Why Has The Cost Of Gasoline Plummeted?

[Abraham]

Anyone know?

Yesterday, I saw $1.79 a gallon for regular.

I can't recall the last time gasoline cost being so low.

Thanks!

[Beiruty]

KSA wants USA to stop ramping shale oil production, Squeeze Russia and Iran too for their support of Syrian Regime.

[Abraham]

So, it all KSA's doing in toto?

[puma guy]

KSA wants USA to stop ramping shale oil production, Squeeze Russia and Iran too for their support of Syrian Regime.

Bingo! They want to make fracturing and oil sale production to negative profit level. Benchmark (Brent and WTI) crude price dropped 46% in 2014. I will keep politics out of and just say this totally refutes the logic that increasing domestic production won't help oil prices.

[jmra]

Good article on the subject
http://www.vox.com/2014/12/16/7401705/o ... es-falling

[Abraham]

jmra,

Thanks for the very enlightening article.

One thing not mentioned (or perhaps I missed it) is the positive effect on the the lowered cost of freight.

That alone will provide a huge, positive economic impact, both domestically and globally.

[suthdj]

jmra,

Thanks for the very enlightening article.

One thing not mentioned (or perhaps I missed it) is the positive effect on the the lowered cost of freight.

That alone will provide a huge, positive economic impact, both domestically and globally.

Only if we see a prices drop on the grocery shelf, I doubt we will.

[Texas_Blaze]

I'll be a Debbie downer...

Supermajor operators have cancelled long term multi million dollar development projects. For those of us (me included) in O&G services industry this is going to hurt. Layoffs started in early Dec and will continue at my company. Hiring has been frozen. Early retirement packages have been offered. Not looking forward to first half 2015.

[Jim Beaux]

Seldom do things happen for a single reason & in the case of oil, there appears to be several factors & a lot of behind the scenes players.

Lot of lose ends & unknowns, but I see this as a case of strategic opportunism with geopolitical & economic agendas - basically a matter of taking advantage of circumstances.

Saudi is surrounded by enemies. Its major enemy is Iran, followed by the ISIS movement & its base, Syria. The ally of both Syria & Iran is Russia. These 3 countries are rogue & subjects of sanctions that have yet to produce results.

Iran's nuclear development is a threat to Saudi & the world. Low oil prices seems to be pressuring Iran towards a nuclear deal & will eventually force it, which is paying to keep the Assad regime afloat in Syria, to re-access its priorities.

Russia has a track record for fishing in troubled waters, it has become belligerent, has invaded Ukraine & is building a war machine funded by oil. Low oil greatly impacts Russia's economy & chokes off its military build up. It also diminishes its ability to violate the Iran & Syria sanctions. Currently the sanctions have hurt Russia big time. The ruble has been devalued by half its exchange rate & there is 9% inflation.

Saudi & US has a symbiotic relationship. The countries share common strategic & economic interests - but Saudi's rival for its main partner is the US domestic oil industry. Saudis are akin to a drug dealer. They have to keep the addict dependent. An energy independent US diminishes Saudi's viability & it would probably collapse. Saudi has covertly undermined the US domestic oil industry by funding anti Keystone, anti hydraulic fracturing (blocked from using the common term LOL) movements & movies. ( The Promised Land)

Cheap oil puts the issue of domestic exploration on the back burner, it lends credence to obama's anti fossil fuel & Keystone Pipeline rhetoric. The collapse in oil is merely an investment for Saudi. I believe there is collusion with Europe & US. I think oil will stay down at least until Russian & Iran really feel the pain.

U.S. big oil is like a buzzard waiting for death - it was too slow in recognizing the potential in the shale deposits & are now only able to access the less productive fields. If and when the smaller producers fail, the big guys will step in and buy their leases.

BTW- China & India is making out like bandits. They are replenishing oil reserves and leasing all the VLCC's they can acquire. China is also becoming a big time contango player.

For what it's worth - I believe crude prices will stay in flux for a while and start increasing late 2016.

[Jim Beaux]

I'll be a Debbie downer...

Supermajor operators have cancelled long term multi million dollar development projects. For those of us (me included) in O&G services industry this is going to hurt. Layoffs started in early Dec and will continue at my company. Hiring has been frozen. Early retirement packages have been offered. Not looking forward to first half 2015.

I hope the best for you TX Blaze. Im also in the industry & own stock in a Houston based offshore drilling contractor. I am sometimes contacted for projects needing engineers and would be happy to pass them on to you.

Feel free to PM for my contact info.

[LeakyWaders]

Seldom do things happen for a single reason & in the case of oil, there appears to be several factors & a lot of behind the scenes players.

Lot of lose ends & unknowns, but I see this as a case of strategic opportunism with geopolitical & economic agendas - basically a matter of taking advantage of circumstances.

Saudi is surrounded by enemies. Its major enemy is Iran, followed by the ISIS movement & its base, Syria. The ally of both Syria & Iran is Russia. These 3 countries are rogue & subjects of sanctions that have yet to produce results.

Iran's nuclear development is a threat to Saudi & the world. Low oil prices seems to be pressuring Iran towards a nuclear deal & will eventually force it, which is paying to keep the Assad regime afloat in Syria, to re-access its priorities.

Russia has a track record for fishing in troubled waters, it has become belligerent, has invaded Ukraine & is building a war machine funded by oil. Low oil greatly impacts Russia's economy & chokes off its military build up. It also diminishes its ability to violate the Iran & Syria sanctions. Currently the sanctions have hurt Russia big time. The ruble has been devalued by half its exchange rate & there is 9% inflation.

Saudi & US has a symbiotic relationship. The countries share common strategic & economic interests - but Saudi's rival for its main partner is the US domestic oil industry. Saudis are akin to a drug dealer. They have to keep the addict dependent. An energy independent US diminishes Saudi's viability & it would probably collapse. Saudi has covertly undermined the US domestic oil industry by funding anti Keystone, anti hydraulic fracturing (blocked from using the common term LOL) movements & movies. ( The Promised Land)

Cheap oil puts the issue of domestic exploration on the back burner, it lends credence to obama's anti fossil fuel & Keystone Pipeline rhetoric. The collapse in oil is merely an investment for Saudi. I believe there is collusion with Europe & US. I think oil will stay down at least until Russian & Iran really feel the pain.

U.S. big oil is like a buzzard waiting for death - it was too slow in recognizing the potential in the shale deposits & are now only able to access the less productive fields. If and when the smaller producers fail, the big guys will step in and buy their leases.

BTW- China & India is making out like bandits. They are replenishing oil reserves and leasing all the VLCC's they can acquire. China is also becoming a big time contango player.

For what it's worth - I believe crude prices will stay in flux for a while and start increasing late 2016.

Very informative and comprehensive explanation. Thank you.

[Texas_Blaze]

It's been a blood bath in O&G. Headcount reductions have been rampant. Houston, if not Texas, is gonna suffer some significant job losses. I hope the state economy can handle this...

Thank God I have been spared, but even if I ain't at a later time, He is still good.

[cb1000rider]

I drove the RV into town to fill it up at $1.59. It's crazy.
Diesel, however, it hasn't impacted as much... The diesel advantage is a disadvantage currently, at least in the passenger car space

[Oldgringo]

What/who is KSA?

[Texas_Blaze]

What/who is KSA?

Kingdom of Saudia Arabia