4 ms·

Adjusting the Taps on Oil Price

18 points by rfreytag 11y ago

revelation 11y ago
Saudi-Arabia and others fund their regime and frankly, standard of living, primarily through oil profits, in the same way that Google finances self-driving cars R&D and other projects through ads. So sure, they can profitably extract oil at $20 price point, but that doesn't pay for their state budget. They really need a price at $80+. Meanwhile, western producers don't care very much; if the price is high, they can export, if the price is low, that massively benefits their other industry while the oil part hibernates.
- myth_drannon 11y ago
  Tell that to Canadians that had their currency dropped like a stone. They need to feed their families while the prices of fresh food doubled
  - tosseraccount 11y ago
    Fact check: ( source : https://www.uoguelph.ca/foodinstitute/system/files/Food%20Price%20Report%202016%20English.pdf https://www.uoguelph.ca/foodinstitute/system/files/Food%20Pr... ) Food Price Report 2016 UNIVERSITY OF GUELPH ECONOMIC BRIEF 4 Prepared by the Food Institute of the University of Guelph 12/10/2015 "In 2014,the Food Institute of the University of Guelph predicted that overall food prices in 2015 would rise by up to 3.0%. As stated in our revised report in February 2015, this prediction was based on a much stronger Canadian dollar versus the American currency. For 2015, overall food price inflationary patterns were consistent with our predictions. " I know you said "fresh food", but it is January. It would not be surprising that some prices double around this time. I know that "fresh strawberries" are triple the price where I live.
  - toomuchtodo 11y ago
    Canada should've diversified its economy then.
  - revelation 11y ago
    Well yeah, you need that other industry. They instead foolishly decided to get rid of that in favor of oil profits. There was a topic on this recently: https://news.ycombinator.com/item?id=10885001 https://news.ycombinator.com/item?id=10885001
- SixSigma 11y ago
  But they don't control the price. No-one is a price setter any more, they are all price takers. They are playing Stag Hunt [1] and the Nash equilibria are "All Low" or "All High", no single entity can up the price without losing sales, only rising demand or majority throttling of supply can do that now. [1] https://en.wikipedia.org/wiki/Stag_hunt https://en.wikipedia.org/wiki/Stag_hunt
- ThinkBeat 11y ago
  Production costs in SA are very low. Whereas off shore oil production is quite high also shale oil. Norway is an example of a western nation that cares quite a lot.
salimmadjd 11y ago
OT: I researched the savings to American pockets. Going from $4/gallon -> $2/gallon saves American $500 Billion annually. I included the savings from the cost of food as well (food cost had a direct correlation to oil prices). How much of that is going to be pumped back into the economy is unknown, but the amount is sizable. You would also expect, some amount of savings globally on food and fuel. So net, this might give the global economy a bit of a boost. OT OT: It also surprised me why Obama administration never, framed the Iran Nuclear Deal as a $2/gallon or $1/gallon victory for American people. It would have been more sticky.
- jayess 11y ago
  With the happy side effect that $billions are not going to Saudi Arabia, the ISIS that succeeded.
- TheCowboy 11y ago
  Things have changed. A lot of states' new and old oil industry experiences a contraction at prices that low. Alaskan residents used to get cut a check, but that might be going away due to budget shortfalls. Then you have plenty of lost jobs in the shale states. It also should not be the responsibility of politicians to promise cheap gasoline. It might be a quick political victory when it's easy to promise, but it leads to bad policies when it gets complicated.
- revelation 11y ago
  The issue of course is that a sizable portion of these "savings" are just simply poured into driving more.

18 points by rfreytag 11y ago

Saudi-Arabia and others fund their regime and frankly, standard of living, primarily through oil profits, in the same way that Google finances self-driving cars R&D and other projects through ads. So sure, they can profitably extract oil at $20 price point, but that doesn't pay for their state budget. They really need a price at $80+. Meanwhile, western producers don't care very much; if the price is high, they can export, if the price is low, that massively benefits their other industry while the oil part hibernates.

myth_drannon 11y ago
Tell that to Canadians that had their currency dropped like a stone. They need to feed their families while the prices of fresh food doubled
- tosseraccount 11y ago
  Fact check: ( source : https://www.uoguelph.ca/foodinstitute/system/files/Food%20Price%20Report%202016%20English.pdf https://www.uoguelph.ca/foodinstitute/system/files/Food%20Pr... ) Food Price Report 2016 UNIVERSITY OF GUELPH ECONOMIC BRIEF 4 Prepared by the Food Institute of the University of Guelph 12/10/2015 "In 2014,the Food Institute of the University of Guelph predicted that overall food prices in 2015 would rise by up to 3.0%. As stated in our revised report in February 2015, this prediction was based on a much stronger Canadian dollar versus the American currency. For 2015, overall food price inflationary patterns were consistent with our predictions. " I know you said "fresh food", but it is January. It would not be surprising that some prices double around this time. I know that "fresh strawberries" are triple the price where I live.
- toomuchtodo 11y ago
  Canada should've diversified its economy then.
- revelation 11y ago
  Well yeah, you need that other industry. They instead foolishly decided to get rid of that in favor of oil profits. There was a topic on this recently: https://news.ycombinator.com/item?id=10885001 https://news.ycombinator.com/item?id=10885001
SixSigma 11y ago
But they don't control the price. No-one is a price setter any more, they are all price takers. They are playing Stag Hunt [1] and the Nash equilibria are "All Low" or "All High", no single entity can up the price without losing sales, only rising demand or majority throttling of supply can do that now. [1] https://en.wikipedia.org/wiki/Stag_hunt https://en.wikipedia.org/wiki/Stag_hunt
ThinkBeat 11y ago
Production costs in SA are very low. Whereas off shore oil production is quite high also shale oil. Norway is an example of a western nation that cares quite a lot.

salimmadjd 11y ago

OT: I researched the savings to American pockets. Going from $4/gallon -> $2/gallon saves American $500 Billion annually. I included the savings from the cost of food as well (food cost had a direct correlation to oil prices). How much of that is going to be pumped back into the economy is unknown, but the amount is sizable. You would also expect, some amount of savings globally on food and fuel. So net, this might give the global economy a bit of a boost. OT OT: It also surprised me why Obama administration never, framed the Iran Nuclear Deal as a $2/gallon or $1/gallon victory for American people. It would have been more sticky.

jayess 11y ago
With the happy side effect that $billions are not going to Saudi Arabia, the ISIS that succeeded.
TheCowboy 11y ago
Things have changed. A lot of states' new and old oil industry experiences a contraction at prices that low. Alaskan residents used to get cut a check, but that might be going away due to budget shortfalls. Then you have plenty of lost jobs in the shale states. It also should not be the responsibility of politicians to promise cheap gasoline. It might be a quick political victory when it's easy to promise, but it leads to bad policies when it gets complicated.
revelation 11y ago
The issue of course is that a sizable portion of these "savings" are just simply poured into driving more.