Oil Prices...?

Question

What will be the impact on the price of gas when the oil fields in the former USSR go into full production?

Answer 1

OK my friends, let's discuss this slippery subject. I have been following and tracking oil prices and trading on oil (options, indexes for over 17 years). I think I can grasp the subject. Here we go:

1. Technically, USSR is now called Russia. Sorry, I'm picky about being accurate on this stuff.

2. It is not likely that Russia will go into "full production" on all their oil fields. Most of the oil in Russia has not been either (1) discovered, (2) is very hard to get to – deep, deep in the ground and in freezing/ frozen areas. Don't have time to name them.

3. Oil prices are driven by supply and demand, and various political and other events that impact open oil markets. It would not be wise for Russia or any oil producing country to dump oil on the open market in mass cause it would temporarily drive prices down, and subsequently lower gas prices. Hence, driving down oil prices means they would get less money from selling oil. From an economic standpoint, you want to limit the supply of oil on the open market to keep prices artificially high. This means you can produce less oil (lower drilling and refinery costs), and thus have more profit.

Extra tid bit on what is currently driving oil prices (10-18-2007).

Gas prices hit $90 barrel (bbl) in overnight trading. This may or may not hold.

If the issues in the mid east - Iraq (the obvious), Iran (nuclear development issue), Turkey (Parliament just voted to allow Turkey to launch an offensive in Iraq – link below, and a weak U.S. Dollar). These are current contributing factors to higher oil prices.

Next the two fastest growing countries in the world, China and India have a huge demand for oil. It’s not just the USA anymore. These and other factors continue to drive oil prices higher. Possibly, to over 100-120 bbl over the next 1-6 mo. in my current estimate. The high end range ($115-120 bbl) factors a disaster: War or attack on Iran (30% chance my current estimate); Turkey aggressively attacks Iraq, and oil pipelines are attacked (35% chance my current estimate), other unknown disaster.

So what does this mean to us?
If oil stays high - over $75 to $85 bbl. by next spring/ summer, we could be looking at $4 to $5 gal/gas in California. Other states you have lower gas prices except NY. You’re still prob looking at $3.20 to $3.60 gal is my current guestimate.

In 2006, oil prices hit about $60 or so per barrel (bbl) and during the same time gas prices hit as high as $3.75+ in California (CA). Oil is now about $90/bbl, so what is the logical conclusion of where gas prices SHOULD BE? Way higher huh? If gas in CA was as high as $3.75 at $60 bbl, then at say $100-120bbl could prices at the pump almost double? Remember, we in the US pay a lot less for gas the Europeans. No need to panic, but I am putting my 13 MPG SUV up for sale now.

What else can drive oil prices higher?
If the Federal Reserve (The FED) lowers rates again (as early as 10-31-2007 or as late as Dec 2007 – by another 50 basis points (bps) (that’s a 1/2%) - very possible – current 70% chance of ¼ point drop, 50% chance ½ point rate drop), that could also lead to higher oil prices.

Why would the FED do this? To bail out Citibank, B of A, and WAMU from their awful real estate loans. Citi and Wamu are in financial trouble from my perspective. Not going out of business, but may need a government (tax payer) bail out. Hope not, but the FED is likely to step in by lowering rates to help the banks.

I was arguing for lower rates ½ point by Dec 2007, which we got in Sept 2007, and up to 1.00% to 1.50% drop in rates to shore up the housing market within 12-18 months. I was arguing this for the last 2 years!

Now, I am thinking, as much as I would like to have a lower rate on a house, it may be bad for the economy right now. Lower US interest rates would be good for the stock market (normally), but could lead to Stagflation (inflation with a recession). Inflation in higher commodity prices (oil, wheat, metals, corn, even milk); and recession driven from lower housing prices, hence less consumer spending, hence slower economy. A big blow to the housing market means a greater blow to the economy.

Don’t worry; it will work itself out in 5-13 years. Average real estate market cycle in terms of home prices from peak to trough to peak etc, is about 13 years.

So how does lower U.S. interest rates effect oil prices?
Oil prices are quoted in U.S. dollars. Lower U.S. dollar = higher oil prices. Why? OPEC will cut production to boost oil prices. Purpose: Make up for getting fewer dollars selling oil in the open market. Like they need the money.

Just to p everyone off now.
The USA spends billions of tax payer money every year to protect many of these oil producing counties who (for the most part, hate us any way) just so they can sell us their oil. Basically, we offer them FREE protection on their oil fields and in the gulf areas so they can safely drill oil to sell to the USA and the rest of the world. Shouldn’t we be charging them for protecting their axx?

What could drive oil prices lower?
Easy, a U.S. recession. My current estimate – 55% chance. The higher odds include 75% of that 55% due to the housing recession (depression).

We’ll, that’s a bit more than I was going to write, but I hope this gives everyone some new insight and sources to look at.

Good luck!

Disclaimer: Some information contained herein was obtained from 3rd party sources and are believed to be reliable. However, we cannot guarantee their accuracy or completeness. Investing contains risk, and should be carefully evaluated for suitability. Opinions may change as market, economic, and other conditions change daily without notice. The information herein is not to be deemed a recommendation to buy or sell securities or other investments.

Russia Oil Facts
http://www.eia.doe.gov/emeu/cabs/Russia/Background.html

Iraq & Turkey Issue
http://www.nytimes.com/2007/10/18/world/europe/18turkey.html?_r=1&hp=&pagewanted=all&oref=slogin

WAMU Earrings
http://www.marketwatch.com/news/story/wash-mutual-falls-after-earnings/story.aspx?guid=%7BE46B3764-9277-4D5F-BFC3-9283C27B8621%7D

B of A Earnings
http://biz.yahoo.com/ap/071018/earns_banks.html?.v=9

Citigroup’s earnings.
http://www.usatoday.com/money/companies/earnings/2007-10-15-citi_N.htm?csp=34

US Spends Billions on Oil from Terrorist Supporting Countries
http://gerlach.house.gov/News/DocumentSingle.aspx?DocumentID=69512

Extensive Report:
http://www.its.ucdavis.edu/publications/2004/UCD-ITS-RR-96-03(15)_rev2.pdf

Gasoline Cost Externalities: Security and Protection Services
http://www.icta.org/doc/RPG%20security%20update.pdf

Answer 2

No different than if we desecrate the Arctic National Wildlife Refuge (ANWR). It takes a long time for production to rise to its maximum level, and demand (consumption) of oil will be rising much faster.

Given that a third of the price of oil is the "risk factor," our best bet to lower oil prices is to lower the risk. That can be done by focusing on world peace instead of threatening new wars.

More importantly, we've probably reached "peak oil" already, and our future will depend on utilizing alternative energy, renewable energy, and reducing consumption of fossil fuels.

Higher oil and gas prices will encourage people to get cars with better mileage and find ways to lower their use of oil and gas, but they have to recognize that solar, wind, hydrogen, biofuels, and other sources are the future. Oil is the past.

Answer 3

loss of refinery potential does no longer reason oil expenses to upward thrust - in reality, a adequate worldwide loss of refinery capcity could relatively cut back the call for, and to that end marketplace fee, of crude. What it may do is reason the fee of gas to upward thrust /even larger/ than the intense fee of oil could point out, if call for is physically powerful adequate. Oil manufacturers earnings while the charges upward thrust. Oil-exporting countries many times have long-term exploration and progression contracts with oil businesses. while the fee is larger than it grew to become into expected to be while such contracts have been drawn up, the corporate reaps a providence. different oil-exporting countries pump thier own oil, and sell it on the open marketplace, and that they recieve the providence, themselves. yet another enormous winner while the charges are intense are countries that have greater durable to make the main oil ingredients. Canada, case in point, has great oil reserves, yet they're confusing to truly extract: while expenses are intense, Canada has an oil marketplace, while they're low, it effectively would not (yet no person accuses Canada of attempting to restoration oil expenses). finally, selection fuels and renewable skill sources get a extensive strengthen from intense oil expenses. So environmentalists might desire to additionally be perking up each and every time the fee of a barrel is going up. the costlier oil gets, the greater just about doable photograph voltaic, EVs, biodiesel, and whatnot grow to be. (yet, back, no person accuses the environmentalists of conspiring to create unrest in the middle east).

Answer 4

New prices 15W40 55 Gallon Drum http://reddrums.com

Answer 5

nothing the govm't regulates it all....in the supposed oil crisis of the late 70's my friends dad was on a taker ship full of oil and told not to dock for over 6 months....no landfall in 6 months is crappy on a ship and it was the gov'mt way of regulating oil prices without the help of opec....

Answer 6

Well we do buy some oil from Russia, but not much so it wont affect us. We buy most of our oil from arabia, venezuela, mexico, and we use our own oil. I believe less than 10%of our oil is from russia.

Answer 7

It might occur to have been the greatest mistake in the rolls tradition other than most an event is needed to spice up things!!

Answer 8

more production would mean lower prices in theory; more supply... less demand...

but I'm sure they'll have some sort of excuse not to do so...

Answer 9

no effect in u.s.....most of that oil will probably go to China...besides,it's not supply but rather refining that drives prices

Answer 10

not low enough!