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  1. #11  
    Senior Member hampshirebrit's Avatar
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    It doesn't matter any more how much untapped oil the US, or anyone else has.

    We are about to pay, in arrears, for far too many years of far too low oil prices.

    It takes, on average, 10 years to develop deep-water discoveries and bring the first few barrels to market.

    The cost of exploration is becoming prohibitive, and it's only the new high $/bbl price that makes this very risky business worth the risk.

    Extraction of shale and tar sands is very energy and water resource intensive, and deposits tend to be in areas that have poor access to either, especially to water.

    The price of drilling rigs has gone through the roof in the past year or so. If you're looking for a good investment, get into companies that specialise in extraction services.

    If you want to devellope ANWR, or Bakkan, or the new maybe superfield offshore off Brazil, then it will cost much, much more than it would have done two years ago.
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  2. #12  
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    Move to New England where it will cost $8,000 to heat the average house this coming winter.
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  3. #13  
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    Quote Originally Posted by Cold Warrior View Post
    Unless people here think that drilling in ANWAR and other areas is going to dramatically increase the world's oil supply in the short term, there is no reason to think that such activities will dramatically lower the price of oil. Unless, of course, you believe that the oil companies will sell oil to Americans cheaper than world market prices (and if you believe that, there's a bridge...).
    I think drilling in Anwar and finding new areas to explore along with new alternative sources of energy will bring the price down in the short run and the long run. Some experts claim that 30% of the increase in the price of oil is due to speculation that the price will keep going up. The physiological effect of more exploration along with more alternative energy will make the price drop. When these hedge funds investments in oil start retracting, just watch what happens to the price. Since the Saudis announced today that they will ramp up production, oil prices will drop but that does not necessarily mean that gasoline prices will drop for a while. The largest refiner in the country, Valero, is making a very small profit off their sales, and are even trying to sell 3 of their 17 refineries.
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  4. #14  
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    Quote Originally Posted by lacarnut View Post
    I think drilling in Anwar and finding new areas to explore along with new alternative sources of energy will bring the price down in the short run and the long run. Some experts claim that 30% of the increase in the price of oil is due to speculation that the price will keep going up. The physiological effect of more exploration along with more alternative energy will make the price drop. When these hedge funds investments in oil start retracting, just watch what happens to the price. Since the Saudis announced today that they will ramp up production, oil prices will drop but that does not necessarily mean that gasoline prices will drop for a while. The largest refiner in the country, Valero, is making a very small profit off their sales, and are even trying to sell 3 of their 17 refineries.
    It will have to be a psychological effect, as it can have no real effect upon world supplies for the next 5-7 years. Clearly, a significant amount of the rise in the price of oil is due to speculators; however, a much more significant percentage of that rise is due to the fall of the dollar vs other currencies, particularly the Euro. Chart the Euro vs Dollar ratio vs the price of oil and the correlation becomes evident. And the weakness of the dollar is directly attributable to the trade deficit and the Fed's persistence in lowering interest rates. What investor wants to invest in a currency carrying the current Fed rate? You might as well invest in the Yen.
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  5. #15  
    Senior Member namvet's Avatar
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    Quote Originally Posted by Cold Warrior View Post
    "Sharing?" So, we're going to throw free market capitalism right out the window and mandate to those publically-held companies that they can only sell to Americans at below the market rate? Seems like you're saying capitalism is good when it affects others adversely, but bad when it affects me adversely.
    we need to care of OUR needs first. and then the world. I take it you don't live in this country
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  6. #16  
    Senior Member namvet's Avatar
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    Quote Originally Posted by LogansPapa View Post
    Let's be realistic about this - the oil producers now know we can handle this pain and have found the new threshold. I'm thinking $10.00 for Regular might be the new choke point that would bring the American economy to a halt because people couldn't get to work - driving alone. The fuel dock at Avalon on Catalina Island is charging $6.78 a gallon for gas and boats from the mainland - hundreds of them per day - are lining up to buy it. We have a very rich nation.
    they also know the nation is pointing a BIG finger at them. and NO we can't handle the pain. people in this country are starving because they can't afford food. many have been forced to quit their jobs cause they can't afford gas. the red light is blinking. can anyone see it???
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  7. #17  
    Senior Member hampshirebrit's Avatar
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    Quote Originally Posted by lacarnut View Post
    Since the Saudis announced today that they will ramp up production, oil prices will drop but that does not necessarily mean that gasoline prices will drop for a while.
    The Saudis have not announced this at all, as far as I know.

    They have been making repeated statements for the past two months that they will not increase production, because "the market is well supplied".

    Why would they increase production, at a time when the bbl price is near $140?

    I would not. Would you?

    If I was a supplier of widgets, and I realised that my ability to keep suppying these widgets was declining, then I would charge whatever the market would bear, especially if I, at the same time, could make this much money from restricting supply. If I were stupid enough to supply more widgets to the market, then the market price would drop.

    Oil has a unique place among commodities: we are so dependent on oil that real demand destruction will only be driven by unavailability of further supply. We may see (are already seeing) a decline in discretional demand, but that is nowhere near the same thing as demand destruction.

    I will only stop buying gas when my local gas stations no longer sell gas.
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  8. #18  
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    Quote Originally Posted by Cold Warrior View Post
    It will have to be a psychological effect, as it can have no real effect upon world supplies for the next 5-7 years. Clearly, a significant amount of the rise in the price of oil is due to speculators; however, a much more significant percentage of that rise is due to the fall of the dollar vs other currencies, particularly the Euro. Chart the Euro vs Dollar ratio vs the price of oil and the correlation becomes evident. And the weakness of the dollar is directly attributable to the trade deficit and the Fed's persistence in lowering interest rates. What investor wants to invest in a currency carrying the current Fed rate? You might as well invest in the Yen.
    What goes up must come down and that is what is going to happen to the Euro. The dollar will start rising. That should push the price of oil downward somewhat. The EU is worried about the rise of the Euro because it makes their products much more expensive. Many Europeans are coming to the US because of the falling dollar as their Euros buy more and makes our products cheaper. It's a trade off, and our exports have never been so high.

    Like Hemp. said, oil service and domestic exploration stocks are good investments.
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  9. #19  
    Senior Member namvet's Avatar
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    Quote Originally Posted by hampshirebrit View Post
    The Saudis have not announced this at all, as far as I know.

    They have been making repeated statements for the past two months that they will not increase production, because "the market is well supplied".

    Why would they increase production, at a time when the bbl price is near $140?

    I would not. Would you?

    If I was a supplier of widgets, and I realised that my ability to keep suppying these widgets was declining, then I would charge whatever the market would bear, especially if I, at the same time, could make this much money from restricting supply. If I were stupid enough to supply more widgets to the market, then the market price would drop.

    Oil has a unique place among commodities: we are so dependent on oil that real demand destruction will only be driven by unavailability of further supply. We may see (are already seeing) a decline in discretional demand, but that is nowhere near the same thing as demand destruction.

    I will only stop buying gas when my local gas stations no longer sell gas.
    Why would they increase production, at a time when the bbl price is near $140?
    would you still say this if you found out your biggest customer is drilling their own oil????
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  10. #20  
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    Quote Originally Posted by namvet View Post
    we need to care of OUR needs first. and then the world. I take it you don't live in this country
    I do, indeed, for the next 5-7 years at least. However, from your conception of the market, I take it you don't know jack about economics, do you?

    It's a nice sentiment -- "we need to care of OUR needs first" -- that makes very little economic sense. How, exactly, would you accomplish that in a global economy? One way would be to get the government into the oil business. To do that, you'll need a whole lot of infrastructure so the most direct way would be to nationalize the oil companies. Is that your proposal? If so, there's another site that people here often laugh at, that might suit your views better, as probably 99.9% of them would agree with you. Unfortunately, that approach didn't work very well for the Soviets.

    If that's not your answer, then perhaps you would like the Congress to pass laws that all oil drilled in the US is required to be sold within the US at rates significantly less than the world market rate? Forget for the moment the additional costs those companies would bear in starting up in new sites, we can always address that by direct government subsidies and tax breaks. Now, under this scenario, if you're an investor, investing in oil companies, which company are you invest in: Company A under US government imposed price controls or Company B, based outside of the US, under no such controls and selling oil at global market rates? I hope you answered the latter; if not, you have very little chance of being a portfolio manager with any large funds management firm.

    If you've got a third way, I'd sure be interested in hearing it.
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