Oil down $60 / Gas down 60 satang - what do you make of it?

[NeverSure]

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Maybe they have to get rid of the OLD Stock, for which they paid inflated prices and then the NEW lower priced product will come on the market.

Yeh....and "Pigs Fly" don't they?

Possibly but unlikely. The majors that have both UP and DOWN stream production capability are covering the shortfalls from low oil prices by being able to refine cheaper and therefore realise better margins. The smaller exploration companies and fracking companies without any downstream capability are suffering and don't have the comparable financial strength to weather the storm.

The price of oil would have to drop below $60/bbl for the fracking to come to a halt in the Bakken and Marcellus fields. It could happen but I rather doubt it as there are other producers worldwide that will feel the pain long before the boys in the Dakotas do I hope oil stays around $70/bbl, however I think by next summer we will be right back in the $90-$100 range again

Saudi and Putin need profits on oil to feed their people. The US doesn't.

In Saudi and Russia the governments own the means of production and oil is a mainstay of the economy. Not so in the US.

The last man standing is the US.

[Leung Falang]

Also in 2011 in west Tx. they discovered a reserve 30,000 feet down. They can drill to it but are trying to figure a way to pressurize it to get it to surface. It goes from Texas to Canadian border. It is the size of all known reserve's in the world today. The Permian basin has geared up to never stop pumping at this point. They don't like to see the price come down, but know eventually they will have the corner on the market. Notice that the US is trying to distance itself from Middle east, no longer dependent on that oil supply.

We live a bit east of Midland/Odessa, Texas and know from friends that motel/hotel prices are double or triple normal, and that renting a house is out of the question. Lot of young guys find high paying jobs there in production but cannot find a place to live.

[NeverSure]

Word on the street is the conventional oil boys are doing this to drive out the shale oilers who on average cost $80 barrel to produce. It won't take long to give them the message they can do this at anytime they please.

Big boy games. If you were heavily invested in shale oil I would be getting a little worried.

It helps to clarify "doing this" to mean OPEC continues at normal production levels and understands that as the price falls, shale production will begin to contract as well as production in tar sands. It seems the price drop began with recession fears in Europe and a slow down in China.

OPEC needs profits to feed the economies and therefore the people. US companies have no such encumbrance. They are capitalist financed by capital at risk.

Shale oil techniques are improving, yields are improving and costs are dropping.

The US has more recoverable oil than all of the rest of the world combined.

Putin's oil supplies are dwindling and he'll be searching in Siberia, even in the Arctic for more oil. Saudi's supplies are dwindling. The US hasn't even geared up yet.

Putin has to be shitting himself. He needs $100 oil to stabilize his economy, and he needs to find more.

[mattsilver]

As V-Vic suggested, the price has to drop below fracking production costs before it'll impact production from the shale sites. Just how much is the question. Today's WTI crude pricing is USD $66.15/barrel. The Economist estimates that the break-even price for producing shale oil is currently between $60-$70, depending on the site (BusinessInsider data from over a month ago indicated that the range was from $52 to >$100, depending on the specific site...http://www.businessinsider.com/shale-basin-breakeven-prices-2014-10). The vast majority of US shale fields land in the $60's range. Keep in mind that fracking costs have gone down every year for over a decade now, and this trend isn't likely to reverse anytime soon. Are we on the cusp of slowing shale oil production? Doubt it. Today's Saudi stock market plunge would suggest the same. They're getting nervous because they can't do the usual and cut production to artificially raise costs/increase shortages--that would cut too deeply into overall revenues to be worthwhile for them, at least right now. Not incidentally, the 1-year forecast for crude oil prices is an estimated USD $76, which is not much different from today. Here in Florida, I gassed up today for $2.75/gallon (3.79 liters), or about USD $0.73/liter--at approximately 33 baht/USD, that'd equal about 24 baht/liter--nice change from the past couple of years...

[NeverSure]

BTW on topic, I paid US$2.60 per US gallon of regular unleaded gas this weekend. That's 85.5 baht per gallon. There are 3.8 liters in a US gallon.

Oops, sorry Mattsilver, typing while you posted.

Edited December 1, 2014 by NeverSure

[Timwin]

There could be another factor in play. Global oil demand could be peaking. Transportation sector globally use about 60-70 percent of the oil yearly produced and the highest growth sector is personal use cars.

There are multiple serious research projects of new battery technologies and many of those technologies are very promising.

[Pib]

As far as I know Thailand has a variable tax/subsidy on petroleum products that is designed to prevent price movements at the pump even if the price of crude or the value of the USD varies.

Looks like it's working.

Yeap, the govt varies the fuel tax (sometimes the govt calls it a subsidy whenever they lower the tax) on the products....usually lowers the tax when oil price is high and raises it when oil prices are low. As oil has been falling in price recently they have lowered the fuel prices little in order to build-up tax revenue to be used as a buffer when they need to spend that buffer to keep the fuel prices fairly stable.

Fuel prices in Thailand are still much lower than other places like in Europe where fuel taxes are much higher. See this link for worldwide gasoline prices per liter as of 24 Nov 14.

Yea, look at that list. The most expensive country, Norway... And they even have their own oil production that covers their needs and more!

So the tax is a big part, but all countries need tax revenue to pay for things like healthcare, education and infrastructure.

They sure do need taxes to pay for such things....that's why some countries have higher overall taxes than others...and once again European countries seem to have the highest overall taxes...I wonder if they have the best healthcare, education, infrastructure....or have the countries just gone wild on taxes?

Go to this Wikipedia article and sort to show the highest percentage of tax revenue by GDP...European countries dominate the top of the list....like Norway near the top 43.6%....U.K. at 39%...US at 26.9%...and Thailand at 17%.

[Naam]

There could be another factor in play. Global oil demand could be peaking. Transportation sector globally use about 60-70 percent of the oil yearly produced and the highest growth sector is personal use cars.

There are multiple serious research projects of new battery technologies and many of those technologies are very promising.

batteries have to be charged with electricity. electricity has to be generated. oil demand will only fall if enough electricity is generated by different means such as wind, solar, etc.

new battery technology cannot create a 'perpetuum mobile'. fact is that because of various losses more energy has to be created than what can be stored/used by batteries.

note: in the 70s we had a joke in Germany making fun of the green treehuggers:

"we don't need power plants! German homes are equipped with outlets from which electricity can be drawn."

[Janner1]

Hi all, At the risk of being called a know all, just consider this for a few moments.

Whilst fracking is a useful tool for finding a reason for the oil price slump and is easier to perpetuate than to tell the real truth which may be politically embarrassing,but I think the real truth is what better way to undermine an ignorant arrogant political structure that knowingly and willingly shoots passenger aircraft out of the sky in order to make the Ukraine look as though they did it but when found out will not admit it.

Now I am not Putin anything about but I will lay you a pound to a penny that this is the real reason oil has fallen and no body is Russian around to correct it especially as oil and gas is the main export across Europe.

The only fly in the ointment is China because a pipeline agreement is already signed

[connda]

The cost of the feed stock may have reduced, but the cost of refining hasn't decreased, the crude price is only a small component of the overall cost of the refined product, if crude price drops 20% this doesn't translate into a 20% reduction at the pumps, further most petroleum products are bought on a forward contract type basis at a negotiated price, therefore over the short term decreases in crude price will not have real affect on the pump price, until the new contracts are negotiated

BTW the "oil price" is not set by the Thai government

If the crude is bought on forward contracts (futures), and that is a reason why oil prices don't move down in response to lower crude prices, then why do prices at the pump tend to quickly move in lockstep with rising crude prices?

[chris2004]

BTW on topic, I paid US$2.60 per US gallon of regular unleaded gas this weekend. That's 85.5 baht per gallon. There are 3.8 liters in a US gallon.

Oops, sorry Mattsilver, typing while you posted.

22 bahts a litre, they virtually give it away in the States. In Europe it would be 60-70 bahts a litre.

[Stray]

The cost of the feed stock may have reduced, but the cost of refining hasn't decreased, the crude price is only a small component of the overall cost of the refined product, if crude price drops 20% this doesn't translate into a 20% reduction at the pumps, further most petroleum products are bought on a forward contract type basis at a negotiated price, therefore over the short term decreases in crude price will not have real affect on the pump price, until the new contracts are negotiated

BTW the "oil price" is not set by the Thai government

The oil price ain't but they certainly fiddle with the price of petrol at the pump, which is what it's all about.

"if crude price drops 20% this doesn't translate into a 20% reduction at the pumps,"

Well it should even out over time once old stocks have cleared, unless refining a cheaper barrel somehow magically becomes non-linearly more expensive. I get the forward contracts concept, but it's all BS at the end of the day... you just watch how fast those contracts are spent once the price rises! The whole oil business is bonkers, from the overpaid people pulling it up out the ground who pick a spot and stand around all day, to the grubby oil bosses and the governments that fiddle the figures and tax the pump to the hilt. The world will be a better place once it's all gone and we're forced to draw our energy from appropriate sources.

You really don't know much about rig pigs and oil trash, do you daveAustin?

Try spending long periods of time away from family and loved ones. Often in countries that are less than safe, no holidays, no sick leave, no days off during your hitch. Working 12+ hour tours, every day of your hitch and, even when you are off-tour, you may be called to hit the deck. Sometimes, no contact with anyone beyond the confines of the rig (particularly during rig moves). You believe the people who choose to do that should not be properly remunerated for the hardships.

As far as standing around all day, you really don't have a clue.

You, daveAustin, are an ignorant buffoon!!!

[Berinek]

I am a bit surprised of this post. Because I am deffinitely enjoying a big reduction of gas prices in Thailand. Just about 3 months ago I was paying about 43 THB/L for Gasohol 95. And now I get the same under 35 THB, which means during just last 3 months the Gasohol 95 went down by more then 8 THB/L, which is for me quite big reduction. And it seems that gas still continues to go down. Moreover about 1 year ago I remember paying up to arround 48 THB/L and that is massive decrease. So I realy do not understand where the OP got his 60 satang reduction if in reality it is far much more.

[diehard60]

In the northeast it has not gone down even 1 stang never mind 60.

[hhgz]

"Global economic slowdown. Less demand for oil and derivative products."

​Several years ago, that was true. Today, the decrease in the price of oil has been caused by a substantial increase in oil production. Rather than recycle old prejudices and theories, the latest news can be found online.

[pattayasnowman]

This apparent disagreement between the OPEC members is, I suspect, just for public show. OPEC and in particular Saudi Arabia are deliberately overproducing with US insistance so as to put economic strain on Russia. OPEC is happy to go along with this to force out the 'weak' producers - Shale oil and deep sea drilling . The cost of production per barrel for these is between $50 -$60, whereas for OPEC its between $5 -$10/barrel)

As to the role of shale oil (and gas) - this is well overstated. The Bakken fields (One of the biggest producers of 'tight' oil) produce approx 0.5 million barrels a day. The reserves are about 7.5 billion barrels. Set these figures against a world wide daily production of appox 98 million barrels a day and an annually consumption of some 30 billion barrels. Bakken Oil represents 4 months supply.

Edited December 1, 2014 by pattayasnowman

[Nuddy]

The whole fuel industry is corrupt.

Is it any surprise especial here in TiT?

[monkeycountry]

Its worse than you think. The government is actually planning to raise LPG/NGV (and likely diesel too) prices despite the crude fall. PTT will benefit, but PTTGC will benefit even more as its input from PTT becomes cheaper while it is able to sell LPG/NGV at higher prices. It remains to be seen whether or not they will actually push it through given the potential public backlash.

You conveniently forgot to mention, or maybe you just did not know, that PTT is currently selling LPG/NGV way below break even price as ordered by the government. I do not recall the numbers, but we are talking something like a 30% loss on each liter/kilo sold.

Diesel is also heavily subsidized, although by the government, not PTT, which is why the government plans to raise that price too. Basically the government will just remove the subsidy.

PTT is currently refusing to build more LPG/NGV gas stations, I think there is around 500, as it makes no sense for them to increase sales only to lose even more money. (They are currently losing 20-30 billion baht/year on LPG/NGV). That is why you often see long queues at those stations. I believe the plan is for PTT to increase the amount of stations, in return for the price to be increased to reflect production cost. They will not make any money that way, but will at least avoid losing money.

PTT has a net profit of around 100 billion baht out of an annual turnover of around 3 trillion baht. In other words, while 100 billion is a lot of money, it only amounts to a profit margin of 3%. Much lower than almost any other profitable company in Thailand.

There may be a public backlash, but mainly because most people have no clue what they are talking about - as usual.

[cocopops]

Word on the street is the conventional oil boys are doing this to drive out the shale oilers who on average cost $80 barrel to produce. It won't take long to give them the message they can do this at anytime they please.

Big boy games. If you were heavily invested in shale oil I would be getting a little worried.

They do say this regards the majority of oil players.

However, Iran, Nigeria and Venezuela need more than $80 to balance their budgets ( $90-$100) whereas Qatar and the UAE need less.($40-$50)

They say the present prices will force out the smaller players in shale drilling but these present prices will have a huge adverse effect for future exploration in the oil world around the Globe.

Let's see, another crisis in the Middle East caused by Iran , Iraq or similar ( Libya) and I think prices will hit $80 again soon. There is already severe unrest through ISIS, Boko Haram and Libya with all the tribesmen. Putin has gone too far to back down and the guy is unstable enough to cause further crisis and worries in Europe and beyond.

From BB today:

To be sure, not all oil producers are suffering. The International Monetary Fund in October assessed the oil price different governments needed to balance their budgets. At one end were Kuwait, Qatar and the United Arab Emirates, which can break even with oil at about $70 a barrel. At the other extreme: Iran needs $136, and Venezuela and Nigeria $120. Russia can manage at $101 a barrel, the IMF said.

http://www.bloomberg.com/news/2014-11-30/oil-at-40-possible-as-market-transforms-caracas-to-iran.html

I don't know which numbers are correct, but your point stands - not all oil producers are equal.

Cartels that work by choking supply are only effective if nobody cheats. Arguably OPEC hasn't meant shit for decades for that reason.

[Pib]

Its worse than you think. The government is actually planning to raise LPG/NGV (and likely diesel too) prices despite the crude fall. PTT will benefit, but PTTGC will benefit even more as its input from PTT becomes cheaper while it is able to sell LPG/NGV at higher prices. It remains to be seen whether or not they will actually push it through given the potential public backlash.

You conveniently forgot to mention, or maybe you just did not know, that PTT is currently selling LPG/NGV way below break even price as ordered by the government. I do not recall the numbers, but we are talking something like a 30% loss on each liter/kilo sold.

Diesel is also heavily subsidized, although by the government, not PTT, which is why the government plans to raise that price too. Basically the government will just remove the subsidy.

PTT is currently refusing to build more LPG/NGV gas stations, I think there is around 500, as it makes no sense for them to increase sales only to lose even more money. (They are currently losing 20-30 billion baht/year on LPG/NGV). That is why you often see long queues at those stations. I believe the plan is for PTT to increase the amount of stations, in return for the price to be increased to reflect production cost. They will not make any money that way, but will at least avoid losing money.

PTT has a net profit of around 100 billion baht out of an annual turnover of around 3 trillion baht. In other words, while 100 billion is a lot of money, it only amounts to a profit margin of 3%. Much lower than almost any other profitable company in Thailand.

There may be a public backlash, but mainly because most people have no clue what they are talking about - as usual.

Can't speak to NVG/CNG, but the only other fuel product the govt currently subsidizes is LPG products to the tune of 5.59 baht per kilo as you will see in below snapshot from a Energy Policy and Planning Office of Thailand spreadsheet. A "negative" sign means the govt is actually chipping in money....however, you will see that are still apply some other taxes to LPG products which up the price another approx 1.5 baht on top of the ex-Refinery cost of 16.54 baht/kilo.

Diesel is not currently heavily subsidized from the point of the govt actually chipping in money to reduce the price, however they have "lowered" how much tax they normally charge which the govt then calls a subsidy since they are not collecting the normal tax amount. See the snapshot below.

Below is a snapshot for the current 1 Dec 14 fuel price structure which shows the various taxes on most fuel products...only where you see a "negative sign" before a number is a govt chipping in money....you will see the govt is still collecting plenty of tax revenue on almost all fuel products. Go to this eppo.go.th weblink to see current/past cost structure of fuel products which shows the ex-refinery cost, taxes/subsides, marketing margin (ie., fuel station profit per liter/kilo), etc.

[NanLaew]

Also in 2011 in west Tx. they discovered a reserve 30,000 feet down. They can drill to it but are trying to figure a way to pressurize it to get it to surface. It goes from Texas to Canadian border. It is the size of all known reserve's in the world today. The Permian basin has geared up to never stop pumping at this point. They don't like to see the price come down, but know eventually they will have the corner on the market. Notice that the US is trying to distance itself from Middle east, no longer dependent on that oil supply.

The Spraberry/Wolfcamp isn't physically that big and the reserve figures being bandied about are totally in the 'pull out of your ass' realm.

[elgordo38]

As a Canadian I look at pump prices here. They mostly are as high as Canada and in some cases higher. Where is the subsidy??The minimum wage here equates to about $10 to 11 a day here (some are making less) while in Canada it equates to $10 or 11 an HOUR so help me out here what am I missing. I also notice branded items here are the same or more than in Canada. I bought a small jar of peanut butter today for 158 bahts and in Canada I could buy a large one (at least 2 or 3 times bigger same brand) for the same price or less. Talk about cartels OPEC and such we have cartel prices in almost all branded items bought here in Thailand and in a lot of cases they are made right here in Thailand with Thai labor yet the internationals slap their brand on it and charge a world price. Yes I feel the whole world is governed by a small group of gougers and we are their ATM machines.

[MJP]

Still £1.25 a litre for diesel in Blighty.

[A1Str8]

I wait some more before i buy shares .

[Pib]

Still £1.25 a litre for diesel in Blighty.

And only about one-third of that cost is fuel cost; the bulk is duty/vat like shown in below graphic...plenty of tax being collected. Fuel taxes gone wild!

http://www.petrolprices.com/the-price-of-fuel.html

[spidermike007]

PROFITEERING, plain and simple, on the part of the PTT, and the government. I realize there are alot of price subsidies, and taxes. However those taxes should be applied as a percentage of the cost, and not a flat rate, as they currently are. That bloats the price, and simply provides the government with more money. It is blatantly unfair to the public. Prices should be dropping far further than they currently are.

[rakman]

Word on the street is the conventional oil boys are doing this to drive out the shale oilers who on average cost $80 barrel to produce. It won't take long to give them the message they can do this at anytime they please.

Big boy games. If you were heavily invested in shale oil I would be getting a little worried.

Just read the shale oil drillers can go as low as US $42/barrel. Pundit were saying oil wouldn't go below $70, but it has.

There is no such thing as "Big Oil". The biggest oil companies are the governments of Saudi, Iraq, Iran and Venezuela, plus a few others. They beat the largest oil companies by a huge margin.

There are many speculators in the oil market, and I suspect there are many who are getting spanked by the low prices.

High oil prices are a drag on the economy of the world. Since energy touches everything, lower prices for goods will take time, and will allow people to enjoy cheaper prices for just about everything and if driving, immediately more money in the pocket paying lower prices for fuel.

The "economistas" have used the high price of oil to hide the rampant inflation experienced almost everywhere. The fear of deflation has allowed the Central Banks to hammer the average and below average income earner.

[rakman]

Still £1.25 a litre for diesel in Blighty.

And only about one-third of that cost is fuel cost; the bulk is duty/vat like shown in below graphic...plenty of tax being collected. Fuel taxes gone wild!

http://www.petrolprices.com/the-price-of-fuel.html

Capture.JPG

In the link, the government punishes the oil companies by increasing the tax on them. But.. Economics 101, companies don't pay taxes. The companies raise their prices to cover the cost of the taxes. The consumer pays all the taxes.

Now, who's your friend? The government (uk example in the link) gets 80.83 p in direct taxes out of 137p per liter and the retailer gets 5p and the oil company, who find, extract, transport, purchase, refine, and deliver, while paying the government additional tax (while taking all the risks) gets only 51.97p per liter. Pretty amazing the oil companies do it at all.

[rakman]

As a Canadian I look at pump prices here. They mostly are as high as Canada and in some cases higher. Where is the subsidy??The minimum wage here equates to about $10 to 11 a day here (some are making less) while in Canada it equates to $10 or 11 an HOUR so help me out here what am I missing. I also notice branded items here are the same or more than in Canada. I bought a small jar of peanut butter today for 158 bahts and in Canada I could buy a large one (at least 2 or 3 times bigger same brand) for the same price or less. Talk about cartels OPEC and such we have cartel prices in almost all branded items bought here in Thailand and in a lot of cases they are made right here in Thailand with Thai labor yet the internationals slap their brand on it and charge a world price. Yes I feel the whole world is governed by a small group of gougers and we are their ATM machines.

Most of the higher price for western goods, even made in Thailand is Thai government taxes, duty and "import tax" (read western goods tax). Yes, you get to pay the tax from the higher prices, if you want the western goods.

[rakman]

Also in 2011 in west Tx. they discovered a reserve 30,000 feet down. They can drill to it but are trying to figure a way to pressurize it to get it to surface. It goes from Texas to Canadian border. It is the size of all known reserve's in the world today. The Permian basin has geared up to never stop pumping at this point. They don't like to see the price come down, but know eventually they will have the corner on the market. Notice that the US is trying to distance itself from Middle east, no longer dependent on that oil supply.

The Spraberry/Wolfcamp isn't physically that big and the reserve figures being bandied about are totally in the 'pull out of your ass' realm.

You can pretty much draw a line from Siberia, through northern Alaska, Canada, the Bakkan oil fields, down though Texas, into the gulf of Mexico and down through Venezuela/Bolivia/Colombia/Paraguay oil region. It's a massive line of oil bigger than Saudi/Iran/Iraq in scope. Plus there is the North Sea/ UK / Norway fields. And there are huge deposits of coal in Germany.

Yes, we've pretty much found the cheapest oil, but as technology matures and innovates, the supply of oil is hardly finished.

Most initial "reserve" estimates are almost always understated with proven reserves many times the original estimate.