Oil

ancona

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It appears as though oil is ready to take a 53 handle. It will be interesting to see the follow on effects of this in a few months. In a natural environment, price changes like this should result in lower air fares, drops in prices for nearly everything we use or buy, and in the longer view, I suspect that if left to equilibrium, rather than algo's, a better overall economy.

Of course we all know that won't happen. At least not until I become Emperor.:rotflmbo:
 

pmbug

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I've been "living under a rock" lately - haven't got out much or followed the news much. I got out and about yesterday for the first time in a while and was shocked when I stopped to fill the gas tank at how much the price of gas has dropped at the pump. It's almost a dollar less than the last time I hit the pump.
 

Penn

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check out zero hedge. 9 trillion in derivitives is going to blow up. basically dollars invested to produce energy- now these loans will not be able to be repaid.

my reply- is that an average person can buy gas food and clothes now
 

11C1P

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It always takes a lot longer for prices to drop when oil goes down than it does for them to go up when oil shoots up. Lots of things have been coming down. The last few weeks aroun here a 2 liter of coke is down 50 cents per liter. They've been saying the one lagging the farthest behind is air fares which haven't dropped a lot. I just hope it doesn't get below $50/barrel cause apparently our state worked out some deal with the frackers that if oil gets below $50 they don't have to pay any taxes for a year. I want the insanity in the state to taper off, but if the frackers get let off the hook for a year of taxes cause oil drops below $50 then their cost to produce is lower so they will probably drill like crazy for that year unless it gets below $35. So I'll cross my fingers that it goes down to $50.01 and hold there for a long time.
 

mmerlinn

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The price of oil is KILLING me. Best estimate is that it will cut my cash flow by at least 25%. I am beginning to wonder if I can survive. I have already been hit by a $1000 reduction in cash flow in the last month and saving $3.50 per day at the gas pump does not even come close to offsetting the loss. Current price around here is $2.39 per gallon, down over 60 cents in the last month. As long as gas stayed around $3.50/gallon I was happy. Not happy at all now.

Also, scrap prices are very soft. Aluminum today is at 60 cents, down from 64 just a few weeks ago. Iron is down from $240/ton a few months ago - Mine is going in tomorrow and I hope I can still get $200/ton.

And to top it all off, the phone is simply not ringing, which means very few sales of any kind. It is getting SCARY. Rent, phone, lights, taxes, etc never drop regardless of how bad things get.

Everything else around here seems to still be rising - OJ at $5.99/jug as opposed to $4.59/jug one month ago. Bread up about 20% in the last month. Dried fruit up 28%. Canned goods are holding steady, though, as are milk and some other items. Nothing seems to be dropping, and not much of anything of value on sale either.

No idea about clothing, electronics, furniture, etc as I simply cannot afford any of it at any price.
 

ancona

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MMerlin,
OJ will continue to rise I am afraid to say. Florida is in a bad way right now, since a citrus disease started spreading through groves across the state. Citrus greening is a pathogen that causes green fruit to drop from the tree, and there currently is no known defense against it. Trees are dying off by the millions right now. It is estimated that on this current trajectory, there will be no commercial citrus in just a handful of years.
 

pmbug

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Lower oil prices are wreaking havoc in Russia:
The ruble fell for a sixth day Tuesday, continuing to drop despite efforts by Russia's central bank to halt the historic slide.

The ruble fell to 70 per dollar for the first time, slumping further hours after Russia's central bank raised a key interest to an eye-popping 17% in an effort to halt a steep slide in the currency and avert a perilous bout of inflation.

The Bank of Russia increased its benchmark rate to 17% from 10.5% Monday after the ruble's value had fallen 10%. That move followed U.S. Congress authorization of tougher sanctions against Russia and further drops in oil prices.

The central bank's move followed a 1 percentage point increase in the rate on Thursday.

"The decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks," the central bank said in a statement.

The ruble has fallen 50% against the dollar since September as oil prices have plummeted. Oil accounts for about two thirds of the country's exports and about half of government revenue, according to Charles Movit of IHS Global Insight.
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http://www.usatoday.com/story/money...central-bank-key-rate-to-17-percent/20455833/

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In Russia, investors are growing increasingly worried that the Kremlin has in effect decided to print money to address a growing debt problem. Traders are also raising concern that the cronyism and opaque insider dealings that have plagued business here have now spread to monetary policy.

According to analysts, the ruble’s fall on Monday was sparked by word of an opaque deal involving the central bank and the state-controlled oil company, Rosneft. The well-connected business executive running the company, Igor I. Sechin, a longtime associate of Mr. Putin, had apparently persuaded the central bank to effectively issue billions of new rubles to his company to help cover debts.
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Rosneft, for example, had been clamoring for months for a government bailout to refinance debt the company ran up while making acquisitions when oil prices were high. Because of sanctions, those loans cannot be rolled over with Western banks. Debt payments are coming due later this month.

Relying only on the company’s own cash reserves would disrupt oil development projects that Russia is relying on for future revenue. With the oil giant in a bind, the central bank ruled that it would accept Rosneft bonds held by commercial banks as collateral for loans.

Rosneft issued 625 billion rubles about $10.9 billion at the exchange rate at the time, in new bonds on Friday. The identities of the buyers were not publicly disclosed, but analysts say that large state banks bought the issue.

When these banks deposit the bonds with the central bank in exchange for loans, Rosneft will have been financed, in effect, with an emission of rubles from the central bank. The deal roiled the ruble on Monday, according to analysts.
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http://www.nytimes.com/2014/12/17/business/russia-ruble-interest-rates.html?_r=1
 

rblong2us

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Theres a fairly strong view that Putin is the master chess player and will have anticipated a drop in oil price.

Even a not too smart person in Putins gang ought to have seen an attack on oil price coming, if it is in fact a US led attack ?

So while significant price increases are going to annoy ordinary Russians, it can be sold as financial warefare and not Putins fault and when you dont really have much debt and can print to fix the problem in the short term and your currency is still an unbacked fiat, then is it such a big problem for Russia ?
 

11C1P

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I don't foresee wheat getting a lot cheaper soon either. Although we had record crop yields this summer, most of it had high levels of vomitoxin so it couldn't be used for human consumption. Piggies have had a disease that made bacon go up, and beef prices are still high as well. The cost of shipping the product will go down but the effect on crops overall prices near term will have little to do with the price of oil. If it stays down for 6 months+ then the input costs for crops & livestock will go down and can start to have an effect on prices, if there are no more widespread crop/livestock disasters.
 

dontdeBasemebro

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Theres a fairly strong view that Putin is the master chess player and will have anticipated a drop in oil price.

Even a not too smart person in Putins gang ought to have seen an attack on oil price coming, if it is in fact a US led attack ?
I think the rumors of Putin's genious are overrated. His cult of personality has managed to penetrate much of the stacker/prepper/libertarian/gun crowd; a crowd that tends to think everything they see in US news is a triple layer conspiracy (lizards!) all the while going to Kremlin-backed RT for the "real truth" (truthful when truth benefits Russia). I guess all that shirtless horseback riding pays off.

No matter how smart Putin's gang is, they still have a 1-dimensional economy and dwindling population. Dangerous, but not in control. In fact, nobody is in control.
 

Penn

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MM- isnt there insurance for that?

Business interuption insurance
 

mmerlinn

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Also, scrap prices are very soft. Aluminum today is at 60 cents, down from 64 just a few weeks ago. Iron is down from $240/ton a few months ago - Mine is going in tomorrow and I hope I can still get $200/ton.
So much for my hope. Iron is $145/ton, meaning that on 3 tons I lost about $150. Ouch!

The only possible positive is that now I may be better able to compete with the big guys since now the scrap aluminum/iron price ratio is better at 8.2:1 as opposed to 6:1. Historically the ratio has held around 20:1, so it still has a long way to go, but will probably get back there in the next few months. The worst ratio was a few years ago at 3.4:1, which darn near did me in.
 

Penn

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I dont think putin is a genious.


We control the money. We own the computer code. ....only a smarter algorhythm can bump us. very few guys are going to rock the boat. it is too easy to be killed or have a family member killed.

I been thinking- what if we have a collapse here- at some point it might be wise to go shopping with all the credit cards- assuming that the system will work for that.
If you think we reach that point please post a thread on this board.

I am sorry MM, that you are taking a beating. I do think it is done on purpose to shake down russia
 

pmbug

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And that, ladies and gentlemen, is what the great oil collapse of 2014/2015 is all about. For those who want to know when to buy oil, the answer is simple: just after (or ideally before) Putin announces he will no longer support the Assad regime. If, that is, he ever does because that act will effectively destroy all leverage Putin may ever have over Europe, and in the process, also end - quite prematurely - his career.

Until then, every single HFT-induced spike in oil is one to be ultimately faded, because as the past few months have shown, it is the Saudis who set the price, and they will not take no for an answer, even if it means crippling the entire US shale, and energy, industry in the process.
http://www.zerohedge.com/news/2015-...entire-oil-collapse-all-about-crushing-russia

Exec. summary: US & Saudis want Qatar oil/gas to flow through Syria (pipeline) to Europe which would damage/destroy Russia's leverage over Europe's oil/gas markets. Oil price crash engineered to pressure Putin/Russia economically. Putin can't cave on this issue though. So politics will ensure the price of oil stays low for the forseeable future.
 

pmbug

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... and here we see the cost of this gambit:
Now that oil prices have dropped by half to $50 a barrel, Saudi Arabia and other commodity-rich nations are fast drawing down those “petrodollar” reserves. Some nations, such as Angola, are burning through their savings at a record pace, removing a source of liquidity from global markets.

If oil and other commodity prices remain depressed, the trend will cut demand for everything from European government debt to U.S. real estate as producing nations seek to fill holes in their domestic budgets.

“This is the first time in 20 years that OPEC nations will be sucking liquidity out of the market rather than adding to it through investments,” said David Spegel, head of emerging markets sovereign credit research at BNP Paribas SA in London.

Saudi Arabia, the world’s largest oil producer, is the prime example of the swiftness and magnitude of the selloff: its foreign exchange reserves fell by $20.2 billion in February, the biggest monthly drop in at least 15 years, according to data from the Saudi Arabian Monetary Agency. That’s almost double the drop after the financial crisis in early 2009, when oil prices plunged and Riyadh consumed $11.6 billion of its reserves in a single month.
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Excluding Iran, whose sales are subject to some sanctions, members of the Organization of Petroleum Exporting Countries are expected to earn $380 billion selling their oil this year, according to U.S. estimates. That represents a $350 billion drop from 2014 — the largest one-year decline in history.

“The shock for oil-rich countries is enormous,” Rabah Arezki, head of the commodities research team at the IMF in Washington, said in an interview.

Oil-rich countries will sell more than $200 billion of assets this year to bridge the gap left between high fiscal spending and low revenues, Spegel said.
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The potential impact of the selloff has divided analysts and officials.

One argument is that petrodollars and other commodity- linked foreign reserves are not a large enough force in an ocean of investments from pension funds, asset managers, insurers and individuals to make a real impact in asset prices and overall liquidity. Plus, bond purchases by central banks involved in so- called quantitative easing mitigates the impact of sales.

The other school of thought, broadly backed by the IMF, says that petrodollars matter because they’re significant enough to turn market sentiment as flows switch direction.
...
http://davidstockmanscontracorner.c...etrodollar-assets-at-record-200-billion-pace/
 

ancona

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Oil reports detail that Saudi Arabia has jacked up production by the equivalent of 50% of all Baaken production. What is going on now is what did in Venezuela. They are trying to desperately boost income so they pump like mad. In turn, prices drop to levels that require even more pumping to meet income goals but at lower prices paid. It is a self realizing feedback loop. It cannot go on for long.
 

11C1P

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Drilling is plummeting here, also they aren't fracking several drilled holes, waiting to see if the price stays below $55 iirc, then they will get a huge tax break and make the holes more profitable to pump. I am very much ready for all the oil field trash to blow out the state and take the crime, littering, traffic, pollution with them. I would pay $4 gas for $30 oil, just so they leave.
 

dontdeBasemebro

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Drilling is plummeting here, also they aren't fracking several drilled holes, waiting to see if the price stays below $55 iirc, then they will get a huge tax break and make the holes more profitable to pump. I am very much ready for all the oil field trash to blow out the state and take the crime, littering, traffic, pollution with them. I would pay $4 gas for $30 oil, just so they leave.
The stories that I've heard from the oil worker shanty towns sound terrible. Kind of crazy that guys pulling 6 figures are sharing campers and motel rooms since there is literally nowhere to live. Well, at least that was the story before the recent price drop.
 
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