5 ms·

The game theory on this is awesome. You've got OPEC a collection of countries that don't all like each other, trying to agree to lower their individual product

The game theory on this is awesome. You've got OPEC a collection of countries that don't all like each other, trying to agree to lower their individual production knowing that they can't trust each other. At the same time this exact group of countries are running deficits and any cut's they make will increase those deficits in the short term. Keep in mind these are countries who can't be described as stable. In many the only thing keeping the government in power is they oil money they sprinkle on their populations. You've got oil producing countries outside of OPEC who would love to see the price of oil rise so they can expand their production of oil that's more expensive to produce. Keep in mind there is a prominent theory that OPEC flooded the market with cheap oil to drive these countries out of the oil producing business. You've got world economies that depend on oil, all of which are using cheap oil to prop themselves up to differing degrees. A return to $100/barrel oil would be short term trouble for many 1st world economies. I love the oil market. I can't figure it out, but I love trying:)

hayksaakian 10y ago
all this in mind, it takes a lot of thought to imagine a world not reliant on oil imagine all the countries that won't have oil money that has so many implications
strictnein 10y ago
> "...love to see the price of oil rise so they can expand their production of oil that's more expensive to produce" Yeah, it's a weird dynamic. For example, the higher the price of oil, the less dependent the US is on the rest of the world. Lots of oil in that $60-$80+ range in and around the US.
- Retric 10y ago
  The 60-80$ range US Oil only lasts for a few years at US consumption rates, but that's plenty to influence OPEC. The real issue is Expensive Oil has a lot of competition but Cheap Oil does not. Further, it takes years for substitutes to get onto the market. So, OPEC is better off with large price swings than a steady state which causes long term demand to fall off a cliff or uses up their supply at very low prices. On top of that, politics can make price swings a useful weapon. Cheap Oil makes Russia for example far weaker. PS: IMO, small scale Russian aggression actually fits as a 'wag the dog' distraction from how bad things are going for them.
  - nnq 10y ago
    > small scale Russian aggression Let's hope they keep it small and don't try to covertly start a big fire that will drive oil prices back up. It's scary to see a world economic situation where starting/fueling wars starts to make more and more economic sense... I can almost imagine a future "WarEnron" selling the future profits indirectly caused by future wars :) We should find a way to make sure we have profits aligned with peace and abolish the concept of "wars that make economic sense"! The US and EU at least do this (more or less unintentionally) by keeping weapons and military operations very expensive. Russia probably has more practical means for "cheap destruction" and this is dangerous because at some point some will start placing bets on this and then try nudging world events in the direction of their "win".
    - jballanc 10y ago
      > I can almost imagine a future "WarEnron" selling the future profits indirectly caused by future wars Pretty sure you just described every fund that's big into Honeywell, General Dynamics, Lockheed, etc. Many of these companies profits depend on the US insisting on maintaining the largest military in the world (by a lot) as a hedge against just these sorts of "profit wars" from being waged.
    - irln 10y ago
      It seems like a major influence in the price of oil is the US Dollar, [1][2] rather than geopolitical issues. [1] Price of Oil Chart: https://fred.stlouisfed.org/series/DCOILWTICO https://fred.stlouisfed.org/series/DCOILWTICO [2] Dolar Chart: https://fred.stlouisfed.org/series/DTWEXM https://fred.stlouisfed.org/series/DTWEXM
  - greedo 10y ago
    But you can't exclude the natural gas that's also part of fracking. The reserves of it in the US are incredible, and have a large impact on energy prices.
    - Retric 10y ago
      Natural gas is often burnt off as not worth recovering in many places. It's valuable in the US largely due to low transportation costs, but on it's own is generally not worth it.
CyberDildonics 10y ago
Putting these countries in difficult situations is why the deal with Iran was so valuable.
- Fjolsvith 10y ago
  Could you elaborate?
  - CyberDildonics 10y ago
    The Iran deal was win/win in many ways from what I can tell. They agree not to pursue their nuclear program and as a result they get sanctions lifted allowing them to sell oil through OPEC, bringing prices down further. Cheap oil hurts Saudi Arabia, Russia, Venezuela, ISIS, etc. You might want to fact check everything I just said though, it has been a while since I've looked at this.
akhatri_aus 10y ago
The most optimum thing (or one of the optimums) is for them to do, Game Theory wise, is to announce a deal and cheat unofficially! The only way to check this is to see their shipment numbers on the importing side, after the fact. They've cheated before.. The benefits come from the market expectation of lower output, immediately gaining higher revenue.

hayksaakian 10y ago

all this in mind, it takes a lot of thought to imagine a world not reliant on oil imagine all the countries that won't have oil money that has so many implications

strictnein 10y ago

> "...love to see the price of oil rise so they can expand their production of oil that's more expensive to produce" Yeah, it's a weird dynamic. For example, the higher the price of oil, the less dependent the US is on the rest of the world. Lots of oil in that $60-$80+ range in and around the US.

Retric 10y ago
The 60-80$ range US Oil only lasts for a few years at US consumption rates, but that's plenty to influence OPEC. The real issue is Expensive Oil has a lot of competition but Cheap Oil does not. Further, it takes years for substitutes to get onto the market. So, OPEC is better off with large price swings than a steady state which causes long term demand to fall off a cliff or uses up their supply at very low prices. On top of that, politics can make price swings a useful weapon. Cheap Oil makes Russia for example far weaker. PS: IMO, small scale Russian aggression actually fits as a 'wag the dog' distraction from how bad things are going for them.
- nnq 10y ago
  > small scale Russian aggression Let's hope they keep it small and don't try to covertly start a big fire that will drive oil prices back up. It's scary to see a world economic situation where starting/fueling wars starts to make more and more economic sense... I can almost imagine a future "WarEnron" selling the future profits indirectly caused by future wars :) We should find a way to make sure we have profits aligned with peace and abolish the concept of "wars that make economic sense"! The US and EU at least do this (more or less unintentionally) by keeping weapons and military operations very expensive. Russia probably has more practical means for "cheap destruction" and this is dangerous because at some point some will start placing bets on this and then try nudging world events in the direction of their "win".
  - jballanc 10y ago
    > I can almost imagine a future "WarEnron" selling the future profits indirectly caused by future wars Pretty sure you just described every fund that's big into Honeywell, General Dynamics, Lockheed, etc. Many of these companies profits depend on the US insisting on maintaining the largest military in the world (by a lot) as a hedge against just these sorts of "profit wars" from being waged.
  - irln 10y ago
    It seems like a major influence in the price of oil is the US Dollar, [1][2] rather than geopolitical issues. [1] Price of Oil Chart: https://fred.stlouisfed.org/series/DCOILWTICO https://fred.stlouisfed.org/series/DCOILWTICO [2] Dolar Chart: https://fred.stlouisfed.org/series/DTWEXM https://fred.stlouisfed.org/series/DTWEXM
- greedo 10y ago
  But you can't exclude the natural gas that's also part of fracking. The reserves of it in the US are incredible, and have a large impact on energy prices.
  - Retric 10y ago
    Natural gas is often burnt off as not worth recovering in many places. It's valuable in the US largely due to low transportation costs, but on it's own is generally not worth it.

CyberDildonics 10y ago

Putting these countries in difficult situations is why the deal with Iran was so valuable.

Fjolsvith 10y ago
Could you elaborate?
- CyberDildonics 10y ago
  The Iran deal was win/win in many ways from what I can tell. They agree not to pursue their nuclear program and as a result they get sanctions lifted allowing them to sell oil through OPEC, bringing prices down further. Cheap oil hurts Saudi Arabia, Russia, Venezuela, ISIS, etc. You might want to fact check everything I just said though, it has been a while since I've looked at this.

akhatri_aus 10y ago

The most optimum thing (or one of the optimums) is for them to do, Game Theory wise, is to announce a deal and cheat unofficially! The only way to check this is to see their shipment numbers on the importing side, after the fact. They've cheated before.. The benefits come from the market expectation of lower output, immediately gaining higher revenue.