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End of Oil? Not
Old 04-21-2020, 06:04 AM   #61
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End of Oil? Not

Incredible - oil futures opened today less than 0.

IMHO - Oil price collapse will be followed by a slow recovery with world economies. Big cruise ships and airline usage will be depressed for years. Transportation will recover faster - but not the unicorn V-shaped recovery.

Terrible impact on the USA and Canadian independents and their suppliers (equipment and steel); traumatic impact on the workers (unemployment and mortgage defaults).

How bad will it get for the leaders of regimes that depend on the hard currency of oil to support their dictatorships? Russia, Iran, Saudi Arabia, Kuwait, UAE. What will these countries do when reserves run out? Russia and Iran may have least reserves to ride out the price depression.

What will those despots do to divert popular unrest attention elsewhere?
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Old 04-21-2020, 06:23 AM   #62
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Originally Posted by atmsmshr View Post
How bad will it get for the leaders of regimes that depend on the hard currency of oil to support their dictatorships? Russia, Iran, Saudi Arabia, Kuwait, UAE. What will these countries do when reserves run out? Russia and Iran may have least reserves to ride out the price depression.

What will those despots do to divert popular unrest attention elsewhere?

Good questions. These regimes seem to be at peak mischief when oil prices are high, building up armaments and manipulating other countries while gorging on corruption at home. Peak oil price periods also make their currencies very expensive, making them extremely import-oriented with little domestic production except for oil. It could be a good thing for the world ultimately if our good friends in Russia and Saudi Arabia have their arms and legs tied behind their backs for a while and maybe it will be enough for Venezuelans to kick their wrecked hulk of a government over the cliff.
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Old 04-21-2020, 06:47 AM   #63
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I view this news (the price of oil collapsing)as good news. With the weakened demand caused by the virus it just shows that eventually with the move to electric vehicles then a large portion of the fossil fuel industry with just go away. I know that will be some time coming but the prediction of the declining need for oil is not only possible but hopefully reality. Time to move on to a 21st century means of energy production. Oil is so 19th century.

^^^^^^
I'm not sure I have ever disagreed with a post more than this one above. Although I've disagreed with a good number of posts over the years. This is not good news and the negative ramifications are likely to be far reaching and are unpredictable at this time, especially if these negative prices drag on for any length of time. (Oil prices in the teens are bad enough) However, I would agree that eventually we will run out of fossil fuels and be forced to alternate sources but that's a long time away. Well beyond my lifetime anyway.

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If oil stays this low for extended periods, ie: gas at under $1/gal for years, Electric vehicle sales will drop to near zero. I wonder what percentage of oil production airlines consumed?

I do recall my mother always getting “$2 worth please” back around 1965-70, (I’d be 7-12) when all stations were full service, and they checked your oil and cleaned the windshield while it filled. And then gave you Green Stamps. “Fillerup!” was like $4-5. That would be crazy to see again.
^^^^^^^^

Fully agree with this post. From my POV, with the price of gas going much lower than it is today, why would anyone want to buy an EV. Except maybe the environmental purist. (That's as politically correct as I can say it)

Also, you must have grown up rich. I can remember my mom pulling into the gas station and asking for a dollars worth. Of course that was in the very early 60's... And I do remember getting Green Stamps too.

I can remember seeing gas for 19.9 at one time. (Late 50's or early 60's)
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Old 04-21-2020, 06:57 AM   #64
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Sounds like a good time to fill the strategic petroleum reserve - maybe even expand it (however that would be done.)

I can't help much. Both my 15 gallon tanks were filled a month ago and I haven't driven more than 30 miles total since then. YMMV
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Old 04-21-2020, 07:07 AM   #65
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Sounds like a good time to fill the strategic petroleum reserve - maybe even expand it (however that would be done.)

I can't help much. Both my 15 gallon tanks were filled a month ago and I haven't driven more than 30 miles total since then. YMMV
I drive thru Houston all the time (not by choice) and I've seen the number of tank storage farms increase by many multiples in the past 10 years. The SE part of the greater Houston area is full of them. I "assume" they are all full by now. Must be a incredible amount in storage now as compared to 10 years ago. Not to mention the strategic reserve held in salt domes.

Now I'm smiling everytime I tank up my 700+ hp gas guzzling Jeep... Too bad there's no where to go.
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Old 04-21-2020, 08:00 AM   #66
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Question about oil storage;
I thought it was possible to just pump crude right back down the well. Buying oil cheap overseas and storing it domestically in US wells. Is that not true?
I don't think so, usually it comes out under it's own pressure.
Underground storage is done by filling old salt domes with oil, that is our strategic reserve method.
Of course all the available salt domes are already probably in use as they afford a huge cheap safe way to store oil.
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Old 04-21-2020, 08:01 AM   #67
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If oil stays this low for extended periods, ie: gas at under $1/gal for years, Electric vehicle sales will drop to near zero. I wonder what percentage of oil production airlines consumed?

I do recall my mother always getting “$2 worth please” back around 1965-70, (I’d be 7-12) when all stations were full service, and they checked your oil and cleaned the windshield while it filled. And then gave you Green Stamps. “Fillerup!” was like $4-5. That would be crazy to see again.
But weren't the hourly wages back then something like $3 an hour? I would hate to work at a gas station for that little.
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Old 04-21-2020, 08:07 AM   #68
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Sounds like a good time to fill the strategic petroleum reserve - maybe even expand it (however that would be done.)

I can't help much. Both my 15 gallon tanks were filled a month ago and I haven't driven more than 30 miles total since then. YMMV
That is the plan. The Administration is looking at adding 75 million barrels or charging for storage.
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Old 04-21-2020, 08:53 AM   #69
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That is the plan. The Administration is looking at adding 75 million barrels or charging for storage.

Maybe the gov't can get paid to take the oil, then paid to store the oil, and use that to help offset all the increased spending due to covid19


Circular logic if there ever was
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Old 04-21-2020, 09:00 AM   #70
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^^^^^^
I'm not sure I have ever disagreed with a post more than this one above. Although I've disagreed with a good number of posts over the years. This is not good news and the negative ramifications are likely to be far reaching and are unpredictable at this time, especially if these negative prices drag on for any length of time. (Oil prices in the teens are bad enough) However, I would agree that eventually we will run out of fossil fuels and be forced to alternate sources but that's a long time away. Well beyond my lifetime anyway.
If you disagreed with my earlier post then you'll probably love this one.

The oil business has been a declining industry for over a decade. It has been supported by subsides and geopolitical turmoil for a long time. There will be calls to support the sector with bailouts but that would clearly be a political decision ignoring the economics. In an effort to be "energy independent" we have seen Wallstreet give the shale industry tons of cash which loaded the companies up with a lot of debt. The expected profits never materialized. Lot of bankruptcies in the last few years. There is no business case that can be made for fracking. “If you had a child with a lemonade stand that every day spent more money on lemons and sugar than they got selling lemonade, eventually you would say there’s no business case for that lemonade stand.”

Nationalization of the sector might be the best way out. As was recently described in an article by Democracy Collaborative’s Carla Skandier, "If the government takes a majority stake in privately owned fossil fuel firms, winding down production along a science-based timeline and giving workers a dignified off-ramp into other well-paid work, all the while muting the industry’s enormous influence over our political system. “Only democratic government can ensure the planned wind-down of fossil fuel production in accordance with climate safety goals,” she writes. “With room for private profit cut out of fossil fuel extraction and production, the powerful entrenched opposition of the energy sector would crumble.”
By taking fossil fuel companies under public ownership while they’re cheap to buy, the U.S. could ensure the country’s energy demands are met responsibly as it transitions to a net-zero-emissions economy.

I am tired of the environmental hazard created by this industry even as we have the know how and technology for a better solution. Not to mention the subsidies of >25B worth of state and federal subsidies each year. Move that money to green technology and have a phased transition to a cleaner and sustainable energy future. It is inevitable so why wait for the next crisis to deal with something we know is necessary.
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Old 04-21-2020, 09:05 AM   #71
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On sale...
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Old 04-21-2020, 09:12 AM   #72
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Why are the energy ETF's not down more?
Because investors think that the future earnings potential of the companies owned by the ETF justifies the current price, despite the current crude oil price as reflected in the May futures.
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Old 04-21-2020, 09:17 AM   #73
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On sale...
Perfect!
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Old 04-21-2020, 09:19 AM   #74
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Good questions. These regimes seem to be at peak mischief when oil prices are high, building up armaments and manipulating other countries while gorging on corruption at home. Peak oil price periods also make their currencies very expensive, making them extremely import-oriented with little domestic production except for oil. It could be a good thing for the world ultimately if our good friends in Russia and Saudi Arabia have their arms and legs tied behind their backs for a while and maybe it will be enough for Venezuelans to kick their wrecked hulk of a government over the cliff.
A good parallel (but not oil related) is North Korea firing off 'test' missiles lately like the fourth of July. Evidentially Kim Jon fatso has been "recovering from heart surgery."
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Old 04-21-2020, 09:34 AM   #75
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But weren't the hourly wages back then something like $3 an hour? I would hate to work at a gas station for that little.
When I pumped gas in high school, gas was $1/gallon and I was paid $2.10 hour. Those days may be here again.
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Old 04-21-2020, 10:01 AM   #76
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The lessons to be learned from this adventure are not being made. There is talk of efficient markets, there is almost no larger market than the oil market, weeks ago I saw analysts discussing how the lack of storage space would lead to negative oil prices as there was more in oil to be delivered by May contract than there was storage space so prices would have to go negative. Despite this for weeks after the MAY contract traded over $20 until it came time for deliveries and ETF's that held the contracts but no possible method of storing the oil realized they were stuck and some had to sell at minus $57 per barrel. This was a known problem by some of the richest and smartest individuals in world and still in one day commodity fell over 100% It was not until the actual paper flowed that prices moved to realize the actual demand/supply.

Now today people holding June July August paper on oil futures suddenly realize they have a huge problem and today those contracts are down 35%. Which would have been an all time record for a one time decline in the price of oil, excepting for what happened yesterday.

The same issue is poised to happen to all of the holders of stock market certificates. There is no money nor is it any longer socially acceptable for corporations to use their funds to buy stock back, states are not having funds paid to them so they will certainly defer funding public pensions. Individuals are increasingly not working and will be accessing their 401K funds to maintain their lifestyle, indeed the IRS has changed the rules to eliminate the penalty on doing so.

Contributions to 401K will drop precipitously. The result is as the months pass without a full return to normalcy there is going to be a increased supply of stock for sale with a very diminished long term storage capacity. In the aftermath, this will be clear to everyone that prices on the way down are not set by active managers, they just sell and no longer have influence, but when passive investors sell there is no one with the storage capacity to sell to and there will be days with air pockets in the market. By the time this becomes obvious there will be a collective, "should have seen that coming it was an obvious known problem just like the oil issue but too late now".

The oil market is just the canary in the coal mine. I wonder who the individuals sitting with these 100% losses are....
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Old 04-21-2020, 10:14 AM   #77
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Originally Posted by Beststash View Post
I view this news (the price of oil collapsing)as good news. With the weakened demand caused by the virus it just shows that eventually with the move to electric vehicles then a large portion of the fossil fuel industry with just go away. I know that will be some time coming but the prediction of the declining need for oil is not only possible but hopefully reality. Time to move on to a 21st century means of energy production. Oil is so 19th century.
Yep, and we will be on electric powered commercial airplanes and cruise ships soon.
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Old 04-21-2020, 10:21 AM   #78
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When I pumped gas in high school, gas was $1/gallon and I was paid $2.10 hour. Those days may be here again.
Gas prices have been in flux for YEARS (although this craziness is new, obviously). Back in the early 90's, I worked in a warehouse making $15 an hour and could get gas for 80 cents a gallon.
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Old 04-21-2020, 10:24 AM   #79
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The lessons to be learned from this adventure are not being made. There is talk of efficient markets, there is almost no larger market than the oil market, weeks ago I saw analysts discussing how the lack of storage space would lead to negative oil prices as there was more in oil to be delivered by May contract than there was storage space so prices would have to go negative. Despite this for weeks after the MAY contract traded over $20 until it came time for deliveries and ETF's that held the contracts but no possible method of storing the oil realized they were stuck and some had to sell at minus $57 per barrel. This was a known problem by some of the richest and smartest individuals in world and still in one day commodity fell over 100% It was not until the actual paper flowed that prices moved to realize the actual demand/supply.

Now today people holding June July August paper on oil futures suddenly realize they have a huge problem and today those contracts are down 35%. Which would have been an all time record for a one time decline in the price of oil, excepting for what happened yesterday.

The same issue is poised to happen to all of the holders of stock market certificates. There is no money nor is it any longer socially acceptable for corporations to use their funds to buy stock back, states are not having funds paid to them so they will certainly defer funding public pensions. Individuals are increasingly not working and will be accessing their 401K funds to maintain their lifestyle, indeed the IRS has changed the rules to eliminate the penalty on doing so.

Contributions to 401K will drop precipitously. The result is as the months pass without a full return to normalcy there is going to be a increased supply of stock for sale with a very diminished long term storage capacity. In the aftermath, this will be clear to everyone that prices on the way down are not set by active managers, they just sell and no longer have influence, but when passive investors sell there is no one with the storage capacity to sell to and there will be days with air pockets in the market. By the time this becomes obvious there will be a collective, "should have seen that coming it was an obvious known problem just like the oil issue but too late now".

The oil market is just the canary in the coal mine. I wonder who the individuals sitting with these 100% losses are....
I agree.

Basically a demand side shock coming for stocks on top of a months long and rippling earnings decline. The Fed can keep us from a liquidity crunch, but not from bankruptcies and a lot of cash stuffed into mattresses.
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Old 04-21-2020, 10:26 AM   #80
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Contributions to 401K will drop precipitously. The result is as the months pass without a full return to normalcy there is going to be a increased supply of stock for sale with a very diminished long term storage capacity. In the aftermath, this will be clear to everyone that prices on the way down are not set by active managers, they just sell and no longer have influence, but when passive investors sell there is no one with the storage capacity to sell to and there will be days with air pockets in the market. By the time this becomes obvious there will be a collective, "should have seen that coming it was an obvious known problem just like the oil issue but too late now".

The oil market is just the canary in the coal mine. I wonder who the individuals sitting with these 100% losses are....
As much as I would like to disagree, I cannot...and that is a very, VERY scary scenario. This is an illustration that we really have no idea how bad this could get...we have never been here before.
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