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Gas price drop a game of chicken?

by Steven Haninger / January 5, 2015 9:40 PM PST

At least one news program so much as inferred this might be the case by stating that the break even point of shale oil was about 60 bucks a barrel...and that the Middle Eastern oil producing nations were allowing the price to drop in an effort to make it too expensive to extract oil this way. So maybe we're not seeing the results of government success in creating energy independence but just a war between giants to see which one will lord over us.

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Results
by Willy / January 5, 2015 11:38 PM PST

The price of gas compared to the days of my youth are outrageous. When it was $.19/gal and a few bucks got you around. Now that prices are far higher, we now have better engines, tires, body styles, oils, electronics and you name it, anything to get more miles out of gal. of gas. It doesn't matter where that gas comes from, but it certainly does at the pump. We're VERY LUCKY to sit on our own oil reserves no matter what the type and can make use of it. Then there's Canada and Mexico as well to supply US with oil. The only reason we use Mid-east oil is because it usually "sweeter" and they want to sell it to us. What else do they have, really. That's oil it also part of the "energy picture" which we have moved on and not just talk. When we drill for oil we get gas as well. That gas has to be sold, you can store only so much. One big reason that "gas fired" electric plants are around us now. Also, during refining gas is produced and if a place can have it piped to another source for gas for electric plants uses. I'll guarantee you if other countries we're the position we are, they'll make the same decisions. Of course, getting to oil/gas is a messy business so continued clean efforts should be imposed, otherwise falling back on coal will wipe out any emissions stds.. But getting oil/gas isn't as messy as coal. The whole energy picture is all about that to include solar and wind, even if they are small players they reduce the dependence on sole sources of energy. Enjoy it for now the gas prices, they won't stay low for that long. Any energy saving we have in oil is being sucked by China, the next customer down the line. They have little oil reserves and coal is their prime energy source. You can see that their skies are dirty as heck. One reason, they're into oil exploration now in a big way is to gain access using cheaper drilling tools or accepting foreign payments far lower than normal and/or gaining footholds in foreign markets in order to export back to China, gee whiz Louise. We're here now only because of something Prez. Carter started in trying to have better energy planning or wean ourselves from being energy hogs. It took this long to get any benefits and usually only because of hammering at it. When not hammering, everything went back to cheaper or less govt. interference, but that won't produce anything in the "long run". In these situations the results are from long yrs. of plans and sticking to the plan especially when the govt. is involved, usually does for any benefit to arise. off soapbox -----Willy Happy

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Willy, I wish you would break up your posts
by Diana Forum moderator / January 6, 2015 3:16 AM PST
In reply to: Results

I had to copy it into Word and break up the sentences so I could read it. For those that have the same problem.

The price of gas compared to the days of my youth are outrageous.
When it was $.19/gal and a few bucks got you around.
Now that prices are far higher, we now have better engines, tires, body styles, oils, electronics and you name it, anything to get more miles out of gal. of gas.
It doesn't matter where that gas comes from, but it certainly does at the pump.
We're VERY LUCKY to sit on our own oil reserves no matter what the type and can make use of it.
Then there's Canada and Mexico as well to supply US with oil.
The only reason we use Mid-east oil is because it usually "sweeter" and they want to sell it to us.
What else do they have, really.
That's oil it also part of the "energy picture" which we have moved on and not just talk.
When we drill for oil we get gas as well. That gas has to be sold, you can store only so much.
One big reason that "gas fired" electric plants are around us now.
Also, during refining gas is produced and if a place can have it piped to another source for gas for electric plants uses.
I'll guarantee you if other countries we're the position we are, they'll make the same decisions.
Of course, getting to oil/gas is a messy business so continued clean efforts should be imposed, otherwise falling back on coal will wipe out any emissions stds..
But getting oil/gas isn't as messy as coal.
The whole energy picture is all about that to include solar and wind, even if they are small players they reduce the dependence on sole sources of energy.
Enjoy it for now the gas prices, they won't stay low for that long.
Any energy saving we have in oil is being sucked by China, the next customer down the line.
They have little oil reserves and coal is their prime energy source. You can see that their skies are dirty as heck.
One reason, they're into oil exploration now in a big way is to gain access using cheaper drilling tools or accepting foreign payments far lower than normal and/or gaining footholds in foreign markets in order to export back to China, gee whiz Louise.
We're here now only because of something Prez. Carter started in trying to have better energy planning or wean ourselves from being energy hogs.
It took this long to get any benefits and usually only because of hammering at it.
When not hammering, everything went back to cheaper or less govt. interference, but that won't produce anything in the "long run".
In these situations the results are from long yrs. of plans and sticking to the plan especially when the govt. is involved, usually does for any benefit to arise. off soapbox ---

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I don't think I made myself clear as to what I wanted
by Steven Haninger / January 6, 2015 3:59 AM PST

to discuss so let's try again.

A TV news report the other night (major network but I've forgotten which) seemed to suggest that the deep drop in gas prices wasn't because of US production but that the Middle Eastern oil producers might be attempting to undercut shale producers in an effort to make them less competitive. The argument was short but seemed to be realistic...that this was a war between the oil giants to see who really has the most clout. OPEC is said to have not moved to slow production as it typically would when prices drop. Hence, the game of chicken. At some point it becomes too expensive to keep on drilling or fracking so you either stay in the game at a loss or cry "uncle".

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I saw the same report....
by TONI H / January 6, 2015 4:15 AM PST

The Saudis are the one who are controlling that 'game' right now mainly because OPEC, with the US in 'independent' mode, is losing their clout.

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Yeah, I thought you meant "shale".
by drpruner / January 6, 2015 7:35 AM PST

Sounds reasonable. Anyway "game of chicken" is always a decent description of the capitalist system, isn't it? Especially during price competition. Goes on all the time in retailing, I think, w/o our being aware of it.
Another comment on PBS about OPEC was that they're due for a meeting by June if not earlier. That's when the chicken might hit the fan.
There's also a game of chicken played within OPEC: The first country to cut production (to start a round of price rises) will take an immediate hit in income added to its present problems. No one wants to be that, and I believe Russia can't afford it at all.

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I understand...I think
by Willy / January 8, 2015 1:53 AM PST

That's the oil business as usual. OPEC was made in order to keep themselves inline. Remeber, the US was the largest oil producer before WWII and remained so until about 1960 or earlier. The tool set used is based on US technology, Saudi Arbriba is trying to control the market but also its partners or oil producers in the region which they direct that action at. The US picture simply benefits from all that and NOT by our production alone. BUT!!! the US production is here to stay and for once foreign oil won't dictate internal structure/policy if it's offshore based as well. In other words, we're back to being self-dependent or at least for the time being. Enjoy the current pricing, it won't stay that way for long. -----Willy Happy

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govts vs oil companies
by James Denison / January 9, 2015 1:35 AM PST

It's not always easy to define who is in control of oil prices, considering there is a balance between supply & demand of a huge commodity, the influence or direct control by governments, the control by oil companies, the weather hot or cold, etc.

I'm not sure any single govt entity now controls supply enough to "play chicken" with oil prices, not since OPEC, which as you recall was a multi-govt approach to oil price control, and even it didn't completely control the price as some of it's own members cheated on selling greater supply at inflated prices.

In fact, the power loss of OPEC over oil markets indicate to me even further that no govt is directly controlling the world oil prices.

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