while they could.

Originally Posted by TruckMan

The Saudis are secretive about their reserves because speculation drives prices up, not because they're running out.

Like I said, the Saudis are probally behind the majority of the speculation and also like I said, wether their reserves are drying up is a matter of debate. No one really knows for sure, and it is a matter of opinion.

Weather they are drying up or not, it doesn't make economical sense to continue with the trend of insanely high energy prices which is crippling the economy, resulting is massive lay-offs and causes you to spend a third of your salary heating your home and fuelling your car to get to work.


As far as I am concerned, sitting here wondering and waiting for the oil bubble to burst is a waste of time. I don't believe oil will bust, I don't believe it will ever be as cheap as it was again and therefore we should be concentrating on alternatives, not sitting and waiting. It's just going to take time, money and yes, oil to get there. Until then, we need to ensure we have proven supplies of oil.

[TruckMan]

Originally Posted by johnny smallblock

So because Brazil found oil off their coast we must have some off ours?

Maybe if we're really lucky we can find enough oil so prices come down, everyone starts buying SUVs again and we go back to destroying the planet in high gear. Yeah!

Sorry, I forgot we're all supposed to return to the stone age and not consume any of the world's resources. What was I thinking? And if we do consume resources, it's better to buy it at a premium from foreign countries that suppress and torture their own people so that their government can continue to gouge the rest of the world. Nevermind all this talk of energy independence and supporting our economy and such.

And what's wrong with SUVs? I bet today's SUVs get better mileage and give off less pollutants than your Cutlass and Caprice. So, if you're so concerned about the planet, where's your hybrid? Hypocrite.

And what gives you the right to judge other people? If they want to buy a Hummer H2, then good for them. Last time I checked, this was a "free" country. Take your hypocritical preachings and read them yourself before you start judging other people.

[TruckMan]

Originally Posted by ChevyRacing48

I guess I should have said "proven" reserves are getting fewer and further in between. There may be crude supplies in numerous locations as you state, but how are they going to get at it? If it takes more energy to get it out, than it will actually produce, it is not a viable well. SAGD (steam assisted gravity drainage) technology is only so good right now. It will get better, but if you need to burn more fuel to make the steam to get at the oil than the energy the oil actually produces, is it really worth it?

That's why I was saying that as crude prices increase, these fields become more profitable to drill. Of course, if it costs $100 a barrell to drill, then nobody will touch it as long as the market has it for cheaper. But if crude hangs around $150 or more for a while, then $100 to drill doesn't seem so bad. And as soon as the newer technologies of excavation mature and improve, their prices will decrease, thereby making it even more profitable. Then more "unproven" reserves will become obtainable at lower prices.

This has been another side-effect of cheap oil from the Middle East. Little exploration has occurred in our hemisphere, and the technologies to drill have not matured significantly. It'll be interesting to see what new technologies oil companies come up with over the next 10 years now that it seems they'll never be able to buy oil at $20 a barrell again.

[member12]

Please drop to at least $100/bbl....I can live with $3.00/gallon.

That's the magic number to push fuel efficiency (in consumer's minds) and oil exploration in America.

$30/bbl would hurt our economy as much as $130/bbl.

[smith7629]

I've done some research and educated myself on the process to remove the oil from the "tar sands" in Canada and north US. Its absolutely harsh on the environment. A lot of those "tar sands" are sitting under forests and grasslands that would have to be removed. Afterwards, mining would take place, and then huge expanses (as in as far as you can see) of "tar ponds" would have to be made. Once the tar is removed (by water washing the sand) then you have huge expanses of sand, drifting...looks just like a desert. Ultimately the oil company would replant the forest, but that takes years. I can only imagine what the fresh water supply sources would be subjected to. There's got to be another way.
http://ostseis.anl.gov/index.cfm

[ChevyRacing48]

Originally Posted by TruckMan

That's why I was saying that as crude prices increase, these fields become more profitable to drill. Of course, if it costs $100 a barrell to drill, then nobody will touch it as long as the market has it for cheaper. But if crude hangs around $150 or more for a while, then $100 to drill doesn't seem so bad. And as soon as the newer technologies of excavation mature and improve, their prices will decrease, thereby making it even more profitable. Then more "unproven" reserves will become obtainable at lower prices.

This has been another side-effect of cheap oil from the Middle East. Little exploration has occurred in our hemisphere, and the technologies to drill have not matured significantly. It'll be interesting to see what new technologies oil companies come up with over the next 10 years now that it seems they'll never be able to buy oil at $20 a barrell again.

I'm interested on your opinion to the following:


If there is as much cheap and conventional oil as you say there is, than why would we need to come up with technology (which takes major cash by the way) to make getting at this "heavy crude" easier?

Of course if oil is around 150 bucks a barrell this becomes an attractive option for oil companies to make money. But why is the oil at 150 dollars a barrell to begin with? Is it purely speculative, or is it because the conventional and easy oil can no longer meet the demand?

To me, if companies are spending huge amounts of money in technology to get at hard to recover oil, there has to be a reason for it. I'm sure energy independance plays a role in it, but there is more to it than that.

In a supply and demand economy, it doesn't make any sense at all for an oil company to flood the market with oil, especially if it takes a large amount of technology and money to get at the oil. That right there tells me there has to be a reason for all the investment in heavy oil extraction.


Of course I could be all wrong............this is just how one guy see's it.

[motorman]

the democrats politicians want high oil prices because it will cause people to move back in to the run down democrat run cities so they do not have to drive to work. every democrat run city is in really bad shape financially and get people to move back there is the only thing that will save the cities because there is no tax base there now only slums and derelicts. the democrats hate the suburbs except for the rich one that live there. they are call limousine liberals, they have their chauffeur drive them into the city