Author Topic: Where is the bottom for crashing oil prices?  (Read 45295 times)

DarinC

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Re: Where is the bottom for crashing oil prices?
« Reply #100 on: January 13, 2015, 11:00:09 PM »
The bottom might be pretty low. I remember <$15/bbl oil and <$1/gallon gas 15 years ago.

Course, that didn't last long, with oil prices "soaring" to $30/bbl on their way to $100+/bbl ~8 years later.

http://news.bbc.co.uk/2/hi/business/644028.stm

dungoofed

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Re: Where is the bottom for crashing oil prices?
« Reply #101 on: January 14, 2015, 02:32:56 AM »
http://ftalphaville.ft.com/2015/01/12/2084942/a-capital-contango-and-why-oil-storage-economics-may-be-dead/

(you need to log in to view.... or just load it on Google Cache)

This was an interesting article on why "this time it's different"


James

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Re: Where is the bottom for crashing oil prices?
« Reply #102 on: January 14, 2015, 08:18:01 AM »
http://ftalphaville.ft.com/2015/01/12/2084942/a-capital-contango-and-why-oil-storage-economics-may-be-dead/

(you need to log in to view.... or just load it on Google Cache)

This was an interesting article on why "this time it's different"


I read this article yesterday also, worth a read. I don't buy the "this time is different" story line any more than I buy the "this time is the same" story. Every time is different, which is why it isn't worth trying to time markets without some sort of special knowledge or study. But I still love reading about it and trying to figure it out... :D

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #103 on: January 14, 2015, 08:27:12 AM »
Perhaps lets wait for some real pain to set in (small/leveraged/unhedged E&P and oil service companies going bankrupt), energy hedge funds shutting down, wells getting capped, before we start making educating guesses that the bottom is in. If we see some of that, and then you see a headline in a major magazine or newspaper that oil is going back to $10/barrel, I would think the real bottom should be close.

Bob W

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Re: Where is the bottom for crashing oil prices?
« Reply #104 on: January 14, 2015, 08:44:57 AM »
The bottom might be pretty low. I remember <$15/bbl oil and <$1/gallon gas 15 years ago.

Course, that didn't last long, with oil prices "soaring" to $30/bbl on their way to $100+/bbl ~8 years later.

http://news.bbc.co.uk/2/hi/business/644028.stm

Shit yeah!  Remember the Clinton Administration?  Sub $1 gas rocked.  If you look at the long term chart the period we have been in is really an anomaly in pricing.  $15-20 a barrel I more realistic and I think that the Saudis are inclined to let it rest there at some point. 

Terrestrial

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Re: Where is the bottom for crashing oil prices?
« Reply #105 on: January 14, 2015, 10:02:06 AM »
My 2 cents...I don't agree that the Saudi's/OPEC will be inclined to let oil sit at 10-20 per barrel, because there is not an economic benefit for them to do so.   There may be a small 'screw US producers' benefit, which while satisfying I don't think overcomes the need to maximize income.  The economic viability of the bulk of the US shale boom I think hinges on oil being in the 50-70 range depending on the field/method/etc.  Saudi's don't need oil to be at $20 per barrel, at that price they are just burning through their only really important natural resource to sell it at a huge discount.  Their oil is cheap to get out of the ground so they want as good a margin as possible, I would imagine ideally they want oil to be at the point where they maximize their price but are still low enough to keep the bulk of alternative extraction methods economically non-viable....maybe 40-ish barrel?  Let them burn through their reserves selling it cheap, shale oil will still be there when we need it. 

My personal opinion is that oil under 50 is fine with me.  For the small portion of the companies in our economy that are negatively affected, the potential stimulus effect to the bulk of other companies and consumers having lower expenses/saving money is an overall boon to the economy.  Companies like Fedex and Delta Airlines etc are more profitable when fuel is cheap.  I hear that auto sales of monstrous SUV/Truck clown-mobiles are now in the rise again because of the perception of cheap gas which will help out auto companies and their suppliers all the way down the line.  The Macy's and Walmart's and Amazon's are going to sell more consumer goods when people are spending less $$ on gas.  Companies that use oil/petroleum as an input to goods production for things like plastics will spend less on raw material.  In general especially for a country so levered to consumer spending I'd say it's a positive.  I don't know an exact number but I would guess the oil/gas industry make up maybe...10-15% of our economy?  And a sizable portion of that is still based on 'traditional' extraction that might not like lower oil prices but it's not going to bankrupt them.  Companies like refiners will be relatively fine, lower oil isn't directly a huge blow as long as the crack spreads remain intact.  I think what you're left with is a relatively minor portion of the economy that is truly devastated by cheap oil.

My only personal hesitation is that I feel like advances in alternative energy sources, hybrid/electric cars, etc, (things I am generally in favor of) are primarily driven by when oil prices are high because they become more economically necessary. 
« Last Edit: January 14, 2015, 01:55:32 PM by Terrestrial »

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #106 on: January 14, 2015, 11:00:03 AM »
My personal opinion is that oil under 50 is just fine with me.  For the small portion of the companies in our economy that are negatively affected the potential stimulus effect of the bulk of other companies and consumers saving money is a boon to the economy.  Let them burn through their reserves selling it cheap, shale oil will still be there when we need it.

Yeah I pretty much agree. For everyone saying low oil is going to crash our economy, we forget that it helps out a lot of other industries as well as the consumer. Although I haven't read the numbers, I would think we could balance it out. The '90s proved that you could have low oil prices in the middle of an economic boom.

dragoncar

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Re: Where is the bottom for crashing oil prices?
« Reply #107 on: January 14, 2015, 11:11:44 AM »
The bottom might be pretty low. I remember <$15/bbl oil and <$1/gallon gas 15 years ago.

Course, that didn't last long, with oil prices "soaring" to $30/bbl on their way to $100+/bbl ~8 years later.

http://news.bbc.co.uk/2/hi/business/644028.stm

Shit yeah!  Remember the Clinton Administration?  Sub $1 gas rocked.  If you look at the long term chart the period we have been in is really an anomaly in pricing.  $15-20 a barrel I more realistic and I think that the Saudis are inclined to let it rest there at some point.

I was looking at an inflation adjusted chart recently and the average price in today's dollars was something like $40/bbl.  so we are close to the average

RapmasterD

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Re: Where is the bottom for crashing oil prices?
« Reply #108 on: January 14, 2015, 12:00:53 PM »
I almost never buy individual stocks, so whatever you do, don't follow my lead here.

I just allocated 2% of my stock portfolio toward a purchase of BP shares.

James

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Re: Where is the bottom for crashing oil prices?
« Reply #109 on: January 15, 2015, 08:18:30 AM »
My only personal hesitation is that I feel like advances in alternative energy sources, hybrid/electric cars, etc, (things I am generally in favor of) are primarily driven by when oil prices are high because they become more economically necessary.


This is true, but there is a silver lining in that alternatives will need to become even more efficient to survive. The additional competition will promote benefits that will pay out in the long run. Some will continue to develop alternatives, and for those that do the bar is set even higher. And the market might make that bar of efficiency to keep it slightly competitive given some time, so I don't see this as a total down side for green energy.


We shouldn't underestimate demand and the free market... and the demand for green energy will continue for reasons other than cost.

Bob W

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Re: Where is the bottom for crashing oil prices?
« Reply #110 on: January 15, 2015, 09:16:09 AM »
The bottom might be pretty low. I remember <$15/bbl oil and <$1/gallon gas 15 years ago.

Course, that didn't last long, with oil prices "soaring" to $30/bbl on their way to $100+/bbl ~8 years later.

http://news.bbc.co.uk/2/hi/business/644028.stm

Shit yeah!  Remember the Clinton Administration?  Sub $1 gas rocked.  If you look at the long term chart the period we have been in is really an anomaly in pricing.  $15-20 a barrel I more realistic and I think that the Saudis are inclined to let it rest there at some point.

I was looking at an inflation adjusted chart recently and the average price in today's dollars was something like $40/bbl.  so we are close to the average

That may be accurate although incomes for most working people has been stagnant for over a decade now while gas prices have tripled (until recently).   So there has been virtually no "inflation" in wages.   A more accurate chart would compare income to the price of gas to income.  Here is a nice chart of the "suck" factor.  http://www.areavibes.com/economic-suck-factor/us/

It appears for a decade up until around 2002 gas consumed 1.75% of median income. From then it has risen to 4%.   For low paid workers this really does suck as they are probably closer to 25%. 

The price is pretty artificial since the Arabs can produce it for sub $20 per barrel.

I'm voting for sub $1 per gallon gas and think that is a fair pricing given supply/demand etc..

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #111 on: January 15, 2015, 10:36:27 AM »
A comparison of this year's crash to '08 and the '80s

'08 was a global financial crisis so if I had to make a bet, I would guess we'd be more like the '85 crash.

arebelspy

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Re: Where is the bottom for crashing oil prices?
« Reply #112 on: January 15, 2015, 10:41:02 AM »
A comparison of this year's crash to '08 and the '80s

Nice chart, thanks.
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dragoncar

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Re: Where is the bottom for crashing oil prices?
« Reply #113 on: January 15, 2015, 02:51:53 PM »
The bottom might be pretty low. I remember <$15/bbl oil and <$1/gallon gas 15 years ago.

Course, that didn't last long, with oil prices "soaring" to $30/bbl on their way to $100+/bbl ~8 years later.

http://news.bbc.co.uk/2/hi/business/644028.stm

Shit yeah!  Remember the Clinton Administration?  Sub $1 gas rocked.  If you look at the long term chart the period we have been in is really an anomaly in pricing.  $15-20 a barrel I more realistic and I think that the Saudis are inclined to let it rest there at some point.

I was looking at an inflation adjusted chart recently and the average price in today's dollars was something like $40/bbl.  so we are close to the average

That may be accurate although incomes for most working people has been stagnant for over a decade now while gas prices have tripled (until recently).   So there has been virtually no "inflation" in wages.   A more accurate chart would compare income to the price of gas to income.  Here is a nice chart of the "suck" factor.  http://www.areavibes.com/economic-suck-factor/us/

It appears for a decade up until around 2002 gas consumed 1.75% of median income. From then it has risen to 4%.   For low paid workers this really does suck as they are probably closer to 25%. 

The price is pretty artificial since the Arabs can produce it for sub $20 per barrel.

I'm voting for sub $1 per gallon gas and think that is a fair pricing given supply/demand etc..

Was on mobile before, here's a graph:



But obviously "inflation adjusted" is just a basket of goods, and not (as you mention) necessarily related to income.

Here's one for gas:

« Last Edit: January 15, 2015, 02:55:37 PM by dragoncar »

cuethebrew

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Re: Where is the bottom for crashing oil prices?
« Reply #114 on: January 16, 2015, 08:04:43 PM »
My 2 cents...I don't agree that the Saudi's/OPEC will be inclined to let oil sit at 10-20 per barrel, because there is not an economic benefit for them to do so.   There may be a small 'screw US producers' benefit, which while satisfying I don't think overcomes the need to maximize income.  The economic viability of the bulk of the US shale boom I think hinges on oil being in the 50-70 range depending on the field/method/etc.  Saudi's don't need oil to be at $20 per barrel, at that price they are just burning through their only really important natural resource to sell it at a huge discount.  Their oil is cheap to get out of the ground so they want as good a margin as possible, I would imagine ideally they want oil to be at the point where they maximize their price but are still low enough to keep the bulk of alternative extraction methods economically non-viable....maybe 40-ish barrel?  Let them burn through their reserves selling it cheap, shale oil will still be there when we need it. 

My personal opinion is that oil under 50 is fine with me.  For the small portion of the companies in our economy that are negatively affected, the potential stimulus effect to the bulk of other companies and consumers having lower expenses/saving money is an overall boon to the economy.  Companies like Fedex and Delta Airlines etc are more profitable when fuel is cheap.  I hear that auto sales of monstrous SUV/Truck clown-mobiles are now in the rise again because of the perception of cheap gas which will help out auto companies and their suppliers all the way down the line.  The Macy's and Walmart's and Amazon's are going to sell more consumer goods when people are spending less $$ on gas.  Companies that use oil/petroleum as an input to goods production for things like plastics will spend less on raw material.  In general especially for a country so levered to consumer spending I'd say it's a positive.  I don't know an exact number but I would guess the oil/gas industry make up maybe...10-15% of our economy?  And a sizable portion of that is still based on 'traditional' extraction that might not like lower oil prices but it's not going to bankrupt them.  Companies like refiners will be relatively fine, lower oil isn't directly a huge blow as long as the crack spreads remain intact.  I think what you're left with is a relatively minor portion of the economy that is truly devastated by cheap oil.

My only personal hesitation is that I feel like advances in alternative energy sources, hybrid/electric cars, etc, (things I am generally in favor of) are primarily driven by when oil prices are high because they become more economically necessary.


That's not the case as it stands now. The savings that the average American is experiencing from cheaper oil isn't going back into the economy. It's going either a) into savings or b) to pay off debt. Good for the individual, and over the long term that will eventually lead to more money to put back into the economy, but for the short term the economy is going to suffer. Not to mention its only a matter of time before the highly leveraged shale guys start to go under. It's going to be an interesting ride the next few months..

dragoncar

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Re: Where is the bottom for crashing oil prices?
« Reply #115 on: January 16, 2015, 09:19:20 PM »
My 2 cents...I don't agree that the Saudi's/OPEC will be inclined to let oil sit at 10-20 per barrel, because there is not an economic benefit for them to do so.   There may be a small 'screw US producers' benefit, which while satisfying I don't think overcomes the need to maximize income.  The economic viability of the bulk of the US shale boom I think hinges on oil being in the 50-70 range depending on the field/method/etc.  Saudi's don't need oil to be at $20 per barrel, at that price they are just burning through their only really important natural resource to sell it at a huge discount.  Their oil is cheap to get out of the ground so they want as good a margin as possible, I would imagine ideally they want oil to be at the point where they maximize their price but are still low enough to keep the bulk of alternative extraction methods economically non-viable....maybe 40-ish barrel?  Let them burn through their reserves selling it cheap, shale oil will still be there when we need it. 

My personal opinion is that oil under 50 is fine with me.  For the small portion of the companies in our economy that are negatively affected, the potential stimulus effect to the bulk of other companies and consumers having lower expenses/saving money is an overall boon to the economy.  Companies like Fedex and Delta Airlines etc are more profitable when fuel is cheap.  I hear that auto sales of monstrous SUV/Truck clown-mobiles are now in the rise again because of the perception of cheap gas which will help out auto companies and their suppliers all the way down the line.  The Macy's and Walmart's and Amazon's are going to sell more consumer goods when people are spending less $$ on gas.  Companies that use oil/petroleum as an input to goods production for things like plastics will spend less on raw material.  In general especially for a country so levered to consumer spending I'd say it's a positive.  I don't know an exact number but I would guess the oil/gas industry make up maybe...10-15% of our economy?  And a sizable portion of that is still based on 'traditional' extraction that might not like lower oil prices but it's not going to bankrupt them.  Companies like refiners will be relatively fine, lower oil isn't directly a huge blow as long as the crack spreads remain intact.  I think what you're left with is a relatively minor portion of the economy that is truly devastated by cheap oil.

My only personal hesitation is that I feel like advances in alternative energy sources, hybrid/electric cars, etc, (things I am generally in favor of) are primarily driven by when oil prices are high because they become more economically necessary.


That's not the case as it stands now. The savings that the average American is experiencing from cheaper oil isn't going back into the economy. It's going either a) into savings or b) to pay off debt. Good for the individual, and over the long term that will eventually lead to more money to put back into the economy, but for the short term the economy is going to suffer. Not to mention its only a matter of time before the highly leveraged shale guys start to go under. It's going to be an interesting ride the next few months..

Source? Savings rate seems to be going down since June

http://www.tradingeconomics.com/united-states/personal-savings

dungoofed

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Re: Where is the bottom for crashing oil prices?
« Reply #116 on: January 16, 2015, 09:22:24 PM »
One more data point, when I asked my American friend what he was going to do with all the money he was saving from lower (gas) prices he replied that he felt it would be absorbed by his increasing health insurance costs.

capital

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Re: Where is the bottom for crashing oil prices?
« Reply #117 on: January 16, 2015, 09:24:27 PM »
Used Prius prices probably move pretty strongly in concert with the oil price. Are used Priuses dirt cheap now, or do they need a few more months?

cuethebrew

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Re: Where is the bottom for crashing oil prices?
« Reply #118 on: January 17, 2015, 09:56:05 AM »
That's not the case as it stands now. The savings that the average American is experiencing from cheaper oil isn't going back into the economy. It's going either a) into savings or b) to pay off debt. Good for the individual, and over the long term that will eventually lead to more money to put back into the economy, but for the short term the economy is going to suffer. Not to mention its only a matter of time before the highly leveraged shale guys start to go under. It's going to be an interesting ride the next few months..
[/quote]

Source? Savings rate seems to be going down since June

http://www.tradingeconomics.com/united-states/personal-savings
[/quote]

Data from the US Census Bureau suggesting retail sales down in December - http://bit.ly/1INVb2d

Revolving credit down in November- http://www.federalreserve.gov/releases/g19/current/

pdxvandal

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Re: Where is the bottom for crashing oil prices?
« Reply #119 on: January 17, 2015, 10:30:11 AM »
Just bought 1k of Chevron stock and 1k of Vanguard Energy ETF last week. Plan to hold onto them for at least 2-3 years.

LordSquidworth

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Re: Where is the bottom for crashing oil prices?
« Reply #120 on: January 17, 2015, 11:51:27 AM »
Right now the US and Saudi Arabia have decided to put the squeeze on Iran/Russia.

Even though there is only limited oil coming from Libya/Iraq, there is an excess of oil in the market and it is causing the drop in prices.

Iran needs oil to be $120/barrel to run the country.

My feeling is that the US/Saudi squeeze will not stop till $60/barrel.

Again, this is what I think, who knows what will happen.

Wrong. Saudi is putting the squeeze on everyone. They'll drive a bunch of the US frackers under if oil prices stay where they're at for long.

James

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Re: Where is the bottom for crashing oil prices?
« Reply #121 on: January 17, 2015, 02:20:07 PM »
Whatever is happening isn't fine by me, it provides some creative destruction in the oil market which is good in the long term. US frackers will become more careful and efficient. Everyone spending money on energy will save some for investment, spending, or just stuffing under the mattress. Economies built on high oil prices will learn how to cope with lower oil prices or dissolve. It is capitalism and I love it, even though it is painful for some. The end result is so much better than the alternative.

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #122 on: January 26, 2015, 07:09:04 PM »
Got this from a pro oil trader today. All it takes is several million bucks to pull it off. Who's with me?

"There's definitely money to be made at these levels in the "oil trading" world... it's called "Floating Storage".  You buy & store physical oil at $45/bbl and then sell the Dec 2017 futures (for example) @ $62.75 = $17.75/bbl minus storage costs.  in November 2017 you deliver your barrels out of storage against those Dec 2017 futures that you sold today.  This is what many players in the oil world are doing with this steep contango.  Problem is as Dec 2017 futures rise, you are short from $62.75 and need to come up with the daily margin.  Also, to make any real money on the trade you'd need to do at least 500K bbls... that's a lot of potential money in margin calls if oil rises dramatically over the 3 yrs."

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Re: Where is the bottom for crashing oil prices?
« Reply #123 on: January 26, 2015, 07:33:31 PM »
From an environmental perspective, I'm all for crashing oil prices. Because we like to travel to Canada, where the economy is closely tied to the price of oil, I've been following the effects of the oil price on the CAD and Canadian stocks.

Just bought some Canadian bank stocks (RY & BNS). Their prices are down about 20% since the summer, but they are good old companies and the stocks pay a nice dividend. Wondering if I bought at the bottom or if they will fall further. It will be interesting to watch.

Also moving some more US$ to Canada since the CAD has dropped so low. Again, wondering if it's hit bottom, or will drop further.


dragoncar

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Re: Where is the bottom for crashing oil prices?
« Reply #124 on: January 26, 2015, 10:50:37 PM »
From an environmental perspective, I'm all for crashing oil prices. Because we like to travel to Canada, where the economy is closely tied to the price of oil, I've been following the effects of the oil price on the CAD and Canadian stocks.

Just bought some Canadian bank stocks (RY & BNS). Their prices are down about 20% since the summer, but they are good old companies and the stocks pay a nice dividend. Wondering if I bought at the bottom or if they will fall further. It will be interesting to watch.

Also moving some more US$ to Canada since the CAD has dropped so low. Again, wondering if it's hit bottom, or will drop further.

Wait... how is crashing oil good for the environment?  I'm guessing you mean less fracking even though it means more Co2?

jodelino

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Re: Where is the bottom for crashing oil prices?
« Reply #125 on: January 27, 2015, 07:57:30 AM »
Yes, I was thinking less fracking as that becomes less profitable.

But of course you are right: for many, low gas prices mean more driving and less incentive to buy fuel efficient cars. Alas.

Bob W

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Re: Where is the bottom for crashing oil prices?
« Reply #126 on: January 27, 2015, 03:27:59 PM »
Must have been a blip or something (I don't follow this).  Gas prices at the pump were around 1.66 for a week and then on Wednesday everyone went to 1.79.  Today it is back to 1.69 and I see barrel prices are 45.   

Oh well,  I'm still enjoying this immensely. 

Missouri is talking about raising gas taxes from 18 cents.  It appears the federal highway money has all but dried up and now we only have 350 million per year to maintain something like 10K of roadways.  (seems like 35K per mile should cut it?)

I'm proud that Missouri is kinda efficient in our road department.  We have one of the largest road systems in the US and one of the lowest budgets.    I bet it will become a whole lot more efficient very soon as I doubt Missourians will vote for an increase. 

So here are some ideas for Missouri ( who are more typical than MMM in their spending approach) that could be applied in most states -

1.  quit mowing along highways and bid out the grass harvest to farmers.  Bam a cost now becomes an income.  At very least bid out the process instead of hiring highly paid government workers. Just quit mowing already.
2.  Sell advertising on overpasses,  road side signs (like right on the road),  painted on the pavement etc..
3.  Establish those toll roads and let private non profits run them. 
4.  Do away with the gas tax altogether and simply charge every person 100 per year in extra taxes.  (sales) This would have the effect of truckers choosing to route through Missouri.  Tourist would love us too as we would have the lowest gas price in the US.
5.  Oh and if anyone from Missouri is reading this -- How about doing away with all gas taxes and simply tax internet purchases at the same rate as any other retail taxes.  That is something like 500M.
6.  Start some programs that encourage less driving.  Work from home promotions,  efficient driving promotions, encourage businesses to stager start and end work hour times,  promote internet based and home based employment.

Really if the US government got behind a MMM approach to car usage -- work from home,  bike a little,  walk,  quit all the trips, carpool,  live close to work, drive highly efficient cars etc., we could see a 30-50% reduction in US gas usage in just a few years and that would only lead to less demand,  less road deterioration and lower prices.  What a virtuous cycle that would be.   

Sorry about my rant on Missouri gas taxes -- won't try to derail this thread again. 



dividendman

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Re: Where is the bottom for crashing oil prices?
« Reply #127 on: January 27, 2015, 09:08:14 PM »
Bob W - I like your ideas. What about a per mile tax? Those who use the roads more pay more?

I heard on the radio they were thinking of implementing in this California - at the yearly car registration time they will also track mileage and charge for it.

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Re: Where is the bottom for crashing oil prices?
« Reply #128 on: January 27, 2015, 09:26:25 PM »
Bob W - I like your ideas. What about a per mile tax? Those who use the roads more pay more?

I heard on the radio they were thinking of implementing in this California - at the yearly car registration time they will also track mileage and charge for it.
That would just be awesome. Collect it at the state level for the state's discretion, but at a federal mandated level.

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Re: Where is the bottom for crashing oil prices?
« Reply #129 on: January 27, 2015, 10:24:14 PM »
My 2 cents...I don't agree that the Saudi's/OPEC will be inclined to let oil sit at 10-20 per barrel, because there is not an economic benefit for them to do so.   There may be a small 'screw US producers' benefit, which while satisfying I don't think overcomes the need to maximize income.  The economic viability of the bulk of the US shale boom I think hinges on oil being in the 50-70 range depending on the field/method/etc.  Saudi's don't need oil to be at $20 per barrel, at that price they are just burning through their only really important natural resource to sell it at a huge discount.  Their oil is cheap to get out of the ground so they want as good a margin as possible, I would imagine ideally they want oil to be at the point where they maximize their price but are still low enough to keep the bulk of alternative extraction methods economically non-viable....maybe 40-ish barrel?  Let them burn through their reserves selling it cheap, shale oil will still be there when we need it. 

My personal opinion is that oil under 50 is fine with me.  For the small portion of the companies in our economy that are negatively affected, the potential stimulus effect to the bulk of other companies and consumers having lower expenses/saving money is an overall boon to the economy.  Companies like Fedex and Delta Airlines etc are more profitable when fuel is cheap.  I hear that auto sales of monstrous SUV/Truck clown-mobiles are now in the rise again because of the perception of cheap gas which will help out auto companies and their suppliers all the way down the line.  The Macy's and Walmart's and Amazon's are going to sell more consumer goods when people are spending less $$ on gas.  Companies that use oil/petroleum as an input to goods production for things like plastics will spend less on raw material.  In general especially for a country so levered to consumer spending I'd say it's a positive.  I don't know an exact number but I would guess the oil/gas industry make up maybe...10-15% of our economy?  And a sizable portion of that is still based on 'traditional' extraction that might not like lower oil prices but it's not going to bankrupt them.  Companies like refiners will be relatively fine, lower oil isn't directly a huge blow as long as the crack spreads remain intact.  I think what you're left with is a relatively minor portion of the economy that is truly devastated by cheap oil.

My only personal hesitation is that I feel like advances in alternative energy sources, hybrid/electric cars, etc, (things I am generally in favor of) are primarily driven by when oil prices are high because they become more economically necessary.


That's not the case as it stands now. The savings that the average American is experiencing from cheaper oil isn't going back into the economy. It's going either a) into savings or b) to pay off debt. Good for the individual, and over the long term that will eventually lead to more money to put back into the economy, but for the short term the economy is going to suffer. Not to mention its only a matter of time before the highly leveraged shale guys start to go under. It's going to be an interesting ride the next few months..

Source? Savings rate seems to be going down since June

http://www.tradingeconomics.com/united-states/personal-savings

Saudis are fine with oil at any price for the next two years. Believe it. What many fail to understand is that a lot of the other oil producing countries are budget based economies. This means the state sets a budget based on projected revenues--when there is a shortfall there is a lot of pain. While it may make sense for the countries on a business level to reduce the number of barrels it sells, they are not a business. So instead, they actually pump MORE oil into the system to hit their budgets. Until their budgets are based on much cheaper oil (probably not 2015) I think you will find that the pain will continue, and we could see some shocking oil prices. They will reverse themselves, but only after we witness some significant bankruptcies and pain in the oil sector. Not until OPEC demonstrates their seriousness on owning 40% of the market. Only once OPEC achieves its goal and the other market players behave will we see oil rise. This is not happening soon.

tennisray

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Re: Where is the bottom for crashing oil prices?
« Reply #130 on: January 28, 2015, 01:00:06 PM »
I am a big believer in not timing investments, but I do think that it is smart to buy on dips.  Yes, I hear that oil could go as low as $20/barrel and how this time "is different".  I know the economy is too big to predict, but I feel like I'm getting a deal on energy companies (VDE ETF and RIG as a speculative bet).  I plan on DCA'ng the next 6 months into them. 

Many said that the housing market would take DECADES to come back, but housing turned around in a flash.  I'm not necessarily expecting that, but I remember all the reasons they gave about inventory/millenials not wanting to own/moving to cities.  Same reasons bears are giving on oil.  Also, I don't believe people have long memories...already people are buying more trucks than cars again.

Of course, I could be cursing myself in a year, but hoping for the best!

RapmasterD

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Re: Where is the bottom for crashing oil prices?
« Reply #131 on: January 28, 2015, 02:37:32 PM »
I am a big believer in not timing investments, but I do think that it is smart to buy on dips.  Yes, I hear that oil could go as low as $20/barrel and how this time "is different".  I know the economy is too big to predict, but I feel like I'm getting a deal on energy companies (VDE ETF and RIG as a speculative bet).  I plan on DCA'ng the next 6 months into them. 

Many said that the housing market would take DECADES to come back, but housing turned around in a flash.  I'm not necessarily expecting that, but I remember all the reasons they gave about inventory/millenials not wanting to own/moving to cities.  Same reasons bears are giving on oil.  Also, I don't believe people have long memories...already people are buying more trucks than cars again.

Of course, I could be cursing myself in a year, but hoping for the best!

+1
...particularly if you're talking about long investment horizons of a decade or more. Big oil companies are well run, and the fact that they're being pooped on right now (read this morning's WSJ) and aren't sexy like AAPL makes me even happier.

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #132 on: January 28, 2015, 02:59:48 PM »
Many said that the housing market would take DECADES to come back, but housing turned around in a flash.  I'm not necessarily expecting that, but I remember all the reasons they gave about inventory/millenials not wanting to own/moving to cities.  Same reasons bears are giving on oil.  Also, I don't believe people have long memories...already people are buying more trucks than cars again.

The other side of that argument is to look at the markets after the financial crisis that have not come back...like banks (especially foreign ones) and some commodities. IMO real estate bounced back because an organization with unlimited resources (the Fed), decided they wanted housing prices back up. Doubtful they will be willing to prop up the price of oil.

I'm not saying the price of oil is going to stay depressed for a decade, but not everything goes back up in a timeframe we would like.

defenestrate

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Re: Where is the bottom for crashing oil prices?
« Reply #133 on: January 28, 2015, 08:04:50 PM »
Many said that the housing market would take DECADES to come back, but housing turned around in a flash.  I'm not necessarily expecting that, but I remember all the reasons they gave about inventory/millenials not wanting to own/moving to cities.  Same reasons bears are giving on oil.  Also, I don't believe people have long memories...already people are buying more trucks than cars again.

The other side of that argument is to look at the markets after the financial crisis that have not come back...like banks (especially foreign ones) and some commodities. IMO real estate bounced back because an organization with unlimited resources (the Fed), decided they wanted housing prices back up. Doubtful they will be willing to prop up the price of oil.

I'm not saying the price of oil is going to stay depressed for a decade, but not everything goes back up in a timeframe we would like.

OPEC still owns about 40% of global oil output, so there are organizations that have seemingly unlimited resources that could (and at some point will) prop up the price of oil.

tennisray

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Re: Where is the bottom for crashing oil prices?
« Reply #134 on: January 29, 2015, 05:51:17 AM »
Many said that the housing market would take DECADES to come back, but housing turned around in a flash.  I'm not necessarily expecting that, but I remember all the reasons they gave about inventory/millenials not wanting to own/moving to cities.  Same reasons bears are giving on oil.  Also, I don't believe people have long memories...already people are buying more trucks than cars again.

The other side of that argument is to look at the markets after the financial crisis that have not come back...like banks (especially foreign ones) and some commodities. IMO real estate bounced back because an organization with unlimited resources (the Fed), decided they wanted housing prices back up. Doubtful they will be willing to prop up the price of oil.

I'm not saying the price of oil is going to stay depressed for a decade, but not everything goes back up in a timeframe we would like.

OPEC still owns about 40% of global oil output, so there are organizations that have seemingly unlimited resources that could (and at some point will) prop up the price of oil.

Yes, and Yes!  That's the problem with prediction...both points are valid.  I wouldn't be surprised if oil stays low...as per the charts provided that oil is now where it should be taking into account inflation.  HOWEVER, when oil was at $100, most "experts" believed there were good reasons (not speculators) why oil would NEVER go down below $70-$80...emerging countries, rising middle classes, more auto ownership overseas, even if the US produces there will be demand other places, etc.  The "experts" didn't see housing able to turn around so quickly, even though they knew that the FED was trying to prop up prices.  Why should I believe that they can now predict where oil will be?

My point in buying shares now is that I will never be sure of anything, but at least my downside vs upside does not seem terrible at these prices.  What I do know is that in 5 years, wherever oil prices are, all the "experts" will cherry pick all the "obvious" variables why oil prices are where they are (just like they did with the economy collapsing...hindsight is so easy).

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Re: Where is the bottom for crashing oil prices?
« Reply #135 on: January 29, 2015, 06:59:28 AM »
Only a single data point/anecdotal evidence probably, but one of my employer's clients is shutting down their project with us due to low oil prices. They're saying they expect this downturn to last year or two, so they're trimming most of the projects that aren't producing money at this time. Our project with them was cutting edge technology and wouldn't go commercial for another 2-3 years.

This is a highly reputable O&G company, one of the largest privately own US O&G companies. I can't say which one, but due to this, it's starting to sink in that we may be in for the long-haul. This company is extremely O&G market savvy, so if that's what they're doing, I'm taking notice.

I am no expert on this stuff, but I do work in O&G upstream so I have some working knowledge of the current climate. Anyway, my 2 cents.

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #136 on: January 30, 2015, 07:45:53 PM »
I work in Texas and we have several O&G clients. They are all slowing down. I haven't heard of massive layoffs yet but the effects are starting for sure. International drilling in the Middle East is still good but U.S. Is sucking wind.

DrF

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Re: Where is the bottom for crashing oil prices?
« Reply #137 on: February 02, 2015, 11:39:22 AM »
Is this a signal, or just noise?

Also, USO hit a 52 week low of $16.30 on 1-29-15.
« Last Edit: February 02, 2015, 12:49:42 PM by DrFunk »

GemJedi

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Re: Where is the bottom for crashing oil prices?
« Reply #138 on: February 02, 2015, 03:10:02 PM »
Rig counts are falling. The market is creating a bottom as unprofitable fields stop producing at these prices. It is therefore a one way bet to invest in major producers (one way but timing is unknown). Buy now and hold for the next few years and you will likely gain 40% to 50% in capital appreciation (most majors showing about a 30% to 40% drop from recent highs) while at the same time collecting nice (4.5% to 5.5%) dividends. True, dividends may decline for a short period but the majors are reported to be cutting costs sharply to preserve the dividend.The larger shareholders are doing a nice job holding management's feet to the fire to preserve dividends and we smaller investors can freeload on their efforts.

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #139 on: February 02, 2015, 04:16:57 PM »
Cheapest independent oil and gas companies by price to book value, buy the cheapest 30 and sell in 3 years. What could go wrong? :)

http://finviz.com/screener.ashx?v=121&f=ind_independentoilgas&o=pb

Edit: Made a Google Doc of the cheapest 30 stocks last night. You can track performance here: https://docs.google.com/spreadsheets/d/1qLtQav_NFEq44EpTXnOJZvsmHF4oXMczGchSbca0TkU/edit?usp=sharing
« Last Edit: February 03, 2015, 08:44:59 AM by hodedofome »

tennisray

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Re: Where is the bottom for crashing oil prices?
« Reply #140 on: February 03, 2015, 09:23:43 AM »
Cheapest independent oil and gas companies by price to book value, buy the cheapest 30 and sell in 3 years. What could go wrong? :)

http://finviz.com/screener.ashx?v=121&f=ind_independentoilgas&o=pb

Edit: Made a Google Doc of the cheapest 30 stocks last night. You can track performance here: https://docs.google.com/spreadsheets/d/1qLtQav_NFEq44EpTXnOJZvsmHF4oXMczGchSbca0TkU/edit?usp=sharing

Love it! Thanks for doing this!
I think it is interesting to see how just the news of oil companies cutting production is moving oil numbers so much the past 2 days.  I won't be surprised if this is just a temporary bump.  I was actually hoping prices would stay depressed until the summer so I could dca some more $ into oil.

DrF

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Re: Where is the bottom for crashing oil prices?
« Reply #141 on: February 03, 2015, 11:25:06 AM »
Cheapest independent oil and gas companies by price to book value, buy the cheapest 30 and sell in 3 years. What could go wrong? :)

http://finviz.com/screener.ashx?v=121&f=ind_independentoilgas&o=pb

Edit: Made a Google Doc of the cheapest 30 stocks last night. You can track performance here: https://docs.google.com/spreadsheets/d/1qLtQav_NFEq44EpTXnOJZvsmHF4oXMczGchSbca0TkU/edit?usp=sharing

Damn it!! I should have gotten in yesterday. Oh wait, I did.

Nice doc there hodedofome.

Edit: Hodedofome, how are you using the term "cheapest", because from the original link if I sort by price, it give a completely different list than what you are tracking in your google doc.
« Last Edit: February 03, 2015, 11:27:29 AM by DrFunk »

szucsgf

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Re: Where is the bottom for crashing oil prices?
« Reply #142 on: February 03, 2015, 11:34:43 AM »
Cheapest independent oil and gas companies by price to book value, buy the cheapest 30 and sell in 3 years. What could go wrong? :)

http://finviz.com/screener.ashx?v=121&f=ind_independentoilgas&o=pb

Edit: Made a Google Doc of the cheapest 30 stocks last night. You can track performance here: https://docs.google.com/spreadsheets/d/1qLtQav_NFEq44EpTXnOJZvsmHF4oXMczGchSbca0TkU/edit?usp=sharing

Damn it!! I should have gotten in yesterday. Oh wait, I did.

Nice doc there hodedofome.

Edit: Hodedofome, how are you using the term "cheapest", because from the original link if I sort by price, it give a completely different list than what you are tracking in your google doc.
He says in his post: by price to book (P/B) ratio.

The stock price alone gives very little information if anything at all.
« Last Edit: February 03, 2015, 11:41:19 AM by szucsgf »

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #143 on: February 03, 2015, 11:40:54 AM »
I sorted by price to book value, one of the classic value measures. It's probably listed as P/B. It's by far not the best value measure, but in a diversified list in a scenario like this (a big crash) it'll probably work good enough...I think.

My bro in law, who is a trader at an energy hedge fund, sent me their top 4 holdings a month ago. It's up 35% on an equal weight basis since then.

DrF

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Re: Where is the bottom for crashing oil prices?
« Reply #144 on: February 03, 2015, 12:07:44 PM »
Bottom?

$49.09 +/- $2.44 around Jan. 25th +/- 12 days. ;)

last I heard the cost per barrel for Aramco is about $18 dollars. Personal opinion is that the price of oil is currently lower than it "should" be.

/fortunetellingmodeoff

Do we have a winner?

anisotropy

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Re: Where is the bottom for crashing oil prices?
« Reply #145 on: February 05, 2015, 06:17:55 PM »
Bottom?

$49.09 +/- $2.44 around Jan. 25th +/- 12 days. ;)

last I heard the cost per barrel for Aramco is about $18 dollars. Personal opinion is that the price of oil is currently lower than it "should" be.

/fortunetellingmodeoff

Do we have a winner?

lol I want to win! Please let me win !

hodedofome

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Re: Where is the bottom for crashing oil prices?
« Reply #146 on: February 06, 2015, 09:12:52 AM »
Yet another chart comparing the current crash vs others since the '80s. The yellow bars are the size and duration of the current crash.

DrF

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Re: Where is the bottom for crashing oil prices?
« Reply #147 on: February 06, 2015, 11:03:52 AM »
Looks like you measured the current crash, and copy/pasted it to the others. Significance of the stars? Maybe similar type of crash (graphically)?? But not similar circumstantially?

Most of the analysis seems to be saying this thing is near done.

RichMoose

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Re: Where is the bottom for crashing oil prices?
« Reply #148 on: February 06, 2015, 01:39:15 PM »
Looks like you measured the current crash, and copy/pasted it to the others. Significance of the stars? Maybe similar type of crash (graphically)?? But not similar circumstantially?

Most of the analysis seems to be saying this thing is near done.

Tip: Never listen to analysts. In December and January they seemed to be saying $45 oil is the future because the Arabs and Russians will flood the market with low cost oil. Now they seem to say its over because rig counts in Texas temporarily dropped. So which is it?

I'm not getting too excited just yet, because I don't think its over this fast.

DrF

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Re: Where is the bottom for crashing oil prices?
« Reply #149 on: February 13, 2015, 01:05:07 PM »
Cheapest independent oil and gas companies by price to book value, buy the cheapest 30 and sell in 3 years. What could go wrong? :)

http://finviz.com/screener.ashx?v=121&f=ind_independentoilgas&o=pb

Edit: Made a Google Doc of the cheapest 30 stocks last night. You can track performance here: https://docs.google.com/spreadsheets/d/1qLtQav_NFEq44EpTXnOJZvsmHF4oXMczGchSbca0TkU/edit?usp=sharing

Looks pretty sweet to me, up nearly 30% in a little under two weeks!