Oil prices.

[Thogey]

I've been reading a bit about the recent drop. I have little understanding of exactly how the market dictates price.
But from what I have read and as much as low gas is appealing, this might not be a good thing in the long run.

What happens if the largest companies survive and most of the others fail? Won't that lock up future monopolies?

I'm not sure this is a good thing because production in the US might get squeezed down.
Are we efficient enough to weather this? I know in the 80's lots of production got squeezed out, mostly because of our idiot Federal bureaucracy.

This current drop is described as being at the point of market capitulation. But, there is a built in market. All the oil produced will be sold.
Apparently it keeps well, not like pork bellies or oranges.

How do you see this playing out?

[Country]

It's an oil war. Saudis want to regain control; taking it away from minor players and making US fracking unprofitable. IMHO, low or even lower oil prices will be maintained at least through 2016.

[TwoAndAHalfCents]

I think Country pretty much nailed it.

[IdahoCopper]

The oil war started decades ago when Nixon closed the gold window and left the petrodollar.

Since that time it has been US policy to use other peoples' oil before the USA's. All environmental laws, regulations, and industry directives were to subdue domestic oil production in favor of importing oil, paid with worthless dollars.

Now that the dollar Ponzi is on its last gasp, US oil production is ramping up, and decimating the world price. Russia, the Middle East, and others are reeling because their oil teat is running dry. Only Norway had the foresight to cache the oil profits for a rainy day, now with nearly a trillion dollars in conserved assets today.

It makes me wonder just how smart are those Puppetmasters we toil under. Pretty frickin' smart, I'd say.

[Recyclersteve]

It is interesting that the common reason given for the price drop is that the Saudis want a price war. I don"t hear nearly as much talk about the issue being all the new production coming out of the Bakken shale formation in No. Dakota, Montana and Canada. So it does seem a lot like a media spin job.

Simple economics dictates that as you raise supply without a similar increase in demand, prices will fall. I don't disagree with the notion that the market fell sharply after OPEC said it would maintain current production, but markets can overreact. That doesn't mean oil won't continue to go lower and continue to take metals along for a ride.

Still this seems like a media spin job.

[Engineer]

It is interesting that the common reason given for the price drop is that the Saudis want a price war. I don"t hear nearly as much talk about the issue being all the new production coming out of the Bakken shale formation in No. Dakota, Montana and Canada. So it does seem a lot like a media spin job.

Simple economics dictates that as you raise supply without a similar increase in demand, prices will fall. I don't disagree with the notion that the market fell sharply after OPEC said it would maintain current production, but markets can overreact. That doesn't mean oil won't continue to go lower and continue to take metals along for a ride.

Still this seems like a media spin job.

I agree.

If the Saudis are starting a price war, it's most likely because it furthers the agenda of TPTB. If history is any guide, it's probably being done to undermine non-dollar oil deals, hurt Russia, etc.

Us little guys can't control the big picture, but we can stock up while the prices are low.

[knibloe]

I think that the price drop has several agendas behind it.

1. Saudis want to squeeze US production to a point below the cost of shale oil production.
2. The current shale oil play in the US is open to anyone. There are many small players and recent start ups. The big oil companies do not like this. I believe that Thogey is right. The squeeze is on the smaller players in order to restore the monopoly to the big guys.
3. I had not thought about the other producers of oil like Russia or even ISIS. The Saudis have enough money that they can weather low prices. Other parts of the world depend very heavily on the oil revenue to survive.

I agree that it is good short term, but am not so optimistic about the future. It was suggested that we stock up now. I wish that we could purchase gasoline and have it keep, but that isn't possible is it?

[68Camaro]

Price drop is lower demand, period. Thats not a good thing because less demand means things are not going well with manufacturers and consumers in the world no matter what tptb or msm say.

It also means simply that the oil producers aren't willing to back off on their production in order to try to balance demand and try to keep prices higher. Those reasons might be various and certainly at this point are speculative. Might OPEC desire to put the hurt on US shale oil? Sure. Might several countries simply be addicted to the income and need to pump no matter the price? Sure. Maybe several other reasons. And maybe all the above.

[knibloe]

Price drop is lower demand, period. Thats not a good thing because less demand means things are not going well with manufacturers and consumers in the world no matter what tptb or msm say.

Can't argue with that.

[Sheikh_yer_Bu'Tay]

The oil war started decades ago when Nixon closed the gold window and left the petrodollar.

Since that time it has been US policy to use other peoples' oil before the USA's. All environmental laws, regulations, and industry directives were to subdue domestic oil production in favor of importing oil, paid with worthless dollars.

Now that the dollar Ponzi is on its last gasp, US oil production is ramping up, and decimating the world price. Russia, the Middle East, and others are reeling because their oil teat is running dry. Only Norway had the foresight to cache the oil profits for a rainy day, now with nearly a trillion dollars in conserved assets today.
.

Spot on!!

I don't fully understand this myself. The Saudis can sell 100% of their oil. Demand should still be strong in spite of N. American crude. (Or am I behind the times?)

At it's low point in the 1980's American Oil just fell apart. The Saudis played a big part in that. IF you knew how to buy into the Oil Patch, it was a buyer's market. It took 28 yrs but now those savvy buyers are making big profits!

[68Camaro]

Its all about supply relative to demand. Oil is still being consumed at high levels but not as high as the levels being produced. So the price falls.

Oil is unlike the PM market. While PMs can be easily manipulated with paper because relatively little is truly consumed and if needed more can be brought to the market relatively quickly via price increases, with oil a true supply excess or shortage will make itself known in the price.

[Thogey]

Oil below 58! When I started this thread it was described a "capitulation".

That was 20 dollars ago.