if only we could discuss WHY gas prices are this way in here and how to reduce them
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Fuel and energy price discussion thread - please keep it civil and factual
- Thread starter eljeffy
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People in the industry knew this would be coming for quite a while now though. The Ukraine/Russia situation just accelerated and added to it. I'll attempt to address this at a high level, with absolutely zero politics in this post, which shouldn't be all too hard really.
World Crude Oil Production (I would love to go back longer than this, but I cannot w/ out paying)
Right before the time of that massive drop in production, June 2020 is the low, a deal was made to cut oil production in various places around the world - US included. You'll notice that since that big dip, we still aren't anywhere near that fairly stable and steadily increasing level of production we were for years prior. There is a reason for that... the deal, is as follows: a 7.7-million-barrel-a-day cut from July to December and then to 5.8 million barrels a day from January 2021 to April 2022. It's still going on today.
For a while, this was not exactly a big deal. Americans weren't driving as much, COVID concerns, etc. But as we're all well aware, that's since changed - and our oil consumption data which is easy to look up, backs this up too.
And its maybe worth mentioning, I'm sure everyone here can see exactly where an additional 5.8 million barrels would put us on that chart. But... a deals a deal and markets are gonna market.
There should be more than enough data here to enable anyone to find more information on this deal, the other impacts, and make their own conclusions around it. But that for sure steps out of the realm I'd be willing to go here.
* Mods: If this chart, and explanation is too political as well, feel free to delete. I don't think it is, but they are your rules.
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There are several recent articles on wolfstreet.com regarding energy and why we are where we are today.
There's an especially relevant article from 2020 discussing the oil boom/bust of excess production around 2014-2015, plunging prices, an O&G industry going bankrupt and then the pandemic and drop in transportation fuel demand put the nail in the coffin for many.
https://wolfstreet.com/2020/08/05/u...owed-the-great-american-oil-gas-bust-phase-2/
If you don't have an informed opinion and are just going to spew MSM soundbites, do yourself a favor and spend a few minutes reading a few articles.
It should be well known I'm no fan of the current POS sleeper in chief in any way shape or form, but dare I say, while they're holding a hammer and nails it's not ENTIRELY their fault. However, blaming it on Putin is just ignorance or egregious dishonesty.
Lastly, I wish I had paid attention and listened to a few people that knew better and bought oil futures on 4-20-2020.
There's an especially relevant article from 2020 discussing the oil boom/bust of excess production around 2014-2015, plunging prices, an O&G industry going bankrupt and then the pandemic and drop in transportation fuel demand put the nail in the coffin for many.
https://wolfstreet.com/2020/08/05/u...owed-the-great-american-oil-gas-bust-phase-2/
If you don't have an informed opinion and are just going to spew MSM soundbites, do yourself a favor and spend a few minutes reading a few articles.
It should be well known I'm no fan of the current POS sleeper in chief in any way shape or form, but dare I say, while they're holding a hammer and nails it's not ENTIRELY their fault. However, blaming it on Putin is just ignorance or egregious dishonesty.
Lastly, I wish I had paid attention and listened to a few people that knew better and bought oil futures on 4-20-2020.
gimmie11s
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None of this is hard to comprehend with any basic supply chain knowledge.
The mental gymnastics are amusing. Call it what it is and either change the policy, or don't and then the voters decide how much they (we) want to pay for gas.
The mental gymnastics are amusing. Call it what it is and either change the policy, or don't and then the voters decide how much they (we) want to pay for gas.
Well the tricky part is if they were to reneg the deal that is set to end in a month or so, if that's even a possibility*, it'd more than likely really sting US based oil companies. Part of why it was put into place was to severely limit imports so we could pick up steam and keep our "local" actions running hard amidst the pandemic. IIRC oil was at something like 25$ a barrel at the time, supply was rapidly outpacing demand, and the price was literally free falling - eventually into negatives. Oil was laying off tons of people and slowing production, here included. The deal did help curb that, pretty damn well to be honest, albeit it's now hurting our wallets since the climate has changed.
But it's also sort of a catch-22 in a way now. While I think everyone wants cheaper fuel, I also think if OPEC is to go wild people will be pretty pissed off when the US flops back to plugging up pipes and laying off local workers. Or well, I'd expect them to be pretty pissed at least. What means more to current leadership ... cheaper oil prices, or employment numbers? I have no idea, but couple that with the rather large percentage of oil workers who are likely more right leaning (broad assumption of my own), and it's more than likely a lose-lose for leadership no matter which way the hairs get split. I do think it'll be interesting to see what happens once the deal expires, and they can begin to ramp up their production again as expected. Prices surely should go down either way. And my guess, is that's what they are waiting out.
Letting the voters decided is an interesting thought though. Kind of goes in the same train of thought, too. Would we the people care more about our fuel/oil prices, or our US workers (and companies) who are now absolutely killing it during this current oil situation? I have no idea, to be honest, and am actually conflicted on which way I'd lean.
Hopefully a new deal will be crafted that falls into a happy medium, globally. And as of today there is definitely some new space that needs to be filled, so there is some great potential as far as I'm concerned.
*I don't recall all of the deals specifics, moreso since it was put into action nearly 2 years ago, so I'm not sure if there is even a way to walk back out of the current situation. The only reason I even specifically remember this event is that I entered a rather large oil position (which is not my space at all) effectively betting on the worlds demand returning to normal much faster than the end of the production cuts, after learning of it.
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gimmie11s
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Interesting points but the assumption that $2/gal gas = millions of laid off oil workers does not tie.
We have decades of data and trends allowing producers and policy makers to carefully balance the supply with demand while still ensuring people stay employed.
This is not directed at you, but the current "deals" and policy creation is as if we just started consuming oil and gas last month. It's absurd.
You're right, they aren't intrinsically tied together. But at this point and time, they somewhat are.
The reason prices are what they are right now, is directly tied to a policy that was put in place ~2 years ago, in a successful attempt to not allow our (local US) oil industry to collapse into itself. And it worked very well in doing so. The downside being that the deal had a shelf life that was way too long for how things panned out.
Like I said, I have no idea if changing that deal is a possibility. but the deal was tied to a much larger global alliance (largely, the arms deal between the Saudis and us and our military support) that has been in place for like 8 decades now. I wouldn't be surprised if that deal couldn't really be touched, as I'm nearly sure we were on the shorter end of it to some capacity (simply because we benefited, again locally). Not to mention, OPEC didn't want to cut production, we did.
Note: largely personal opinions from here on out:
Maybe they could change it. That I don't know. But what I do know, and as someone who very likely donates more time and money than most to the party that directly put this play in action, is where the current problem stems from. And that's what aggravates me.
I think we have a two-fold problem, personally. First being a spiderweb of insane global policies in place, and second, US oil companies who are absolutely terrified to lose money - which is a very common occurrence - because they are raking that **** in right now and know the gravy train isn't forever.
If I were in the hot seat, I'd be pressing US oil companies to find out why they aren't producing more even though they absolutely have the capacity to do so. Make them say that they are currently making money hand over foot, and want to keep the status quo. Then I'd pressure them to either make ends meet or tell them we'd be going offshore and leaving them in our dust. Not very US-business-friendly, but that's how the unfortunate cookie crumbles. And I'd bet one of the majors would step up, and the rest would follow suit. But, again, that's just me not knowing the behind the scenes of what's actually going on in this market.
I also can't confidently say that gas prices would be any different today, regardless of who was in charge, either. That deal would have been in place either way - so unless Trump walked back his own deal with OPEC, we'd still be short through 4/22. And I'd argue that no one really knows how things would be, either. It's easy to point fingers, but I've yet to see any concrete "hows" anywhere, beyond "oh just pump more lol" - which if I think was an option, someone would be doing just that.