Oil prices, not Obama’s veto, may block Keystone

[tomato can]

What do you all think?

 

 

 

http://www.marketwatch.com/story/oil-prices-not-obamas-veto-may-block-keystone-2014-11-07

[GG]

Moronic premise. The pipeline will have a multi-decade useful life. It shouldn't matter what the near term oil price is.

[3rdnlng]

What do you all think?

 

 

 

http://www.marketwat...tone-2014-11-07

 

From your link:

 

"WASHINGTON (MarketWatch) — As victorious Republicans gleefully anticipate quick congressional approval of the Keystone XL pipeline after their gains in midterm elections, plunging oil prices threaten to make the project to transport Canada’s oil sands production a white elephant before it can ever be built...........................................

 

A short-term price dip will not torpedo long-term projects like the oil-sands production sites or the Keystone pipeline."

 

What's the point?

[3rdnlng]

Now here's something worth discussing:

 

http://www.marketwatch.com/story/opec-is-wrong-to-think-it-can-outlast-us-on-oil-prices-2014-12-02?mod=MW_story_top_stories

Give Saudi Arabia credit: Whoever sets oil-production policy for the desert kingdom has guts. Unfortunately, the sheiks have made what’s likely to become a sucker’s bet.

You know this part already, but the 12-nation Organization of the Petroleum Exporting Countries last week declined to cut production, sending Brent crude oil futures tumbling to their cheapest point since 2009. The Saudis appear to be spoiling for a fight, trying to find out exactly how cheap oil must be to force surging U.S. shale-oil production to seize up like an unlubricated engine.

“Naimi declares price war on U.S. shale oil,” a Reuters headline shouted, referring to Saudi Arabia Oil Minister Ali al-Naimi.

But there are at least three big problems with this strategy. One, North American crude isn’t as expensive to produce as it used to be. Two, there’s more than you think in the pipeline to make it even cheaper. And third, OPEC nations, including Saudi Arabia, have squandered their edge in cheap oil supplies on welfare states rulers can’t easily cut back.

In 2012, when U.S. shale burst into public consciousness, common wisdom was that it would cost at least $70 to $75 a barrel to produce. As recently as last week, saying U.S. producers could tolerate $60 oil seemed aggressive.

But data from the state of North Dakota says the average cost per barrel in America’s top oil-producing state is only $42 — to make a 10% return for rig owners. In McKenzie County, which boasts 72 of the state’s 188 oil rigs, the average production cost is just $30, the state says. Another 27 rigs are around $29.

[Joe Miner]

Now here's something worth discussing:

 

http://www.marketwatch.com/story/opec-is-wrong-to-think-it-can-outlast-us-on-oil-prices-2014-12-02?mod=MW_story_top_stories

Give Saudi Arabia credit: Whoever sets oil-production policy for the desert kingdom has guts. Unfortunately, the sheiks have made what’s likely to become a sucker’s bet.

You know this part already, but the 12-nation Organization of the Petroleum Exporting Countries last week declined to cut production, sending Brent crude oil futures tumbling to their cheapest point since 2009. The Saudis appear to be spoiling for a fight, trying to find out exactly how cheap oil must be to force surging U.S. shale-oil production to seize up like an unlubricated engine.

“Naimi declares price war on U.S. shale oil,” a Reuters headline shouted, referring to Saudi Arabia Oil Minister Ali al-Naimi.

But there are at least three big problems with this strategy. One, North American crude isn’t as expensive to produce as it used to be. Two, there’s more than you think in the pipeline to make it even cheaper. And third, OPEC nations, including Saudi Arabia, have squandered their edge in cheap oil supplies on welfare states rulers can’t easily cut back.

In 2012, when U.S. shale burst into public consciousness, common wisdom was that it would cost at least $70 to $75 a barrel to produce. As recently as last week, saying U.S. producers could tolerate $60 oil seemed aggressive.

But data from the state of North Dakota says the average cost per barrel in America’s top oil-producing state is only $42 — to make a 10% return for rig owners. In McKenzie County, which boasts 72 of the state’s 188 oil rigs, the average production cost is just $30, the state says. Another 27 rigs are around $29.

It will have an affect. Just because some operators can be profitable in some areas at those prices, many operators can't.

 

What was a major industry that was helping this anemic recovery will be taking a serious blow. Capital spending from E&P companies will be way down next year. Rig counts for next year are plummeting.

 

We'll have to see who blinks first, OPEC nations or American companies. But I'm sure our foreign relations are such that this administration can help protect America's interests diplomatically.

 

Expect more out of work people in 2015.

[OCinBuffalo]

It will have an affect. Just because some operators can be profitable in some areas at those prices, many operators can't.

 

What was a major industry that was helping this anemic recovery will be taking a serious blow. Capital spending from E&P companies will be way down next year. Rig counts for next year are plummeting.

 

We'll have to see who blinks first, OPEC nations or American companies. But I'm sure our foreign relations are such that this administration can help protect America's interests diplomatically.

 

Expect more out of work people in 2015.

Yeah, but it's like any other emerging line of business. In the late 90s there were 25 "business intelligence"(what is currently called analytics) software companies. In only 18 months, due to competition and acquisition, there were 3. Then, like everything else IBM stepped in and bought up what was left/open source companies emerged, and the market stabilized into niches/models....along with new thingers doing new things, etc.

 

Who is to say that the $42 barrel guys won't make enough to buy their neighbors out, and the American price settles down to around $60, with 3 companies competing with each other, and OPEC?

 

And, who's to say that this new Congress won't override Obama's vetoes, force the EPA back into their hole, and keep prices down? You can sure as hell count on many, many votes on this in the Senate, and Ds who are up in 2016 being forced to vote without Harry Reid protection. This will also kill filibusters. The line is simple: "This vote is about providing cheap energy which creates jobs". Good luck fighting that with "but....Global Warming".

 

Thus, I don't see this industry taking a serious blow as inevitable. (EDIT perhaps short-term, small one?) Not only that, but, if we can maintain the current momentum in energy, now that Obama has been reigned in, and, if we can get reasonable tax reform done? All the offshore money comes back. That $ almost instantly turns into energy demand.

 

I realize there's a lot of dependency there, but, also realize that in terms of % chance, a lot of these are 50/50 if not likely.

Edited December 2, 2014 by OCinBuffalo

[Joe Miner]

Whether companies go out of business, or are bought out, you are looking at a reduction in jobs.

 

Even at $60/barrel you are looking at a lot of held assess that will no longer be produced at those prices. Lower production means fewer jobs not just for the E&P companies, but for all the associated businesses as well.

 

One way or another, expect to have a reduction in the work force of the energy sector. That has been one of the major sectors that has been propping up an already ****ty recovery we are experiencing.

[DC Tom]

Whether companies go out of business, or are bought out, you are looking at a reduction in jobs.

 

Even at $60/barrel you are looking at a lot of held assess that will no longer be produced at those prices. Lower production means fewer jobs not just for the E&P companies, but for all the associated businesses as well.

 

One way or another, expect to have a reduction in the work force of the energy sector. That has been one of the major sectors that has been propping up an already ****ty recovery we are experiencing.

 

I have to wonder if there's a tradeoff, though, given that lower energy costs tend to spur economic growth as well (e.g. the '90s and $15 oil.)

[Joe Miner]

 

I have to wonder if there's a tradeoff, though, given that lower energy costs tend to spur economic growth as well (e.g. the '90s and $15 oil.)

Maybe.

 

But are the lower energy prices stable enough for other industries' investment to make up the difference? Or will those lower prices be seen as too volatile for real investment?

 

My guess is that much like anything else, companies won't feel secure enough about energy prices next year to make real investments.

 

Long term this could work out just fine. I'm just expecting a rough 2015.

[OCinBuffalo]

I have to wonder if there's a tradeoff, though, given that lower energy costs tend to spur economic growth as well (e.g. the '90s and $15 oil.)

That's what I'm saying.

 

We are talking frictional not structural here. If the energy guy who is out of a job, gets one at the factory that now exists because of cheap energy? If somebody, anybody realizes the wisdom of Bill Clinton's adult education programs(which basically meant increasing the supply of workers who can work in high tech....otherwise known as supply side economics )?

 

Thus again, I don't see inevitable, always bad all the time consequences here.

 

Maybe.

 

But are the lower energy prices stable enough for other industries' investment to make up the difference? Or will those lower prices be seen as too volatile for real investment?

 

My guess is that much like anything else, companies won't feel secure enough about energy prices next year to make real investments.

 

Long term this could work out just fine. I'm just expecting a rough 2015.

Yeah, I can see some problems in 2015. But, I don't see companies betting against energy prices being low. Besides, there are tons of plans/expansion that has been on hold for years now, all due to the anti-business environment created by Reid/Pelosi/Obama. Some of these bets may look more tenable now. But, as you say, who knows?

 

Politically, a rough 2015 hurts Hillary, so I don't see where the political will from the reasonable left comes from to stand in the way of tax reform. Thus, I don't see how the offshore money doesn't come back in 2015. The offshore money alone would abate whatever losses the energy vertical suffers. Actually, that offshore money could easily create a boom.

 

EDIT: Upon further review, I supposed all of this is dependent on the size and dispostion of the "reasonable left". It may very well be that there aren't enough to save themselves, and by proxy Hillary, from a bad 2015, and therefor a worse 2016. The funny part is: they've been relying on the stupid, and dumbing down the conversation for so long, that it may be impossible for them to leverage any of this.

Edited December 2, 2014 by OCinBuffalo

[Deranged Rhino]

Moronic premise. The pipeline will have a multi-decade useful life. It shouldn't matter what the near term oil price is.

 

Sure it will... for TransCanada, China, and Saudi Arabia. For Americans it'll be a multi-decade eye-sore that provides little to no benefit to American's oil prices or economy. All that can be ours -- plus they'll throw in the ever present risk of an environmental disaster that could wipe out crop production in the midwest for decades.

[GG]

 

 

Sure it will... for TransCanada, China, and Saudi Arabia. For Americans it'll be a multi-decade eye-sore that provides little to no benefit to American's oil prices or economy. All that can be ours -- plus they'll throw in the ever present risk of an environmental disaster that could wipe out crop production in the midwest for decades.

 

You are mistaken.

 

If you are basing your understanding of the global oil markets on the NYT article you posted, then you are misinformed.

[tomato can]

Now here's something worth discussing:

 

http://www.marketwat...ory_top_stories

 

Give Saudi Arabia credit: Whoever sets oil-production policy for the desert kingdom has guts. Unfortunately, the sheiks have made what’s likely to become a sucker’s bet.

You know this part already, but the 12-nation Organization of the Petroleum Exporting Countries last week declined to cut production, sending Brent crude oil futures tumbling to their cheapest point since 2009. The Saudis appear to be spoiling for a fight, trying to find out exactly how cheap oil must be to force surging U.S. shale-oil production to seize up like an unlubricated engine.

“Naimi declares price war on U.S. shale oil,” a Reuters headline shouted, referring to Saudi Arabia Oil Minister Ali al-Naimi.

But there are at least three big problems with this strategy. One, North American crude isn’t as expensive to produce as it used to be. Two, there’s more than you think in the pipeline to make it even cheaper. And third, OPEC nations, including Saudi Arabia, have squandered their edge in cheap oil supplies on welfare states rulers can’t easily cut back.

In 2012, when U.S. shale burst into public consciousness, common wisdom was that it would cost at least $70 to $75 a barrel to produce. As recently as last week, saying U.S. producers could tolerate $60 oil seemed aggressive.

But data from the state of North Dakota says the average cost per barrel in America’s top oil-producing state is only $42 — to make a 10% return for rig owners. In McKenzie County, which boasts 72 of the state’s 188 oil rigs, the average production cost is just $30, the state says. Another 27 rigs are around $29.

 

Time for them to do a little belt tightening.

[4merper4mer]

 

 

You are mistaken.

 

If you are basing your understanding of the topic at hand on the recent NYT article, then you are misinformed.

 

I modified your post above so it could be cut and paste into any thread. With your permission I will use it as well.

Edited December 3, 2014 by 4merper4mer

[GG]

Time for them to do a little belt tightening.

 

People who think that the US fracking and Canadian tar sands have little to do with what's going on in the oil markets are pure idiots.

 

Oil is a global commodity, and increased supply in North America is railing OPEC and Russia. That's why enviro's and that guy in the WH's claims that the only thing that Keystone will do is enrich Canada and Saudis are moronic. More of that supply that hits the market lowers the commodity's global price. It's not rocket surgery. The claim that only Canadian oil will flow through the pipeline is equally ludicrous, since there will be a leg connecting North Dakota. It's also curious that critics ignore the major reason why the proposed Keystone XL leg is going to the Gulf, rather than taking the easier approach - reach the Great Lakes, and then ship the oil, if the sole reason is to export the oil. I wonder where the roughly 90% of US gasoline refinery capacity sits?

 

As to the Saudi's action, they managed to throw a little sand in the Pretender's face. OPEC was never a cohesive body and Saudis got tired of disproportionately taking supply off market to stabilize oil prices. They and rest of OPEC know they need to cut production, but Saudis wanted production cuts to be ratable across all members. Brilliant gambit by the kingdom. As the largest producer, they can wait it out. Hard not to think of their moves outside geopolitics either. The lower and longer that oil prices go, the more pressure Iran & Russia face. All these regimes' aggressive moves in the last two years stand to hurt the kingdom. So, why wouldn't they inflict some economic pain on their enemies?

 

So while lazy journalists tie Saudi's actions as an attempt to hurt the US oil production, in reality, the picture is much larger. Maybe Obama was right to bow to the King.

[Tiberius]

(Reuters) - BP (BP.L) will cut thousands of jobs cut across its global oil and gas business by the end of next year in a $1 billion restructuring programme announced on Wednesday following steep falls in oil prices.

The British oil major said it was also considering deeper cuts to its 2015 budget beyond the $1-$2 billion reduction already announced in October, as a result of the oil slump.

 

 

 

http://www.reuters.com/article/2014/12/10/us-bp-restructuring-idUSKBN0JO0QN20141210

[Magox]

It will have an affect. Just because some operators can be profitable in some areas at those prices, many operators can't.

 

What was a major industry that was helping this anemic recovery will be taking a serious blow. Capital spending from E&P companies will be way down next year. Rig counts for next year are plummeting.

 

We'll have to see who blinks first, OPEC nations or American companies. But I'm sure our foreign relations are such that this administration can help protect America's interests diplomatically.

 

Expect more out of work people in 2015.

 

If anything their motives wouldn't be to hurt the American's but rather the Iranians.

[IDBillzFan]

http://www.reuters.c...N0JO0QN20141210

 

I imagine you sit around wondering to yourself, "Which makes me happier: learning the WH left four Americans for dead in BenghazI, or finding out that an oil company has to lay off thousands of people? I'm so conflicted."

[Koko78]

I imagine you sit around wondering to yourself, "Which makes me happier: learning the WH left four Americans for dead in BenghazI, or finding out that an oil company has to lay off thousands of people? I'm so conflicted."

 

I rather think the distinction is like watching George Carlin vs. watching a rainbow. One makes you laugh hysterically, and the other just makes you happy - perhaps bringing a tear to your eye.

[TakeYouToTasker]

I've never been more sure, than in this thread, that gatorman has zero understanding of annual business cycles, reporting, forward capital investment modeling, or anything else related to business.