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Oil price impact.
#21
Fred,

I just wonder how a German can think that gold is safe and we won't let them look at their gold? We've sold it for payment to help our profligate spending sure as hell. I bet FT Knox is empty.

The drop off in Texas drilling permits is telling here, the price collapse is working. The key is shale gas and oil. That's what the Saudis want stopped and it isn't easy to start and stop those type operations.
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#22
FT on South Stream cancellation: Anger and dismay as Russia scraps $50bn gas plan.
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#23
(12-03-2014, 03:05 PM)mv Wrote: FT on South Stream cancellation: Anger and dismay as Russia scraps $50bn gas plan.

Michael, why do you link to a site that will not allow us to read? Again, please copy and paste the part you wish us to know about. Its not against the law to do that. Otherwise, you're not helping your fellow readers. S4
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"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#24
Because it allows me to read... I just clicked on the link and it worked.... FT is weird. OK:

Quote:December 2, 2014 7:09 pm
Anger and dismay as Russia scraps $50bn gas plan

Christian Oliver in Brussels, Andrew Byrne in Budapest and Kerin Hope in Athens
More video

Eastern European nations reacted with shock and anger to Russia’s decision to abandon South Stream, its $50bn gas pipeline across the Black Sea into Europe, as shares in some of the companies involved in the project dived.

Bulgaria, Serbia and Hungary said they had received no advance warning that Moscow was scrapping South Stream, even though they all have substantial financial and political capital invested. Russia said it would export its gas to a trade hub in Turkey instead.
[Image: 2c34b574-7a38-11e4-9b34-00144feabdc0.img]

South Stream is so far the biggest casualty of the stand-off between Russia and Europe over Moscow’s military involvement in Ukraine.

The much-vaunted project, backed by Russia’s state-controlled gas group Gazprom, was designed to bring Russian gas into Europe by bypassing Ukraine. It gained momentum after a series of price disputes between Moscow and Kiev over the past decade led to supply cuts for some of Gazprom’s European customers.

But there were fears in Brussels that the pipeline would cement Gazprom’s domination of the European gas market. The European Commission insisted that other gas suppliers be given access to South Stream, arguing that the idea of Gazprom both providing the gas and owning the pipeline violated EU competition rules.

However, the project was backed by several countries in southeastern Europe, which saw it as a way to improve their energy security. They also looked forward to earning money from transit fees for South Stream’s gas as it crossed their territory.

Countries in the region lost another key supply option last year when a rival EU-backed project that would have carried gas from Azerbaijan into the heart of Europe, called Nabucco, was scrapped.

At a meeting in Brussels of EU ambassadors on Tuesday, the Hungarian representative asked Federica Mogherini, the new EU foreign policy chief: “First Nabucco, now South Stream. What are we supposed to do now?”

Peter Szijjarto, Hungary’s foreign minister, said alternative sources of energy would now have to be explored, including gas from Azerbaijan.

Aleksandar Vučić, Serbia’s prime minister, told the country’s RTS channel that the decision was bad news for Belgrade and said he would urgently seek to speak with Mr Putin. “Serbia has been investing in this project for seven years, but now it has to pay the price of a clash between the great [powers],” he said.

Italy and Austria have also been vocal supporters of the venture, pitting themselves against the commission.

Shares in companies with contracts for South Stream also suffered. Stocks in Italian oil services group Saipem closed down 10.8 per cent, while Germany’s Salzgitter, whose joint venture is making pipes for the project, was down 7.4 per cent. Other businesses involved in South Stream include Italy’s Eni and Austria’s OMV.

Saipem and Salzgitter said that they had not received any notification from Moscow that their contracts were being terminated.

The dispute over South Stream also sowed such divisions in the EU that it proved difficult to agree on sanctions against Moscow, diplomats said.

The 28-member bloc insisted that its opposition to South Stream was legal, not political. “Pipelines developed and operated in conflict with EU law endanger the functioning of the internal market and they may also fall short in any expected improvements in security of supply,” said Anna-Kaisa Itkonen, spokesperson for the European Commission.

In addition to its concerns about competition, the commission was also worried that South Stream could fuel corruption and launched an investigation into the legitimacy of the tender process in Bulgaria, where the pipeline was supposed to make landfall.

Ognian Shentov, head of the Centre for the Study of Democracy, a Sofia think-tank, said the cost of the Bulgarian stretch had been inflated from €1.2bn to more than €4bn for the benefit of local construction companies.

South Stream was supposed to have four parallel pipelines, each more than 930km long connecting Russia and Bulgaria under the Black Sea. The pipeline was then supposed to continue overland via Serbia and Hungary to Austria.
[Image: 73d9af66-7a50-11e4-8958-00144feabdc0.img]

The tenders to supply and lay the first two subsea pipelines, each containing 75,000 12-metre pipes, were held this year and the contracts for the other two pipelines were expected to be awarded next year.

In January, Europipe, Salzgitter’s joint venture, won half of a €1bn tender for the first pipeline to supply specialised pipes capable of withstanding depths of 2,200 metres. The other winning contractors were Russia’s United Metallurgical Company (OMK) and Severstal. Voestalpine supplies steel plates to OMK.

Salzgitter is relying on the project to take up capacity at the Europipe mill in Muelheim until 2015. Low orders previously forced the company to cut the hours of some of its workers. In 2013 Salzgitter made a €489.6m group net loss but forecasts a pre-tax result approaching break-even in 2014.

Ingo Martin Schachel at Commerzbank said the pipeline had not yet been installed under the sea and therefore the “‘sunk costs’ for South Stream offshore were not yet high – so the route could still be changed”.

However, he said because the possible alternative route to Turkey would involve a smaller undersea section “the potential change of plans could have significant negative earnings implications for Salzgitter, even if our assumption is true that the existing contract will be honoured”.

Like Salzgitter, Saipem was also counting on an income boost from South Stream after a dismal year in 2013 when it recorded a €404m net loss.
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#25
Thank you. S22

You must be living on luck, or am a paid subscriber, I guess. I can't even twerk it as I can usually do with other restricted sites.
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"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#26
Unless Santa Putin is paying for my subscription I'm not doing anything special. Just firefox. Half of the articles come through.
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#27
You think being a card carrying member of Greater Sodomia may be the cause? S13
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#28
The CEO of ExxonMobil says says the company can remain profitable down to $40/bbl ... ... go ... go ... it's the petro limbo!! S5

Hey mv ... Here's a Russian joke for you ...
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#29
There seems to be an undercurrent of ideas that lower gas pricing will affect the workforce negatively.

Ron has the right of it, that lower gas also lowers the cost of production and distribution which frees up capital to allow increased hiring and raises. Another aspect is the psychology that has many industries hoarding funds in a rainy day fund expecting poor return. With lowered costs of business, that psychology relaxes and allows investments held back for far too long.

Politically, this is diametrically opposed to the Obama/Progressive strategy. They invest in carbon taxes, energy penalties, and injurious regulations and nonsensical bureaucracy to artificially force people to use more expensive "green" energy. As prices come down for the less expensive - but still renewable energy - their plans for personal enrichment fall apart. The Keystone pipeline comes to mind. The only cause for opposing it was to give unfair wealth to Democrat fundraisers. The price of railroad transport was always higher than using pipelines, but lowering the costs brings the Railroad transport closer to marginal returns.
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#30
Looks like Serbia's friendship with Russia isn't all that either. At least Moscow didn't bomb their capital for 79 straight days.
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#31
But Russia supported a dictator who killed thousands and was responsible for the Balkan War.
Srebrenica, remember?
Ok, The US and their POTUS make war crimes... but always after others started.
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#32
Ron was right. The overall loss from some of in the business/work-force is much smaller than the positive gains from the rest of the country. Its just not that easily seen, that's all.
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"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#33
blogs.reuters Wrote:oil company managements have believed with quasi-religious fervour in perpetually rising oil demand. Therefore finding new reserves seemed more important than maximising cash distributions to shareholders.
link
IMO it's too quick to draw a long term forecast about oil now.

A so called oil glut on the market is a question of one or two percent more oil being pumped globaly. This can change very quickely one way or another.

It's not the Saudis who are waging an oil war on US shales. It's US oil that redeveloped because crude prices were too high and reliance on arab and russian sources too burdensome.
In this respect the operation is a success: Oil is cheaper and we don't kiss the ass of the Wahabis or some ultranationalist slav anymore.

Oil demand will rise:
1/ Demographic and economic growth in China and India (two countries who don;t care about rising global temperatures)

2/ Cheaply accessible oil reserves are finite. One day or another more and more expansive oil reserves will have to be tapped.
Even if you believe in non biological oil, it's the depth of the well that matters, not the existing quantity.
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#34
Fred, the main reason why all this development is going on is basic Supply/Demand activity, fueled by self-interest.

As for the 'finite' part, that is debatable. If you believe in this 'Fossil Fuel' superstition, then it is easy to envision this. However, if you are an "Abiotic Oil" person, as I am, it is continually rising from within the molten planet. Its a combination of material, of which carbon is one of the main ingredients, and it never stops giving of itself.

BTY, by the time it becomes scarce enough to cause economic problems, there will be something along to take its place. Its how things seem to always work out. S22
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#35
(12-04-2014, 09:12 PM)John L Wrote: Ron was right. The overall loss from some of in the business/work-force is much smaller than the positive gains from the rest of the country. Its just not that easily seen, that's all.

There is a factor that is not being considered in all this. Cheap oil is great ... and the economic benefits will almost certainly offset any adjustments in crude production because of lowered costs ... but a stable, dependable, local supply ... one that is essentially immune from disturbances a half a world away?? Priceless. It provides nearly complete vertical integration for our economy. Europe on the other hand is, to a great extent, subservient to it's flaky external supplier(s). That's a half assed way to run a modern industrial economy.

The trajectory of U.S. production is up and will stay up for a while ... even if oil goes much lower. There's a bit of latency, but very shortly after the Sauds change course ... the price will increase and so will U.S. domestic production. Mexico is also going on line in the Gulf region ... some projects might get postponed if the dip is deep and extended, but there are also some profitable ones that will go forward regardless.

Bring it! Again, I have yet to see a commercial or interview with an actual producer complaining about the price decline. The major battle being fought is against the greenie regulators. And Colorado (the Julesburg area) is mentioned in the linked article as one of the first casualties in the oil price war. Again, I have not heard a peep in the local media or carping from affected producers. Look at negative doomsday comments and you will almost always see a Citi(shitty)Bank 'analyst' cited. Citi appears to have cut out a 'niche' financing the marginal producers [i.e. the lazy cookie cutter route to riches when shale oil became a "sure bet"] ... and they'll take a black eye over it. And I seriously doubt we'll see Obama bailing out "subprime" oil shale oil financiers.
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#36
Jack's article above Wrote:OPEC’s price war against the American shale industry will erode drilling budgets, shrink profits and even bankrupt some companies. It won’t do the one thing cartel leader Saudi Arabia wants: reduce U.S. production.

He's correct there. And like I stated recently, the only losers are going to be the businesses that are "beyond the margin" and inefficient. The rest will be weathering this just fine. All that will manage to do is weed out the chaff. Natural Selection in action. S5

Eventually the Saudis and others are going to have to cave and quit playing their games. Fraking is here to stay, and it its not going to go away. There's just too much hydrocarbons moving up from within the molten mantle.
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#37
Quote:Eventually the Saudis and others are going to have to cave and quit playing their games.

We actually still do not know what is going on. There are three theories out:

1. Saudis et al are acting against the US shale oil.
2. The US is acting against Russia (unlikely variation: US and Saudis are against Russia)
3. The current trend is natural due to slower economy and oversupply.

There is evidence both for 1. and for 2.

Quote: Fraking is here to stay, and it its not going to go away.

Oh, it is to stay, but perhaps it is time to dispose of glorious dreams.

Petronas postpones investment decision on Pacific Northwest LNG project

This was supposed to be the first and the largest Canadian export projects....
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#38
(12-06-2014, 12:23 PM)mv Wrote:
Quote:Eventually the Saudis and others are going to have to cave and quit playing their games.

We actually still do not know what is going on. There are three theories out:

1. Saudis et al are acting against the US shale oil.
2. The US is acting against Russia (unlikely variation: US and Saudis are against Russia)
3. The current trend is natural due to slower economy and oversupply.

There is evidence both for 1. and for 2.

How about the actual reason that they have stated? In the face of dramatic production expansion that has literally shocked the world, they want to keep their existing customers ... ironically including a dwindling number of U.S. clients.

2. Why exactly would you peg this as an action specifically against Russia? I think you have argued here that Russia has plenty of margin ... and that a falling ruble widens the gap even more ... and deals with China that further buffer and reduce the risk. The imminent casualties here are countries like Venezuela and Iran.

1. Doesn't seem like a sound long term strategy. Their resources get sold at a pittance ... granted a pittance with one of the widest margins in the world, but selling your ONLY resource at yard sale prices?? Not smart. Regardless if shale development is curtailed for a while, the oil will still remain in the ground, the technology is only going to evolve more and the price can only go up (eventually) ... actually that's not 'explicitly' true, the currencies used for purchase will perpetually debase.

3. See the comment above. Again, a 'shocking' and unexpected increase in production ... at a time when consumption is being depressed (by both accident and design). What's not to understand about a tightening oil market?
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#39
On 2:
Quote: Why exactly would you peg this as an action specifically against Russia? I think you have argued here that Russia has plenty of margin ... and that a falling ruble widens the gap even more ... and deals with China that further buffer and reduce the risk.

Russia has sufficient margins to survive this, but obviously having considerably more money would allow more options for Putin. I have not argued that lower prices are actually good for Russia, only that they will not change the current policy.

Now, the argumentation for 2. comes from a blogger "Spydell".... I've been following several bloggers in the last year, some are better in things military, spydell is an economist and in economic affairs he has been pretty good so far. Anyway, his theses are:

* There is no "shocking and unexpected" increase of production at all, the increase is marginal and it would not affect global prices given that nearly the entire volume of produced oil goes to contractual customers. (He had a paper with numbers to support this).
* The oil price market has been manipulated by the US in a way similar to the US stock market, neither the reality of oil production nor the intends of the producers have decisive meaning. However, US intervening in this market is not 24/7, only once in a few years.
* The Obama administration made a calculated decision to destroy US shale industry as the price of weakening Russia.

Something that Spydell did not go in, but I wonder .. remember 2003? Oil went 3x as the result of the US invasion of Iraq... why? Two answers here:
1. Removal of Iraqi oil created shortage (but remember that Saddam was under sanctions and was exporting very little to begin with!)
2. Under the guise of alleged shortage the US manipulated the market toward higher oil pricing.

Observe that the possible 2003 manipulation was exactly what made US shale industry possible (and it was GOP in 2003, which is generally pro-US production and energy independence), whereas the Rats are not all that enthusiastic about shale oil... so perhaps Obama does not see its destruction as a factor. Of course extra pressure on Iran is desirable for the US ... and nothing wrong with causing problems for Venezuela either.

I am only summarizing the article here, not claiming it to be the truth, ... albeit I did not see any inconsistencies in his logic.
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#40
Yeah, Spydell's article -- need to run it through a translator.
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