As of this post, the oil futures have WTI Crude at $91.15
On July 11th prices reached $147, that is a drop of almost 40% in less than 10 weeks.
The questions I have are: Do you see this is a return to sanity in the oil market, or do you take it in purely percentage terms and see this as a huge collapse?
What does this mean for Tulsa? What oil price level will do harm to the recent prosperity in Tulsa oil companies? Sub-$100? Sub-$80, or I had heard in the past, Sub-$60 was a support level for much of the recent activity in the Tulsa economy.
At the current state of the market, I see $80 easily breached, because prices right now have actually held higher than they should over concerns of Hurricane's Gustav and Ike. We already would have been in the $80s or lower by now without the speculation over hurricane damage kept the price propped up.
So while in the past, $60 oil was seen as good enough to sustain Tulsa's recent upturn, do you think the recent $120+ period of oil will have companies so spoiled that they will be disappointed with $80, instead of $60 oil, and scale back operations in our region?
On the bright side, with the current drop in oil prices, gas should be back down in the $2.50 range once all the refinery closures are over with in the Gulf.
There were times when oilmen went broke watching the price drop from $3 a barrel to $1.60 a barrel.
I kept saying it would drop soon, despite the ocean of people saying the end was nigh. It could easily go below 80dollars even 60 dollars. We may see some more spikes in the near term, but a lot more supply and refining capacity is going to come online in the next 10-15 years. 15 years or so after that is when the real trouble begins. But anywhoo, yes, Tulsa and Oklahomas economy are going to suffer. We should still work on becoming more efficient, growing our city in a more eco friendly, energy sensitive manner for many reasons. But cheap oil will just make the incentive harder. Cheap oil will encourage people to continue to sprawl to cheap suburbs, while building in the more expensive core and trying to build alternative transportation/energy infrastructure will be all that more difficult because the economy will be down.
quote:
Originally posted by TheArtist
I kept saying it would drop soon, despite the ocean of people saying the end was nigh. It could easily go below 80dollars even 60 dollars. We may see some more spikes in the near term, but a lot more supply and refining capacity is going to come online in the next 10-15 years. 15 years or so after that is when the real trouble begins. But anywhoo, yes, Tulsa and Oklahomas economy are going to suffer. We should still work on becoming more efficient, growing our city in a more eco friendly, energy sensitive manner for many reasons. But cheap oil will just make the incentive harder. Cheap oil will encourage people to continue to sprawl to cheap suburbs, while building in the more expensive core and trying to build alternative transportation/energy infrastructure will be all that more difficult because the economy will be down.
Oil is a world commodity where is all this excess capacity coming from that you speak of? The only excess capacity I'm aware of is enough to mitigate increased demand through early 2011 muchless 2015 when it looks like the world as a whole will have a shortfall of 6.8 million barrels per day and that includes all planned increases in production/refining. The market has a unique way of closing these gaps, obviously prices could rise again and increase production while simultaneously decreasing demand creating a new equilibrium...but to say we'll have an oil glut in 15 years seems HIGHLY unlikely.
As for prices, there's no doubt in my mind they were too high at 140 dollars and many in the industry agree. Most thought it should be between 60 and 80, since then the cost of production in unconventional plays has gone up considerably and some of it will not be profitable below 90 dollars per barrel. That means if they're already producing they'll continue to produce from those areas but if they're still working on production infrastructure and drilling they may hold up and/or slow down.
Most oil companies including the super majors (exxon, bp, shell, COP) are very profitible at 80 dollar oil and even 60 dollar oil. We will see some margin issues if oil drops below 60/bbl but the small independant companies should be ok even if oil falls into the mid 30s. The small and independant producers are what tulsa thrives on and so I don't see any real issues on the horizon unless we have a true collapse and prices go back to 10 or 15 dollars per barrel.
Remember the prices were irrationally hight at 147 dollars per barrel, bid up by a perfect storm if you will. When none of those issues materialized the price has come down some and the demand world wide has shown weakness compared with prior projections. On top of that the dollar has gained substantially on other world currencies dragging oil down. I think the fair market for a barrel of oil right now is somewhere in the 70 to 90 dollar range. I've been saying this for quite sometime...HOWEVER prices could dip lower...much lower just like they went much higher. If the dollar continues to gain strength and the world economy continues to show weakness and people get scared out of commodities then prices could easily drop into the 50s and God forbid the 40's again.
quote:
Originally posted by YoungTulsan
As of this post, the oil futures have WTI Crude at $91.15
On July 11th prices reached $147, that is a drop of almost 40% in less than 10 weeks.
The questions I have are: Do you see this is a return to sanity in the oil market, or do you take it in purely percentage terms and see this as a huge collapse?
What does this mean for Tulsa? What oil price level will do harm to the recent prosperity in Tulsa oil companies? Sub-$100? Sub-$80, or I had heard in the past, Sub-$60 was a support level for much of the recent activity in the Tulsa economy.
At the current state of the market, I see $80 easily breached, because prices right now have actually held higher than they should over concerns of Hurricane's Gustav and Ike. We already would have been in the $80s or lower by now without the speculation over hurricane damage kept the price propped up.
So while in the past, $60 oil was seen as good enough to sustain Tulsa's recent upturn, do you think the recent $120+ period of oil will have companies so spoiled that they will be disappointed with $80, instead of $60 oil, and scale back operations in our region?
On the bright side, with the current drop in oil prices, gas should be back down in the $2.50 range once all the refinery closures are over with in the Gulf.
$60 is the lower threshhold. At $80, it still makes a lot of sense for expansion and renovation. At $100, it makes sense to spend money for "black sand" and shale recovery, and re-open marginal strippers. Actually $60 is good enough reason on marginal strippers if the pump jack and other equipment are still on site. It costs a lot more doing shale and black sand recovery as it requires temperature and pressure to make it flow. The equipment isn't cheap and you need to burn a fuel to make it happen.
Around my office, we also keep a close eye on natural gas futures as we work with NG processors on midstream plants and the price of NG affects many of our customer's (who are NG end-users) bottom lines. Higher fuel prices help our business as people look for ways to cut fuel consumption.
Steel has dropped by 20% this week. I still don't get all the machinations of the commodities markets, but safe to say, there have been a lot of investors manipulating and profiting in commodities the last two years.
We are in a wait-and-see mode now to see if some of our vendors will start dropping prices on finished equipment we buy.
Update 9/22/08
Oil shot up the most it ever has in a single day today. A $16.37 one-day increase eclipsed the previous record of $10.75 on June 6 of this year. Intraday, it was up over $25. My assumption that oil was on the decline and sub $3.00 gas was about to return may have been premature.
Story: http://biz.yahoo.com/ap/080922/oil_prices.html
So now I'm left confused. Now what? The markets are just going crazy these days. My initial theory is that the futures markets are betting on the US Dollar losing 25% of its purchasing power thanks to all of the money being printed right now to bail out the financial system. That is the only thing I can think of, because nothing earth-shattering happened to the supply and demand scheme today to warrant violent increases in price. I would expect oil to go up $25 if we bomb Iran, Russia blows a pipeline in Georgia, or OPEC announces they are shutting production off. I don't expect oil to go up $25 on an uneventful day.
quote:
Originally posted by YoungTulsan
Update 9/22/08
Oil shot up the most it ever has in a single day today. A $16.37 one-day increase eclipsed the previous record of $10.75 on June 6 of this year. Intraday, it was up over $25. My assumption that oil was on the decline and sub $3.00 gas was about to return may have been premature.
Story: http://biz.yahoo.com/ap/080922/oil_prices.html
So now I'm left confused. Now what? The markets are just going crazy these days. My initial theory is that the futures markets are betting on the US Dollar losing 25% of its purchasing power thanks to all of the money being printed right now to bail out the financial system. That is the only thing I can think of, because nothing earth-shattering happened to the supply and demand scheme today to warrant violent increases in price. I would expect oil to go up $25 if we bomb Iran, Russia blows a pipeline in Georgia, or OPEC announces they are shutting production off. I don't expect oil to go up $25 on an uneventful day.
The dollar lost almost 2% today. On top of that the spread between contracts is quite large, that spread will start to narrow this week if it doesn't we'll see prices come back down. Who nkows they may even drop some tomorrow...
Oil's up. Investors are flocking back into oil. The dollar is falling like a rock. Watch those pump prices start to drift upward toward the sky!! [}:)]
Update 10/16/08
Futures now have WTI Crude at $69.85
This is starting to worry me about the future of Tulsa's economy. False prosperity on easy borrowing is already coming to an end. Real economic activity in the Tulsa area based on profitable levels of energy extraction, alternative energy, etc, was a very real benefit to Tulsa's economy. I was foreseeing a pretty smooth ride for Tulsa through this economic turmoil, but if oil prices continue their downward spiral that could all be over for us.
On the gas price side of things, we're already close to $2.50, I just saw $2.56 this afternoon. I'm starting to think gas prices could fall under $2.00 now, but that isn't 100% a good thing.
This is starting to look pretty nasty...:(
Oil prices are responding to market forces. Less money around the world means less oil - we are dependent and have a fairly inelastic supply. Such is not the case the world over.
IMHO, OPEC burned their bridge in the long run. From the USA to China, we have learned to fear high oil prices and will be more inclined to get away from them. Of course... we've learned that lesson before.
ANYWAY, I'd say $65-70 a barrel is the what the market will settle at. It may dip below, but it will settle around there.
CF, I see the same, but the drop below could be catastrophic for Tulsa. Market forces can have a pendulum effect. Prices were obviously way too high at $147, and perhaps $70 is the real settling point of supply and demand with all the speculation & flocks of investors chasing the next big thing gone from the picture. But in that pendulum swing, lots of damage can be done from a short term plunge to say, $50. Less disciplined business models would completely freak out, massive layoffs, and perhaps collapses of corporations could occur during the interim. Scary times.
Not that Tulsa has never seen this happen before, but we always seem to lose ground when it happens.
Long term back up. Still all those in China and India who want to live like we do.
quote:
Originally posted by Transport_Oklahoma
Long term back up. Still all those in China and India who want to live like we do.
Who could blame them? I bet they are smart enough to not cause their big(est?) market to go to economic oblivion.
quote:
Originally posted by Transport_Oklahoma
Long term back up. Still all those in China and India who want to live like we do.
No doubt that market forces will eventually push prices higher. By 2015 I think we could be back at 150 dollar oil world demand projections are 95 to 100 million barrels a day and thats conservative. Some think world demand could be between 105 and 115mbpd.
Oil is going back up as OPEC cuts production. OPEC never should of let oil get past $100.00 a barrel it was overpriced and opened up oil for a collapse. Pump prices are still too high for $72.00 barrel oil prices. We really need to drill for our own oil so we won't be hooked on OPEC.[B)]
quote:
Originally posted by OUGrad05
quote:
Originally posted by Transport_Oklahoma
Long term back up. Still all those in China and India who want to live like we do.
No doubt that market forces will eventually push prices higher. By 2015 I think we could be back at 150 dollar oil world demand projections are 95 to 100 million barrels a day and thats conservative. Some think world demand could be between 105 and 115mbpd.
Heck- we could have $150.00 a barrel oil in the summer of 2009 if Obama gets elected president and shuts down off shore oil drilling, and with the no-drill democrats in congress we'll be paying a pretty penny for oil and gasoline in 2009. By 2015 we could all be on bikes and on foot with oil at $300.00 a barrel.
quote:
Originally posted by sauerkraut
quote:
Originally posted by OUGrad05
quote:
Originally posted by Transport_Oklahoma
Long term back up. Still all those in China and India who want to live like we do.
No doubt that market forces will eventually push prices higher. By 2015 I think we could be back at 150 dollar oil world demand projections are 95 to 100 million barrels a day and thats conservative. Some think world demand could be between 105 and 115mbpd.
Heck- we could have $150.00 a barrel oil in the summer of 2009 if Obama gets elected president and shuts down off shore oil drilling, and with the no-drill democrats in congress we'll be paying a pretty penny for oil and gasoline in 2009. By 2015 we could all be on bikes and on foot with oil at $300.00 a barrel.
There's them fear-mongering republican talking points at work....
[8)]
Hey, for that matter, we could be tappin' into alternative fuels, hydrogen cells, electric cars, and our dependence on oil might have gone in the crapper. How bout that fear-mongering?
quote:
Originally posted by Hoss
quote:
Originally posted by sauerkraut
quote:
Originally posted by OUGrad05
quote:
Originally posted by Transport_Oklahoma
Long term back up. Still all those in China and India who want to live like we do.
No doubt that market forces will eventually push prices higher. By 2015 I think we could be back at 150 dollar oil world demand projections are 95 to 100 million barrels a day and thats conservative. Some think world demand could be between 105 and 115mbpd.
Heck- we could have $150.00 a barrel oil in the summer of 2009 if Obama gets elected president and shuts down off shore oil drilling, and with the no-drill democrats in congress we'll be paying a pretty penny for oil and gasoline in 2009. By 2015 we could all be on bikes and on foot with oil at $300.00 a barrel.
There's them fear-mongering republican talking points at work....
[8)]
Hey, for that matter, we could be tappin' into alternative fuels, hydrogen cells, electric cars, and our dependence on oil might have gone in the crapper. How bout that fear-mongering?
You care to tell us how its not just a talking point? Pelosi is on record telling democrats to say whatever to get elected but that we're not drilling offshore.
quote:
Originally posted by OUGrad05
quote:
Originally posted by Hoss
quote:
Originally posted by sauerkraut
quote:
Originally posted by OUGrad05
quote:
Originally posted by Transport_Oklahoma
Long term back up. Still all those in China and India who want to live like we do.
No doubt that market forces will eventually push prices higher. By 2015 I think we could be back at 150 dollar oil world demand projections are 95 to 100 million barrels a day and thats conservative. Some think world demand could be between 105 and 115mbpd.
Heck- we could have $150.00 a barrel oil in the summer of 2009 if Obama gets elected president and shuts down off shore oil drilling, and with the no-drill democrats in congress we'll be paying a pretty penny for oil and gasoline in 2009. By 2015 we could all be on bikes and on foot with oil at $300.00 a barrel.
There's them fear-mongering republican talking points at work....
[8)]
Hey, for that matter, we could be tappin' into alternative fuels, hydrogen cells, electric cars, and our dependence on oil might have gone in the crapper. How bout that fear-mongering?
You care to tell us how its not just a talking point? Pelosi is on record telling democrats to say whatever to get elected but that we're not drilling offshore.
Even if they don't drill offshore, it's already been noted that we wouldn't see any benefits in the US for at least 10 years due to the way the market works.
http://www.ourfuture.org/blog-entry/offshore-drilling-comes-empty
Note that: 50 cents a barrel in reduction.
Now, I'm not against offshore drilling, but to say it's a pie-in-the-sky solution to our short term or even long term energy problems is a little naive, dontcha think?
The US has paltry reserves of oil. Even if we put every field into production. A. we would hit maximum capacity pretty quick, but B. we couldnt refine all of it and you cant pull it all out like that anyway. Thats just no the way it works. Your only going to stick so many drilling platforms in one area. Its like turning on faucets or pipes, not opening a dam. No matter how large the body of water behind the dam, only so much is going to flow out of those pipes at once. It only moves so fast and can only have so many wells all at once. Plus, when you have prices as low as they are now, its more risky to build more platforms and refining capacity. When its up, you dont know for how long. Its finding that balance.
This is interesting... Its possible that little Cuba has as much oil reserves as the US. The US has about 21billion barrels
http://www.yourindustrynews.com/cuba+claims+large+oil+reserves+in+gulf+of+mexico_13018.html
With recent finds, even Brazil possibly has more than 50billion barrels in oil reserves (some say up to 100 billion. Though not easy to get to.
Turns out OPEC wants a another massive cut in oil production to boost up falling oil prices, they just anounced it on the news overnight. What scares me is it looks like Obama and the democrats will be controling our nation for the next 4 years and that means no drilling and no new domestic oil drilling, so we'll be hooked on OPEC's prices. What if OPEC decides not to increase oil production for the 2009 summer driving season? We will be looking at pump prices higher than in 2008. We need to start drilling for our own oil and tell OPEC to take a hike..
quote:
Originally posted by TheArtist
The US has paltry reserves of oil. Even if we put every field into production. A. we would hit maximum capacity pretty quick, but B. we couldnt refine all of it and you cant pull it all out like that anyway. Thats just no the way it works. Your only going to stick so many drilling platforms in one area. Its like turning on faucets or pipes, not opening a dam. No matter how large the body of water behind the dam, only so much is going to flow out of those pipes at once. It only moves so fast and can only have so many wells all at once. Plus, when you have prices as low as they are now, its more risky to build more platforms and refining capacity. When its up, you dont know for how long. Its finding that balance.
This is interesting... Its possible that little Cuba has as much oil reserves as the US. The US has about 21billion barrels
http://www.yourindustrynews.com/cuba+claims+large+oil+reserves+in+gulf+of+mexico_13018.html
With recent finds, even Brazil possibly has more than 50billion barrels in oil reserves (some say up to 100 billion. Though not easy to get to.
North America does have alot of oil, we have tons of oil in rock shale and Alaska is floating on a sea of oil but it's all off limits. The eastern Gulf Of Mexico has tons of oil but it to is off limits. We are the only nation in the world that does not use it's own natural resources. We depend on OPEC to keep our oil flowing.[xx(]
quote:
Originally posted by sauerkraut
We need to start drilling for our own oil and tell OPEC to take a hike..
We don't have enough oil to do that, sadly, nor would it be online in any reasonable timeframe if we did do more offshore drilling.
And we aren't the only country in the world to not drill/mine/whatever willy-nilly. Conservation (as in keeping some for later, not reducing use, although that might be a good idea) is smart planning for the future.
If we want to tell them to take a hike, we need to stop consuming so much oil.
quote:
Originally posted by nathanm
quote:
Originally posted by sauerkraut
We need to start drilling for our own oil and tell OPEC to take a hike..
We don't have enough oil to do that, sadly, nor would it be online in any reasonable timeframe if we did do more offshore drilling.
And we aren't the only country in the world to not drill/mine/whatever willy-nilly. Conservation (as in keeping some for later, not reducing use, although that might be a good idea) is smart planning for the future.
If we want to tell them to take a hike, we need to stop consuming so much oil.
North America has more oil than the middle east, we have billions of barrels locked up in oil rock sand, we can get off mid-east oil if we drilled where ever we had oil. We are bending over at the OPEC alter and this weekend OPEC is planning to decide how much to cut oil production- read: increase in pump prices.
quote:
Originally posted by Hoss
quote:
Originally posted by sauerkraut
quote:
Originally posted by OUGrad05
quote:
Originally posted by Transport_Oklahoma
Long term back up. Still all those in China and India who want to live like we do.
No doubt that market forces will eventually push prices higher. By 2015 I think we could be back at 150 dollar oil world demand projections are 95 to 100 million barrels a day and thats conservative. Some think world demand could be between 105 and 115mbpd.
Heck- we could have $150.00 a barrel oil in the summer of 2009 if Obama gets elected president and shuts down off shore oil drilling, and with the no-drill democrats in congress we'll be paying a pretty penny for oil and gasoline in 2009. By 2015 we could all be on bikes and on foot with oil at $300.00 a barrel.
There's them fear-mongering republican talking points at work....
[8)]
Hey, for that matter, we could be tappin' into alternative fuels, hydrogen cells, electric cars, and our dependence on oil might have gone in the crapper. How bout that fear-mongering?
Alternative fuels are still a far off pipe dream. No vehicle today runs on them, today we need oil not hydrogen. Besides it takes oil to make hydrogen. Electric cars have been around since the 1980's and they still are full of bugs. The batteries for them cost $30,000 and they can't tow anything they can't go very far on a charge, and don't run well in winter when the cold weather zaps battery power and a electic car requires a electric heater in winter and all that drains the batteries faster. Then how well will our power grid handle thousands of electric cars plugging into a battery charger every night at 5pm after work? Will the drain cause city blackouts? This stuff all needs to be worked on and figured out. In the meantime we need oil and need to drill, drilling also makes many new jobs. One thing that seems to hold some promise is natural gas cars, natural gas is cheap there is plenty of it and we can fill up at home if we have natural gas in our homes. We would just need to add a natural gas adapter to our current home gas lines. That seems like a good place to start for alternative fuel. Natural gas will cost about $1.20 a "gallon" and we have tons and tons of that.
quote:
Originally posted by sauerkraut
North America has more oil than the middle east, we have billions of barrels locked up in oil rock sand, we can get off mid-east oil if we drilled where ever we had oil. We are bending over at the OPEC alter and this weekend OPEC is planning to decide how much to cut oil production- read: increase in pump prices.
Tar sands aren't really a viable source of energy. It takes too much energy to get at. It's like hydrogen in that way. It takes too much energy to make hydrogen for it to really be a viable fuel source. (short of building a crapton of nuclear power plants to power the conversion process)
Plastic is cheap precisely because it's easily made from oil and oil is relatively cheap, and takes a tiny amount of energy to extract and refine compared to what you get from it. Same with fertilizer, which is what gives us relatively inexpensive food.
Depending on massive energy production for such basic things isn't a good idea.
Not that we can't manufacture oil, but again, it's silly when we could just save some for later.
And your fearmongering about electric cars causing blackouts is just ridiculous.
And as far as our having a lot of oil? You apparently aren't familiar with the amount that we consume. We'd run out in something like 10 years if we could consume only domestic supplies. (of course, we can't produce the volume we consume no matter how much drilling we do because all our fields are getting old and tired, as it were)
I think if we started using natural gas for more of our cars, the price of natural gas wouldn't remain the same, it would rise to equilibrium with gasoline. While I like Pickens' plan, he isn't altruistic, he knows the price of natural gas will skyrocket if a huge new demand for it is created.
We're down to $67 by the way. The "drill drill drill" cries don't get as much attention. Oil is still abundant.
Conan already detailed in an earlier post in this thread that you need a price of at least $100 for the oil sand argument to have merit. In the real world, you need a garuntee of $100++ oil and the POTENTIAL for $250 oil before that would rise into enough production to make a dent in our imports.
Our biggest risk now is the dollar unwinding. It is currently under a huge rally as people flock to treasuries, and foreign currencies inflate worse than ours making us stronger by comparison. That is part of this drop in oil prices. If global confidence in the dollar dries up, the dollar will crash hard, and oil will be back up again.
I know I started this thread fearful for how low oil prices might go (in the interest of the Tulsa, Oklahoma economy) but there is a counter-risk of a complete turning of the tables with the dollar situation.
Maybe everything will even out, but it is a weird battle of inflation and deflation.
quote:
Originally posted by YoungTulsan
I think if we started using natural gas for more of our cars, the price of natural gas wouldn't remain the same, it would rise to equilibrium with gasoline. While I like Pickens' plan, he isn't altruistic, he knows the price of natural gas will skyrocket if a huge new demand for it is created.
We're down to $67 by the way. The "drill drill drill" cries don't get as much attention. Oil is still abundant.
Conan already detailed in an earlier post in this thread that you need a price of at least $100 for the oil sand argument to have merit. In the real world, you need a garuntee of $100++ oil and the POTENTIAL for $250 oil before that would rise into enough production to make a dent in our imports.
Our biggest risk now is the dollar unwinding. It is currently under a huge rally as people flock to treasuries, and foreign currencies inflate worse than ours making us stronger by comparison. That is part of this drop in oil prices. If global confidence in the dollar dries up, the dollar will crash hard, and oil will be back up again.
I know I started this thread fearful for how low oil prices might go (in the interest of the Tulsa, Oklahoma economy) but there is a counter-risk of a complete turning of the tables with the dollar situation.
Maybe everything will even out, but it is a weird battle of inflation and deflation.
Still difficult to defend sending hundreds of billions of dollars to other countries who hold their hands on the energy faucet.
We have all of the energy we need right here. More resources than almost anywhere else in the world. More technology to harvest it. More science and industry to bring it to it's full potential, and more people who depend on it, yet we hand over control to someone else because we fear our own potential for evil.
I fear the potential for evil from those we finance far more than from ourselves, but that's just my opinion.
Refinery Upgrade Called Off
http://www.newson6.com/global/story.asp?s=9307988
TULSA, OK -- It's another sign the economy in crisis is hitting home. Sunoco canceled a $375 million upgrade at the Tulsa refinery. Sunoco's decision eliminates a project that could have had a big economic impact on Tulsa.
Looks like it is starting. Oil futures are at $60.19 right now. Gas is $1.83 a gallon. KOTV is reporting that the Sun refinery upgrades have been called off.
Does anyone know the status on Sinclair? They are supposed to be doing a $1 BILLION upgrade. Is it too far along to halt, or has it even begun yet?
Pretty soon the entire energy sector in Tulsa is going to take a big hit from this. How ironic that Semgroup went under because prices were too HIGH. But Kivisto's bet was correct, that oil prices would fall under $100. His timing is unfortunate, and judgment to engage in flippant gambling were wrong of course.