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Oil price impact.
#1
This is to separate the discussion we had on the Putin's thread, oil price is not obviously linked to his manhood.

Texas drilling permits impacted.

New Russia-Turkey pipeline deal.

South Stream dead.

(The last two items are obviously linked).
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#2
Oil shale projects also will close down before long.

I don't quite get the new Russia - Turkey pipeline. If it brings what Turkey already purchases, what is in it for either side?
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#3
Please note the importance of Azeri gas. Russian gas accounts for 30% of european consumption. When Azeri gas starts flowing in by 2020, it will be even less.

Also the Leviathan gas fileds off Cyprus.

You can get lot of gas through fracking too.

In fact we became more reliant on Putin's oil and gas because we wanted to be less reliant on Islamic oil and gas. Now, since Putin started to be also a treath to the west, we rethink or supply sources once again.

As for the oil price drop on US shale oil, the effect is very variable from one company to another, and from one extraction site to another.
Some average estimate put the profitability treshold at $70. But some are at $50, other at $80. And costs are falling rapidly.

Secondly, unprofitable companies can continue for a couple of years before ceasing operations.
Will oil still be that low when fracking companies will have to shut down? It's impossible to predict and certainly not garanteed.
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#4
(12-01-2014, 06:58 PM)Palladin Wrote: I don't quite get the new Russia - Turkey pipeline. If it brings what Turkey already purchases, what is in it for either side?

Full set of implications is not yet obvious, but preliminary: it creates an alternative way of delivering Russian gas to (gasp) the same Europe, Turkey gets transit fees, and a degree of control over EU.

I'd guess that this does not harm Azeri gas ideas in any way... but Israel and Cyprus is a different story.
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#5
Hysterical reaction from The Times: Putin declares gas war on Europe with Turkey pipeline deal.

(This is pay-walled but the title is refreshing).
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#6
Most of the U.S. based articles I've read carping about price decline and screaming doom and gloom seem to be from the financial sector. There are oil plays in Bakken that break even down to $30-40/bbl or so ... lots of lower cost production in Texas as well. My guess is that (sh)iti Bank and others financed a bunch of speculative projects at closer to $80-90/bbl. I've read that there are only about 4% that don't make money down to $70 ... not sure but I expect there is a Gaussian BE curve with the peak about $50-60/bbl. I've seen zero locally about local companies at risk here in Colorado and there is a huge amount of fracking. I have yet to see any anti-fracking commercials and plenty of PR in favor ... with a spike of them during the election. Most of the effort is going into keeping the greenies from pissing in the well ... so to speak. When I hear local news of a bona fide producer complaining about being hurt by low prices I'll let you know ... I'd expect to start hearing that if it drops another $20/bbl. From what I've read, the smart guys already have their production hedged out through 2015. Frankly, I don't think U.S. natural gas price can go much lower. The price has been essentially plateaued around $4 MBTU for about the last two years ... small and short spike to $6 last Jan or so.
"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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#7
Break even point for Bakken is $69, for Permian Basin (TX) $68, this would explain the reluctance to drill more in Texas -- too close to red zone. But Eagle Ford (also TX) is at $50. Someone with time and energy may want to research Texas permits to see if there is a geographic pattern between these two sites -- there should be one.

[Image: 146436.640xp.jpg]
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#8
Yes, as I mentioned above, that is (sh)iti Bank's outlook and influence ... they are likely to be heavily invested at the (speculative) high end of the curve and are highly motivated to push the "low prices are bad" narrative.

Here's the source of that graph ...
http://www.businessinsider.com/citi-brea...es-2014-11

When you read the various pants crapping articles, you tend to see (sh)iti Bank's gooey fingerprints all over.

$50-60/bbl (Brent) oil would reduce exploration and development ... but production? ... not so much. Interesting that pricing on the graph is in 'Brent' for a product that sells at 'WTI' rates eh? Sneaky. Not sure if production is by site or cumulative ... that would be another sneaky way of (sh)iti (ing) up the facts. If it's cumulative, I think that looks a lot like my Gaussian curve ... on it's side ... and (sh)itily manipulated for pants crapping purposes.
"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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#9
(12-02-2014, 01:15 AM)mr_yak Wrote: Yes, as I mentioned above, that is (sh)iti Bank's outlook and influence ... they are likely to be heavily invested at the (speculative) high end of the curve and are highly motivated to push the "low prices are bad" narrative.

Here's the source of that graph ...
http://www.businessinsider.com/citi-brea...es-2014-11

When you read the various pants crapping articles, you tend to see (sh)iti Bank's gooey fingerprints all over.

$50-60/bbl (Brent) oil would reduce exploration and development ... but production? ... not so much. Interesting that pricing on the graph is in 'Brent' for a product that sells at 'WTI' rates eh? Sneaky. Not sure if production is by site or cumulative ... that would be another sneaky way of (sh)iti (ing) up the facts. If it's cumulative, I think that looks a lot like my Gaussian curve ... on it's side ... and (sh)itily manipulated for pants crapping purposes.

Pardon my ignorance Jack, but what is this "(sh)iti" thing? I'm either missing something significant, or not able to use my imagination properly. Civilianized acronyms are already bad enough for me....................Gah
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"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#10
The drop in the price will hurt Russia more than any other oil producing nation. When was the last time you purchased anything labelled "Made in Russia".
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#11
Quote:"(sh)iti"

It took me an effort to understand.... Citibank almost certainly.

Quote:$50-60/bbl (Brent) oil would reduce exploration and development ... but production? ... not so much.

Not obvious. Shale production requires much more drilling than conventional oil/gas, I saw rough estimate of 10x... this means pretty much continuous drilling to maintain the same levels of production. So reduction of drilling now will affect production in near future, perhaps one year?
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#12
NY Times is excited:

In Diplomatic Defeat, Putin Diverts Pipeline to Turkey.

Not obvious at all that Putin's killing of the *current* South Stream agreement is a defeat. There are multiple factors here, let me name only two that are not likely to be mentioned by the Western press:
(1) South Stream project ceased to be optimal in the current environment. The idea of SS was to bypass Ukraine altogether, including bypassing the Crimea... but making SS go through Crimea cuts down the undersea distance by a factor of 2 and cuts down the cost accordingly. Of course changing SS route this way is impossible right now, but cancellation -- rather than suspension -- of the project allows to return to this at a future time. And of course it is not obvious yet that Ukraine needs to be bypassed at all.
(2) Cancellation of the project will cause some massive soul-searching in some of the EU countries, there were loud screams from Bulgaria for instance.
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#13
Lower oil prices are good for most of the economy. Lower fuel costs means everything that must be transported by truck will cost less, including food. Lower fuel costs will mean more people will be able to afford to heat their homes this winter. Lower fuel costs means manufacturing of virtually everything will cost less, which in turn will help our competitive advantage against foreign trade goods. Lower fuel costs means more people will feel free to travel and take vacations, thereby helping the tourism industry. Lower fuel costs will probably translate into more domestic-made cars being purchased, which in turn will mean increased employment in the auto industry. The only people who will be hurt are the generally wealthy investors, who invested at higher prices. They may cry at the loss of anticipated profits, but none of them really deserve pity as "hardship" cases.
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#14
The workers are hurt when they get laid off.
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#15
CNBC: Will OPEC bankrupt US shale producers?
CNBC: Oil price fall starts to weigh on banks
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#16
(12-02-2014, 12:59 PM)Ron Lambert Wrote: Lower oil prices are good for most of the economy. Lower fuel costs means everything that must be transported by truck will cost less, including food. Lower fuel costs will mean more people will be able to afford to heat their homes this winter. Lower fuel costs means manufacturing of virtually everything will cost less, which in turn will help our competitive advantage against foreign trade goods. Lower fuel costs means more people will feel free to travel and take vacations, thereby helping the tourism industry. Lower fuel costs will probably translate into more domestic-made cars being purchased, which in turn will mean increased employment in the auto industry. The only people who will be hurt are the generally wealthy investors, who invested at higher prices. They may cry at the loss of anticipated profits, but none of them really deserve pity as "hardship" cases.

Ron, congratulation to you. You have a deep understanding of how economics works. I suspect your brother is rubbing off on you a bit here. Nothing is harder to appreciate than the illogical concept of Bastiat's "Unseen" advantages over the "Seen".

I have tried to get some here to take the time and read Bastiat's essay on "The Broken Window Fallacy", but I can see that it didn't take. Not even going to link to it again, because its a waste of time, trying to help the blind see the overall truth.

Anyway, you actually 'Get it'. Its akin to the buggy industry complaining about lost jobs, following the advent of the horseless carriage. S13
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#17
(12-02-2014, 05:26 PM)mv Wrote: CNBC: Will OPEC bankrupt US shale producers?
CNBC: Oil price fall starts to weigh on banks

Typical NBC wacko philosophy. You gotta' love the title here: "Will OPEC bankrupt US shale producers?" It reminds me of your philosophy that if some are bad, all are bad, hence that Sodomite HorseShit. There is one more here with the same "All of nothing" thinking. S6 S18

The truth is that "Some" will bankrupt because they are inefficient and made bad investments. But the majority of shale businesses will remain in business and still do well. Its called Natural Selection, and is the very same thing that recessions used to be for, before Big Government went out of its way to regulate recessions out of existence. All economies do best, for the long haul, when they have a 'weeding out' mechanism. And this oil glut is just one such way the process works. There are always some, who get hurt, but the overall majority make out quite well, because that is how development happens.

But you wouldn't know it by reading Wacky NBC, of some of the economically ignorant.

So yes, there will be some loses, but the "Unseen" benefits will be savings in fuel costs, efficiency of businesses, and overall economic growth for the long run. Oh, and the average citizen will do better as a result, just as Free Trade does for the average Joe Citizen. A steady diet of Dr. Walter E. Williams would do a lot toward curing the economic ills that infect so many people these days. S22
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#18
the German Central Bank Wrote:it trusts the Americans as custodians of it’s gold reserves – despite being denied access to vaults in New York to view their own gold
It means all the vaults are empty.

As I said the Treasury leased or short-sold significant parts of the gold they kept. But the most extraordinary is that they did so also with the gold they kept on the behalf of other nations. And all this is not included in the Obamadebt.

John: There has been a discussion on wether Putin's gold reserves where more manly than Obama's (lack of).

mv Wrote:And of course it is not obvious yet that Ukraine needs to be bypassed at all.
Putin understood that the only way to keep Ukrainians buying Russian gas is to force the Europeans to pay for it as they share the pipeline with Ukraine.
If Europe doesn't pay for Ukrainian gas, they also doesn't get the gas they paid for themselves. Because Ukrainians will use whatever gas transit their teritory instead of freezing to death.
If the pipeline bypass Ukraine, Europeans also bypass Ukraine consumption payment. Not in GazProm's interrests...

mv Wrote:but making SS go through Crimea cuts down the undersea distance...
Funny you use this acronyme for something coming from Russia...
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#19
(12-02-2014, 10:54 AM)mv Wrote: It took me an effort to understand.... Citibank almost certainly.

Yup, sorry John ... apparently you aren't a big South Park fan.

Citi is widely rumored to have financed a number of oil and gas plays that will probably be the first to go under water ... they represent a fairly small number at this point, but when it comes to financing 'subprime' deals, Citi is the champ. There have been a ton of articles with their hacks and analysts indicating that it will be Armageddon if oil goes below $80.

Again, there are a pretty wide variety of breakeven points in U.S. production.
Quote: ... about 80% of the tight oil estimated to be pumped next year will still be profitable at between $50 and $69 a barrel.
There will be some shakeout. My guess is that the price will hover at maybe $70 or so over the next year or two. The Sauds will lose a bit of income, but their production prices are pretty low. Everybody else will muddle through somehow. Nations with high production prices and high dependence on oil revenues will mostly be screwed ... Venezuela will likely be the first among the casualties. They were already circling the bowl even before the price plunge. Of all the BRICS, India is actually starting look fairly decent ... and they will probably be a net beneficiary of low world prices.
"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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#20
My suspicion is that "profitable" means "profitable without any additional drilling", thus the cut in Texas licenses.



An illustration to the South Stream deal while I have it handy:

[Image: i2890c46e006a0865b663c2914fa60c2a_south_stream.jpg]

Notice that bypassing Crimea doubles the distance and killing the project (to perhaps renegotiate it in a year) makes sense. Also notice that while Gazprom spent $4 billion on new pipelines for South Stream, nearly all of it was on the continent, and thus equally suitable for S.Stream or Blue Stream (same origin). Nabucco is dead.

Cancellation of S.Stream implies losses of about $2B for Italy, $0.5 for Germany and $0.3 for Japan (various subcontracts)
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