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

[rakman]

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.

As most "promising" technologies usually state they will be "breakthrough" if they scale, are stable and actually meet expectations in production and cost. Most of these "promising" technologies never make it out of the lab.

We'll probably never see, at least in our lifetimes, a commercial airliner (size of Boeing or Airbus) powered by batteries.

[NeverSure]

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?

The same reason that a grocery store raises prices on existing stock if replacement stock is going to cost more. They don't price based on what they paid, but rather on what it will cost to replace. If they didn't they would run out of capital for replacement of stock.

[NeverSure]

Regular unleaded gasoline 22 baht per liter where I am in the US today.

[NeverSure]

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."

555. We have a joke that when batteries are dead they are given away free of charge.

[IMA_FARANG]

Many oil companies run a "vertical Monopoly scheme".

The actual cost of the extraction of the oil from the ground is less than 20% (often considerably less) than the ultimate cost at the retailers petrol station,

For that reason, it is not necessarily true that reduction in the cost of a barrel of oil is quickly evident in the cost of petrol products at the consumer.

In fact, much of the cost of oil products at the consumer is costs "added on" in the chain up from crude extraction to finished petrol at the pump that the consumer buys.

If cost at the pump, does indeed start to show a decline for the consumers, it will be some time in the future before that is shown.

There is quite a lot of "working space" up from the bottom to the top in that "vertical monopoly" ladder for extra costs to be found to raise the end cost to the consumer.

That's how the oil giants make their profits .... those hidden charges and profits.

When I worked in Saudi Arabia, the actual cost of a gallon of petrol at the pump was raised from (after conversion and exchange rates) about 5 U.S. cents a gallon to about 12 U.S. cents a gallon.

Much of that increase was revenue for the Saudi government in the form of tax revenue to fund weapon purchases for the Royal Saudi Air force, the army, and the National Guard modernization programs.

That was the official Saudi Government rate at the time when consumers in the U.S. were screaming in outrage because the price per gallon at the pump in the U.S. had gone over 2.50 dollars a gallon.

(That was many years ago, now),

[fletchsmile]

Part of it is just oil companies taking the opportunity to make money. Prices fall pass them on slowly. Prices rise pass them on quickly.

Part of it is also related to accounting treatment. Stock is often held on the balance sheet at the lower of cost and net realisable value (NRV) - although can vary depending on differing policies and countries' practices. Hence although the new stock coming is is lower price, the older stock will have been a higher price. If they have to revalue the old stock they suffer a loss, even though new stock coming thru is cheaper. Hence to mitigate a large potential loss on stock they keep the revenue side.

(In reverse, given stock is held at lower of cost and NRV, there isn't necessarily the mark up gain on old stock)

There are also other reasons in play, eg hedging/fixed rate contacts.

Difficult to get away from the cynical view its opportunist to extent at least though

Cheers

Fletch

Edited December 2, 2014 by fletchsmile

[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.

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.

Is this what they teach geologists these days?

That's basically a line drawn around the boundaries of ALL CURRENTLY KNOWN MAJOR NON MIDDLE EAST OIL PRODUCING REGIONS and proclaiming that this is somehow a new frontier of oil exploration. I could easily draw a line around Europe and label it 'location of most countries using the Euro currency' or around Scotland and flag it 'place where men wear kilts' or another around Australia and label it 'region with most kangaroos'.

The earth sciences are exactly that, a science. But the science dictates that the proof comes through exploration. Claiming that one has found loads of new oil and one only needs to drill sideways and pressurise it into production is in the realm of snake oil sales... and those desperately seeking the less savvy investor.

I agree that there's no end to finding new reserves but claiming that there's a vast, contiguous, deep underground puddle that just needs technology to catch up is far-fetched.

[heionus heretic]

under $60 now

and discounting...

[Soutpeel]

under $60 now

and discounting...

Don't wet your panties, it will be back at circa 100 USD a barrel by mid next year

[heionus heretic]

under $60 now

and discounting...

Don't wet your panties, it will be back at circa 100 USD a barrel by mid next year

i trust my own crystal ball before most others and it isnt saying that. what do you base your prediction on?

.........

not near term but definitely a longer term factor

http://www.thaivisa.com/forum/topic/777524-toyota-rolls-out-worlds-first-mass-market-fuel-cell-car/

Edited December 12, 2014 by heionus heretic

[Pib]

Yea, just doing some googling to pull up links on projected 2015 prices by various crystal ball users and practically all are forecasting amounts well below $100/barrel. Personally, I prefer a drunken dart throw for commodity/stock market forecasts.