Why oil is cheap; what does it mean?

[IamIan]

Keeping in mind they are still making significant profits at the current lower gasoline retail prices.

Exon 2014 Quarterly Profits
1st Quarter 8.52%
2nd Quarter 7.86%
3rd Quarter 7.51%
Average 2014 APR to-date = ~7.96%

Chevron
1st Quarter 8.47%
2nd Quarter 9.78%
3rd Quarter 10.23%
Average 2014 APR to-date = ~9.49%

etc...

Caveat : Those are published company wide profits .. so it also includes revenue from other non-gasoline sources .. and it also includes non-gasoline costs they paid for buying new equipment , upgrading facilities, etc.

[niky]

Reading up... apparently that's due to their refining business... not production. As other players dropped their refining operations, those two are cleaning up. A glut in supply hurts primary producers, but crude oil still has to be refined, one way or another.

[Frank Lee]

Oil dipped below $50 today...

[cts_casemod]

The last years of expensive oil have made manufacturers concentrate on electric and hybrid technology a lot more. It's not just a DIY business here in Europe (and I guess other parts of the world) 70% of the manufacturers offer electric vehicles and a much larger percentage offer hybrids at a similar price to the petrol versions after governmental rebates.

Now I am not surprised the petrol guys are backing down. After all, more expensive prices will only work to bring more people into more efficient vehicles

[Xusn96]

1.799 at Sam's Club in Kenosha, WI. yesterday

[Lokhankin]

From PR interview with Obama:
"Is it something that you did?

If you'll recall, their economy was already contracting and capital was fleeing even before oil collapsed. And part of our rationale in this process was that the only thing keeping that economy afloat was the price of oil.

And if, in fact, we were steady in applying sanction pressure, which we have been, that over time it would make the economy of Russia sufficiently vulnerable that if and when there were disruptions with respect to the price of oil — which, inevitably, there are going to be sometime, if not this year then next year or the year after — that they'd have enormous difficulty managing it."
(from transcript of "President Obama's Full NPR Interview : NPR")

Thus, for so long, average Joe was manipulated and fooled around with whatever private company called "USA Federal Reserve" was covering up, in response of average Joe economical demands in expensive cars, HD TVs, etc., etc., taking back some of money via high gas prices, growing costs of high education, etc. Still, to maintain supply economy need wars. Safest ones - on foreign lands, hopefully by foreign hands. Like in Ukraine.
In this forum, though, people don't appear to be providers for the need of USA economy to be artificially "strong". Then let's call all the US troops back home as "ankle Sam" doesn't care of them anyway.

[Fingie]

Gas cost roughly 5,56 US dollars a gallon here in Finland. B-) It's because the gov taxes the hell out of it, and adds up in all prices :/
Our crude oil comes from Primorsk in Russia.

[Xist]

I am a Soldier and I do well enough.

[servant74]

After working in the 'oil patch' for most of my working life, the price of oil is based on supply and demand. Right now, we have a 'glut', it will dry up and the price will rise.

Oil is low now due to a 'glut' because of extra production in North America. Saudi decided not to cut production to keep the price up.

Even though I sympathise with oil companies, I do believe there is no 'great oil conspiracy'. The market is really supply and demand driven, mixed with a little speculation that causes 'irregularities' that we all pay for in the long run.

Yes, fracking, finding new oil deposits, doing secondary and tertiary recovery on 'old fields' (including fracking) helps.

Fracking is 'cheap' to do for the oil recovered, and yes, that too will dry up. All oil fields dry up eventually. Fracking, back burns, water insertion, gas injection, all help getting more out of a field.

The cheapest oil is oil from primary wells, close to the surface, in 'loose rock' (porous like big holes in sponges like in Saudi is cheapest, hard rock requires minimal fracking of one kind or another - there has been fracturing of rock going on for years, recent bad decisions were made to 'over produce' in some areas).

For most of us, plan on $5/gal gas, enjoy $2/gal gas and pocket the difference on your 'mad money' for when it. Just don't blow it on an SUV, but if you were thinking about a prius, save the nickles toward that.

The price of energy will go back up eventually. We need to be ready for that when it happens.

When people ask, I have said for years that there is no $10/barrel oil, there is lots of $400/barrel oil.

Just decide what oil (or any commodity) is worth to both a willing buyer and a willing seller, that is price they will trade on. That is how the price is set in the long term.

[acparker]

The retail price of gasoline is a lot less flexible than the spot price of oil and usually does not follow the price of oil closely. I am a bit suspicious of the current drop in gasoline prices in the US. Look for proposals to significantly increase fuel taxes. Once those pass, the price will likely rebound, plus the new taxes.

Coal-to-liquid's break even price was around $40/barrel in 2006, which was the trigger price for subsidies to kick in under legislation proposed by, then, Sen. Obama. He dropped his support to win the green vote. CTL will return, eventually. The coal isn't going anywhere. We can convert algae or any other biomass source to liquid fuel. If that doesn't work out, we can convert limestone and water to liquid fuel -- at considerable expense. We can stretch the current transportation paradigm out for a good long time.