Oil prices marching back up. Is that good.

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BenThere
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Oil prices marching back up. Is that good.

#1 Post by BenThere » Thu May 21, 2020 11:38 am

I've enjoyed the last few months of my fuel purchase costs being cut roughly in half. The truth of it is that as we are restricted on when and where we can go, we are driving about 25% of the miles we were accustomed to. We don't any longer meet with friends for dinner at restaurants; we don't do casual shopping but only go to the grocery to secure sustenance. We watch Netflix and don't go to the movie theatre. We shop on Amazon which is still working.

On the other hand a fairly good portion of my savings are now invested in energy. Overall I welcome low energy costs as a greater reward than investment returns, and they help fuel recovery of the economy from Covid-19.

I've found a tendency to stay in my robe all day rather than shower, shave to be presentable, realizing that I'm not going to be going anywhere. It's a sort of dissipation, I recognize, but I don't have a schedule, don't have to be anywhere, and having earned my retirement don't want to be told where I must be and when. My solution to the new reality is Scotch. While I remain optimistic about America overall, the near term looks pretty grim. I think the markets have all that mostly priced in but 30% unemployment is a big hill to climb. On the bright side the state of affairs we will experience, like it or not, might engender in our youth a wiser assessment of what matters.

I still strongly believe in America and in a brighter future once we figure out the virus thing, and we will.

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Re: Oil prices marching back up. Is that good.

#2 Post by Dushan » Thu May 21, 2020 6:58 pm

Our gas was $0.65/L at one point in April, now it's back to $0.90/L. It is the only product that seems to be able to fluctuate, even in normal times +/- 10% all week long. It fell 50% in April and is now up 50%, well on its way to a 100% increase.
Because they stand on the wall and say "nothing's gonna hurt you tonight, not on my watch".

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Re: Oil prices marching back up. Is that good.

#3 Post by Undried Plum » Thu May 21, 2020 7:04 pm

I was lecturing on a specialised bit of Geodesy at the University for Slow Learners in Lafayette in 1986 when the oil business was in a deep slump.

USL was quite strong on petroleum engineering degree courses, many of which were attended by mature (*) students who had some years of personal experience on rigs.

I remember that many cars in the parking lot had a bumper sticker which said something to effect of:
Dear Lord, please give us another oil boom. I promise I won't piss it away.

They got their next oil boom, and yes, they did piss it all away.

The idiocy of the recent fracking boom was classic American stupidity. It had failure deeply embedded within it.

Fracked wells do produce prolifically, but only for two or three years. Then the production rate collapses and after about five years they have to be re-fracked, which is hugely expensive and never produces a flow rate as good as the first time around, or they have to be replaced by new fracked wells elsewhere in the formation.

The funding for most of those wells came from Debt, mostly junk bonds. Almost none of them has turned in a net real profit for the owners. Lots of profit for the service providers such as Halliburton and Schlumberger and Baker etc, but none for the well owners.

Another problem with the shale oil dream is that many of those wells are not connected to a pipeline from wellhead to refinery. Those that are, have the intrinsic problem of any business with a sole customer: the customer dictates the price and will always do so to his own advantage and at the expense of the supplier. None of those wells get anything like the posted price of WTI. Another problem of not being connected to the pipeline network is that the expense of exporting oil to market involves colossally expensive road and rail haulage which eats deeply into any potential gross profits. The hauliers know how to screw their customers better than Pikeys and Gypsies in the UK.

Probably the biggest problem is that shale oil is intrinsically a victim of its own success. When the wells are producing at their best rate they push down their own market price to catastrophically low levels. There's no way around that. The price discovery mechanism of free market economics is a bitch.


(*) People outside the US may not understand that a "college degree" "graduate" in the US has been educated to an academic standard which might possibly scrape through with a narrow pass at 11+ level, though probably not, but would quite certainly fail the Common Entrance exams of a decent prep school in England. Many of the mature students, and a few of the college-educated kids, in my classes at USL were functionally illiterate. I mean really illiterate. Many could not write a single sentence or even a single word without confusing upper and lower case letters. The letter S or s was often written in mirror image. These guys are now in the upper echelons of Big Oil companies.


I'll say a wee bit more about oil price economics later, but now dinner is calling and I have a confiscated salmon to munch upon.

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Re: Oil prices marching back up. Is that good.

#4 Post by G-CPTN » Thu May 21, 2020 7:30 pm

Undried Plum wrote:
Thu May 21, 2020 7:04 pm
I have a confiscated salmon to munch upon.
Creates a wonderful image of enjoyment.

Did you have it poached?

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Re: Oil prices marching back up. Is that good.

#5 Post by Undried Plum » Thu May 21, 2020 7:59 pm

That's why I confiscated it!

I'm a Water Bailiff. On a patrol I encountered a scrote who is well known to me and to ra Polis. He was 'ripping' fish, ie deliberately foul-hooking them. He's on no less than two suspended sentences, either one of which will send 'im back to pokey if he so much as farts in church.

He gladly surrendered the Fish, on the understanding that if I ever see him within walking distance of that part of 'my' river I will have my dog rip his fukking lungs out of his chest.

A good deal, I think.

Dinner was yummy, by the way.


Edited to add:

Whiskybutter made from homemade butter and Mac30, and light soy sauce, on real salmon (forget the toxic farmed shite) is pure delight. Food of gods, though I don't personally know any.

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Re: Oil prices marching back up. Is that good.

#6 Post by G-CPTN » Thu May 21, 2020 8:04 pm

:-bd

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