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Oil Wars: Why OPEC Will Win
Posted on 12/14/14 at 9:58 pm
Posted on 12/14/14 at 9:58 pm
quote:
In the green corner we have the US shale producers. In the red corner we have the oil exporting countries of OPEC. Assuming the fight is fought to a conclusion, who wins?
OPEC wins. The US shale producers will shut down first. The reasons are:
• The US shale producers are motivated by economics, and all other things being equal will have an incentive to cut production at or around the point where production cost exceeds sales price.
• The OPEC countries are motivated by social imperatives. They have historically used their oil wealth to finance social programs, build infrastructure and subsidize basic foodstuffs and other items such as gasoline (which costs one cent/liter in Venezuela). Cutting back on social spending courts civil unrest and cutting back on oil production cuts spending, so they have a disincentive to cut oil production. (As long as the oil price exceeds cash production costs, which it does in all OPEC countries by a substantial margin, they in fact have an incentive to increase production).
LINK
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Posted on 12/15/14 at 1:37 am to bayoubengals88
In kind of confused how that spells that OPEC wins "in its conclusion."
There is a point where they can't maintain a rate of production sufficient enough and cheap enough to price out global wells.
And as the article says, they need oil revenue to stay in power. So when they go cheap, they have to sell even more to compensate.
They are hastening their own demise while the world bides their time......and the author thinks that is winning?
There is a point where they can't maintain a rate of production sufficient enough and cheap enough to price out global wells.
And as the article says, they need oil revenue to stay in power. So when they go cheap, they have to sell even more to compensate.
They are hastening their own demise while the world bides their time......and the author thinks that is winning?
Posted on 12/15/14 at 5:56 am to Volvagia
anybody have any decent opinions what would happen if we lifted the ban on export oil?
Posted on 12/15/14 at 7:13 am to cjared036
More global supply, so further downward pressure.
My guess anyway
My guess anyway
Posted on 12/15/14 at 7:16 am to bayoubengals88
The shale producers have a lower break-even point than OPEC countries though. OPEC gets stomped in a price war
Posted on 12/15/14 at 7:22 am to I Love Bama
quote:
More global supply, so further downward pressure.
Not exactly true, the WTI oil price would increase while the Brent price would decrease. We would see a much smaller differential in the two prices.
Posted on 12/15/14 at 7:22 am to Thib-a-doe Tiger
Seriously? I didn't know what.
Can shale produce enough volume though?
Can shale produce enough volume though?
Posted on 12/15/14 at 7:54 am to Thib-a-doe Tiger
quote:
The shale producers have a lower break-even point than OPEC countries
I've heard just the opposite, and it is the reason OPEC is playing this game, they know that the shale producers will bottom out first.
Posted on 12/15/14 at 8:01 am to Thib-a-doe Tiger
quote:
The shale producers have a lower break-even point than OPEC countries though. OPEC gets stomped in a price war
That may be the absolute worst statement I have ever seen on the money board. You could not be more wrong.
Posted on 12/15/14 at 8:04 am to htownjeep
The COFD and lifting costs for Saudi oil is ridiculously cheap. Its probably 4 times cheaper than some of the tight oil plays in the US.
Posted on 12/15/14 at 8:16 am to bayoubengals88
quote:
OPEC wins. The US shale producers will shut down first. The reasons are:
I don't really understand what they hope to gain here. In the long run it will hurt OPEC more than the US. Sure the shale producing companies will take a hit but these fields are not going away. Unless OPEC plans on keeping oil prices around or below $50 forever, these fields will come back online by someone else when the prices increase.
OPEC is not hurting the US economy, if anything it will help it.
This is a win for the US, we needed a relief from these overpriced oil prices.
Posted on 12/15/14 at 8:21 am to htownjeep
quote:
That may be the absolute worst statement I have ever seen on the money board. You could not be more wrong.
Considering this is the board where VTSMX is the be all end all of mutual funds, I'll take that as a compliment
Posted on 12/15/14 at 8:21 am to Thib-a-doe Tiger
quote:
That may be the absolute worst statement I have ever seen on the money board. You could not be more wrong.
Considering this is the board where VTSMX is the be all end all of mutual funds, I'll take that as a compliment
I said "may" be
Posted on 12/15/14 at 8:27 am to htownjeep
I'll try to find the article, it was from a major business publication, that said most shale producers could still turn a profit at $45, whereas OPEC would be slitting it's own throat
Posted on 12/15/14 at 8:33 am to Thib-a-doe Tiger
Saudi Arabias oil fields are massive, shallow and produce high rate wells. Their lifting costs are estimated to be somewhere in the $5-15 range.
Posted on 12/15/14 at 8:41 am to lsugradman
Yeah, but that's an estimate. CNBC was reporting the Saudis said they need oil at 60 or above long term, while there are many wells that have been drilled but not tapped here that could be brought online for $5
Posted on 12/15/14 at 8:48 am to Thib-a-doe Tiger
I'd love to read the article that you saw that in. Then I would seriously reconsider anything I had ever read in that publication.
The only case one could make is one that would incorporate the cost of their social programs into their drilling/production. But, it would also have to include the nearly $1 Trillion they have in cash reserves, which I have yet to see anyone bring up both in the same article.
The only case one could make is one that would incorporate the cost of their social programs into their drilling/production. But, it would also have to include the nearly $1 Trillion they have in cash reserves, which I have yet to see anyone bring up both in the same article.
Posted on 12/15/14 at 8:48 am to offshoretrash
quote:
I don't really understand what they hope to gain here
Market Share. Making their money in volume rather than the spread.
Posted on 12/15/14 at 8:52 am to Thib-a-doe Tiger
quote:
while there are many wells that have been drilled but not tapped here that could be brought online for $5
Then why are some in the US tearing down rigs as we speak and having layoffs?
Posted on 12/15/14 at 8:56 am to I Love Bama
Dude im sorry you dont know what you are talking about. I dont care what some obscure article said. The costs fir the Saudis to find, develop and produce their oil is way cheaper than it is for all the plays in the US and 95% of those around the world. They know this, we know this and its the # 1 reason they arent cutting production right now. They want to drive prices down to squeeze out all the small players in higher cost environments. They want market share by reducing the competition. They might WANT oil at $60 a barrel but they sure as hell dont need it there.
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