8 ms·

U.S. crude oil price tops $80 a barrel, the highest since 2014

47 points by nimbius 5y ago

deft 5y ago
So prices are rising rapidly but we're also facing really high inflation everywhere. I'm pretty naive when it comes to the oil boom/bust cycle, but taking in everything where are we now? I'm working in o&g and we're growing fast, I want to know how to maximize my ability to profit off what's going on if I can before inflation slashes any extra money I make.
- mywittyname 5y ago
  How long have you been in the industry? I ask because the last bust was not that long ago, like 2016ish.
1cvmask 5y ago
The age of pervasive global inflation has started. The global supply shock has led to rising prices everywhere. In addition, the lack of incentive to work as a truck driver etc. in some countries due to free checks has led to wage-push inflation and cost-push inflation. We might soon get a $25 minimum wage which can end up buying just one fast food burger. https://en.wikipedia.org/wiki/Supply_shock https://en.wikipedia.org/wiki/Supply_shock https://en.wikipedia.org/wiki/Cost-push_inflation https://en.wikipedia.org/wiki/Cost-push_inflation https://www.investopedia.com/terms/w/wage-push-inflation.asp#:~:text=Wage%20push%20inflation%20has%20an,their%20products%20and%2For%20services.&text=An%20increase%20in%20demand%20for,goods%20in%20the%20broader%20market https://www.investopedia.com/terms/w/wage-push-inflation.asp....
- SSilver2k2 5y ago
  Wages haven't gone up, and prices still went up.
  - 1cvmask 5y ago
    In California they have in 2 ways. They have increased signing bonuses, starting salaries and some places have expanded their pool of applicants by "reducing" minimum requirements: https://www.pe.com/2021/07/23/more-southern-california-employers-no-longer-testing-most-job-candidates-for-drugs/ https://www.pe.com/2021/07/23/more-southern-california-emplo...
  - alexgmcm 5y ago
    That makes sense if these price rises reflect real shortages of goods and not just more money in the economy. Essentially, we are seeing cost-push inflation and it's not clear when it will go away given the supply chain problems.
- arbuge 5y ago
  There are those who disagree: https://www.ai-cio.com/news/cathie-wood-the-big-risk-is-deflation-not-inflation/ https://www.ai-cio.com/news/cathie-wood-the-big-risk-is-defl... For what it's worth, I personally think she's dead wrong, chiefly because she's forgetting that inflation is primarily a monetary phenomenon. In an environment where governments and central banks are strongly biased in favor of printing money, I see the possibility of deflation as extremely small.
  - ganeshkrishnan 5y ago
    >inflation is primarily a monetary phenomenon. Inflation has not been a monetary phenomenon at all ever since most currencies dropped the gold standard. If that was the case we would have had hyper inflation during QE from 2009. Japan also prints money in excess (for the last 20+ years) and they havent had inflation. The current inflation (as is with most developed countries) is always due to supply/labor.
  - newaccount2021 5y ago
    The Fed has already announced its tapering. A rate rise won't be far behind. The time to ride an inflationary bubble is when it is starting (2009), not when it is ending (2022).
  - mywittyname 5y ago
    > I see the possibility of deflation as extremely small. Which is good, deflationary pressure is devastating. The low prices that occurred during a deflationary phase look appealing after-the-fact. But the cause of those low prices were the fact that nobody could afford anything close to market price for assets. Inflation slowly erodes purchasing power, but deflation completely erases it. People who've lived through the GFC remember why houses, cars, and stocks where cheap: because your income could go to zero at any time. Even if you had the money now to buy something, that wasn't prudent. The phrase of the era was, "cash is king."
  - analyst74 5y ago
    Central banks definitely have demonstrated their willingness to print. However, the Fed's mandate also includes managing inflation, meaning they're unlikely to continue the printing if that contributes higher inflation.
- sgc 5y ago
  > We might soon get a $25 minimum wage which can end up buying just one fast food burger. But correlation does not equal causation, and that is not at all the case in countries that have higher minimum wages right now. All the theoretical bloviating by uncompromising capitalists doesn't change that. We don't need quasi-slavery to function as a society in 2021. We just have it because we are addicted to it. https://www.statista.com/statistics/274326/big-mac-index-global-prices-for-a-big-mac/ https://www.statista.com/statistics/274326/big-mac-index-glo...
- hindsightbias 5y ago
  Pandemic recoveries are the new norm? HN told me lumber prices proved inflation just a few months back. 2x4 cost me $3.38 last weekend.
  - jjk166 5y ago
    Lumber might not be nearly as bad as it was in May but it's still double where it was in October 2019.
steve76 5y ago
Manufacturing surges when oil prices go up. Purchases for more efficient heavy equipment start to make sense.
KSteffensen 5y ago
Wasn't the crude oil price negative a year ago? What happened?
- jbay808 5y ago
  Russia and Saudi Arabia stopped fighting a price war with each other and the COVID demand slump is coming to an end.
- gruez 5y ago
  demand went back up.
  - YinglingLight 5y ago
    sure
- hammock 5y ago
  Commodities trade at the margin, because there are many times more futures contracts than actual deliveries, but the people that actually take delivery and need these commodities to run their operations, will pay whatever price necessary to get them and not stop production. The effect of this is to make the markets extremely volatile.
  - mpmpmpmp 5y ago
    The last sentence is not true. The whole point of a futures contract is to hedge risk and allow price discovery. It is true the companies consuming commodities will buy at almost any price but more active trading results in a price more closer to fair market value over time. It’s the same reason why prices for rarely sold items fluctuate widely between sales. There’s no activity to visibly show the change in demand or supply in between.
    - hammock 5y ago
      >The last sentence is not true. Is that so? In theory, derivatives like futures can increase the efficiency of market clearing. Nevertheless, it is apparent that the price of oil is many times more volatile than the price of downstream finished goods using oil.
alvis 5y ago
Do we have any substantial change recently? Nothing, just news on the logistic backlogs, which ironically means we consume less fuel on shipping. Well. Speculation never makes sense.
- mywittyname 5y ago
  Oil prices are coming out of depression phase that started in around 2015. I know inflation is on everyone's mind now-a-days, but oil is still very cheap compared to even 10 years go. Prices have a ways to go up just to get back to non-inflation adjusted numbers from 10 years ago. And adjusted for inflation, $80/bbl is about average for the past 20 years. https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha...
- dood 5y ago
  Multiple trends combining to reach a tipping point, mainly decreased appetite for capital investment by the west, inflation expectations becoming increasingly embedded and pandemic destabilization constraining supply/strengthening opec. It's hard to see the era of cheap oil making a sudden comeback in this environment so this speculation doesn't seem unreasonable, though may be a tad overeager since winter is coming.
WarOnPrivacy 5y ago
oil benchmark, crossed $80 per barrel on Friday for the first time since November 2014 as demand rebounds while supply remains tight We're (unwillingly) part of the increasing demand. We had to move & our only choice was farther out. We're driving >5x more than we were 6 months ago. * only choice = 50-400 applicants for each available rental. Most are statistically unlikely to find anything here at all.
- wffurr 5y ago
  Time to go electric!
  - WarOnPrivacy 5y ago
    Our cars are 1961, 1963, 1969, 1996, 2006. Electrifying them would be a notable project.
    - wffurr 5y ago
      Presumably you would start with replacing the one with the duty cycle that best fits electric range and charging capability. But you know your situation best, of course. Shame there aren't 10-15 year old electric cars on the used market. Maybe in another 10 years there will be reasonable used electric options.
      - WarOnPrivacy 5y ago
        > Presumably you would start with replacing the one with the duty cycle that best fits electric range and charging capability. We've considered it but the joy in driving these things is largely due to their ICUs. You're probably right about waiting for used electrics. Need to see what the repercussions are of EoL battery packs.
        wffurr 5y ago
        I bought a 2017 Bolt and am eagerly awaiting a brand new battery pack with extended warranty. Also, I forgot to say in my initial comment, I'm sorry you had to move so far from where you'd clearly rather be. That sucks. :(
mrfusion 5y ago
Shouldn’t we be looking at the inflation adjusted price before declaring a new record?
- ohyes 5y ago
  I've long thought that maybe we should just measure everything in joules and call it a day.
- deleted 5y ago
  [deleted]
lordentropy 5y ago
Lets not forget about OPEC+. They reduced the supply significantly due to the pandemic and haven't increased the oil supply back to the normal levels. Higher oil prices is causing inflation, not the other way around.
- epistasis 5y ago
  Very true. And, "inflation" means a lot of different things, and almost never the thing that is of real concern: hyperinflation. Cost push inflation is different from demand pull inflation, but if we are talking about only isolated sectors of the economy increasing in price, like oil, I don't know why we are taking about "inflation" in general.
  - mc32 5y ago
    Energy powers everything so of course it needs to be considered as part of inflation in general.
  - kijin 5y ago
    Everything except organic local produce is either made of oil, need oil during production, or need oil for shipping. Hardly an isolated economic sector. Edit: Even the organic local produce was probably brought to you on a gas-guzzling truck.
    - epistasis 5y ago
      This is increasingly untrue, as we diversify our energy sources. There's also at least three other things that are very different from the 1970s when inflation did seem to be caused by an oil shortage: 1) we have made massive gains in efficiency in the oil that we do use, and 2) we are unlikely to institute price controls, like Nixon did in the 1970s, and 3) we have a massive amount of fracking capacity that will come online if prices stay as high as they are now.
- deleted 5y ago
  [deleted]
bfrog 5y ago
The artificial inflation rate finally starts to show some leaks now that oil is going up. If the CPI actually included the things that cost the most, it would have been 5% for a decade. Housing, healthcare, university. Easily the triad of debt burden.
- onlyrealcuzzo 5y ago
  Housing, healthcare, and university are all included in the Fed's measurement of inflation. Housing is based on rent & the FINANCING cost of owning a home. If house prices and rent go up a ton and interest rates go down - it is possible the way they measure housing costs could be negative. Since non-homeowners are close to 40% of the population and rent is their biggest expense and many of them are trying to buy a home - this metric is pretty obviously broken for them. University prices don't have a high weight because they only affect the people currently paying for college (~18M US students - some of them are graduate students going to school "for free" = <5.5% of the population).
  - imtringued 5y ago
    Until 2019 housing costs was one of the main drivers of inflation. The CPI had something like 3%-4% housing inflation but there are lots of products with barely any inflation which dragged the numbers to 2% or below. The amount you pay on your mortgage and the amount that the previous homeowner gets are two different numbers because you have to pay interest on your mortgage. Low interest rates don't really change your monthly payment people the bank simply charges less interest which lets you bid for higher prices on homes. You get a more expensive home without paying more on your mortgage.
    - onlyrealcuzzo 5y ago
      You're forgetting that >60% of homeowners don't own their home outright and can refinance at lower rates. <7% of homeowners have owned their home for <1 year - the rest can refinance to take advantage of lower rates.
jeffbee 5y ago
Big yawn. Real oil prices were higher continuously from 2005 to 2014 and somehow life continued. $50/barrel should be the carbon severance tax anyway.
xyst 5y ago
On the flip side, the rising cost of crude oil means more demand for alternatives (ie, electric) and investment in non-fossil fuel energy sources.
- idiotsecant 5y ago
  How so? Almost no energy production in the west uses crude. It's nearly all natural gas, coal, nuke, or hydro. You might make the argument that rising fuel prices raise the price of everything else, but you can make that argument about literally everything, renewables included.
  - xyst 5y ago
    I was referring to transportation sector, not the energy production. IIRC, 70% of crude oil is used in the residential (truck/car) and commercial sectors. There are some other applicable sectors like roads and lubricants but account for a few percentage points. In the past increases in crude oil would cause increases in sales of high mpg vehicles. I remember when crude was $100 a barrel, the prius was flying off the dealerships. With newer technologies and alternative fuel sources (electric), we should see similar trends with electric vehicle adoption if the price of crude should continue to climb.
  - gonzo 5y ago
    Have you looked at Hawaii?

47 points by nimbius 5y ago

deft 5y ago

So prices are rising rapidly but we're also facing really high inflation everywhere. I'm pretty naive when it comes to the oil boom/bust cycle, but taking in everything where are we now? I'm working in o&g and we're growing fast, I want to know how to maximize my ability to profit off what's going on if I can before inflation slashes any extra money I make.

mywittyname 5y ago
How long have you been in the industry? I ask because the last bust was not that long ago, like 2016ish.

1cvmask 5y ago

The age of pervasive global inflation has started. The global supply shock has led to rising prices everywhere. In addition, the lack of incentive to work as a truck driver etc. in some countries due to free checks has led to wage-push inflation and cost-push inflation. We might soon get a $25 minimum wage which can end up buying just one fast food burger. https://en.wikipedia.org/wiki/Supply_shock https://en.wikipedia.org/wiki/Supply_shock https://en.wikipedia.org/wiki/Cost-push_inflation https://en.wikipedia.org/wiki/Cost-push_inflation https://www.investopedia.com/terms/w/wage-push-inflation.asp#:~:text=Wage%20push%20inflation%20has%20an,their%20products%20and%2For%20services.&text=An%20increase%20in%20demand%20for,goods%20in%20the%20broader%20market https://www.investopedia.com/terms/w/wage-push-inflation.asp....

SSilver2k2 5y ago
Wages haven't gone up, and prices still went up.
- 1cvmask 5y ago
  In California they have in 2 ways. They have increased signing bonuses, starting salaries and some places have expanded their pool of applicants by "reducing" minimum requirements: https://www.pe.com/2021/07/23/more-southern-california-employers-no-longer-testing-most-job-candidates-for-drugs/ https://www.pe.com/2021/07/23/more-southern-california-emplo...
- alexgmcm 5y ago
  That makes sense if these price rises reflect real shortages of goods and not just more money in the economy. Essentially, we are seeing cost-push inflation and it's not clear when it will go away given the supply chain problems.
arbuge 5y ago
There are those who disagree: https://www.ai-cio.com/news/cathie-wood-the-big-risk-is-deflation-not-inflation/ https://www.ai-cio.com/news/cathie-wood-the-big-risk-is-defl... For what it's worth, I personally think she's dead wrong, chiefly because she's forgetting that inflation is primarily a monetary phenomenon. In an environment where governments and central banks are strongly biased in favor of printing money, I see the possibility of deflation as extremely small.
- ganeshkrishnan 5y ago
  >inflation is primarily a monetary phenomenon. Inflation has not been a monetary phenomenon at all ever since most currencies dropped the gold standard. If that was the case we would have had hyper inflation during QE from 2009. Japan also prints money in excess (for the last 20+ years) and they havent had inflation. The current inflation (as is with most developed countries) is always due to supply/labor.
- newaccount2021 5y ago
  The Fed has already announced its tapering. A rate rise won't be far behind. The time to ride an inflationary bubble is when it is starting (2009), not when it is ending (2022).
- mywittyname 5y ago
  > I see the possibility of deflation as extremely small. Which is good, deflationary pressure is devastating. The low prices that occurred during a deflationary phase look appealing after-the-fact. But the cause of those low prices were the fact that nobody could afford anything close to market price for assets. Inflation slowly erodes purchasing power, but deflation completely erases it. People who've lived through the GFC remember why houses, cars, and stocks where cheap: because your income could go to zero at any time. Even if you had the money now to buy something, that wasn't prudent. The phrase of the era was, "cash is king."
- analyst74 5y ago
  Central banks definitely have demonstrated their willingness to print. However, the Fed's mandate also includes managing inflation, meaning they're unlikely to continue the printing if that contributes higher inflation.
sgc 5y ago
> We might soon get a $25 minimum wage which can end up buying just one fast food burger. But correlation does not equal causation, and that is not at all the case in countries that have higher minimum wages right now. All the theoretical bloviating by uncompromising capitalists doesn't change that. We don't need quasi-slavery to function as a society in 2021. We just have it because we are addicted to it. https://www.statista.com/statistics/274326/big-mac-index-global-prices-for-a-big-mac/ https://www.statista.com/statistics/274326/big-mac-index-glo...
hindsightbias 5y ago
Pandemic recoveries are the new norm? HN told me lumber prices proved inflation just a few months back. 2x4 cost me $3.38 last weekend.
- jjk166 5y ago
  Lumber might not be nearly as bad as it was in May but it's still double where it was in October 2019.

steve76 5y ago

Manufacturing surges when oil prices go up. Purchases for more efficient heavy equipment start to make sense.

KSteffensen 5y ago

Wasn't the crude oil price negative a year ago? What happened?

jbay808 5y ago
Russia and Saudi Arabia stopped fighting a price war with each other and the COVID demand slump is coming to an end.
gruez 5y ago
demand went back up.
- YinglingLight 5y ago
  sure
hammock 5y ago
Commodities trade at the margin, because there are many times more futures contracts than actual deliveries, but the people that actually take delivery and need these commodities to run their operations, will pay whatever price necessary to get them and not stop production. The effect of this is to make the markets extremely volatile.
- mpmpmpmp 5y ago
  The last sentence is not true. The whole point of a futures contract is to hedge risk and allow price discovery. It is true the companies consuming commodities will buy at almost any price but more active trading results in a price more closer to fair market value over time. It’s the same reason why prices for rarely sold items fluctuate widely between sales. There’s no activity to visibly show the change in demand or supply in between.
  - hammock 5y ago
    >The last sentence is not true. Is that so? In theory, derivatives like futures can increase the efficiency of market clearing. Nevertheless, it is apparent that the price of oil is many times more volatile than the price of downstream finished goods using oil.

alvis 5y ago

Do we have any substantial change recently? Nothing, just news on the logistic backlogs, which ironically means we consume less fuel on shipping. Well. Speculation never makes sense.

mywittyname 5y ago
Oil prices are coming out of depression phase that started in around 2015. I know inflation is on everyone's mind now-a-days, but oil is still very cheap compared to even 10 years go. Prices have a ways to go up just to get back to non-inflation adjusted numbers from 10 years ago. And adjusted for inflation, $80/bbl is about average for the past 20 years. https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha...
dood 5y ago
Multiple trends combining to reach a tipping point, mainly decreased appetite for capital investment by the west, inflation expectations becoming increasingly embedded and pandemic destabilization constraining supply/strengthening opec. It's hard to see the era of cheap oil making a sudden comeback in this environment so this speculation doesn't seem unreasonable, though may be a tad overeager since winter is coming.

WarOnPrivacy 5y ago

oil benchmark, crossed $80 per barrel on Friday for the first time since November 2014 as demand rebounds while supply remains tight We're (unwillingly) part of the increasing demand. We had to move & our only choice was farther out. We're driving >5x more than we were 6 months ago. * only choice = 50-400 applicants for each available rental. Most are statistically unlikely to find anything here at all.

wffurr 5y ago
Time to go electric!
- WarOnPrivacy 5y ago
  Our cars are 1961, 1963, 1969, 1996, 2006. Electrifying them would be a notable project.
  - wffurr 5y ago
    Presumably you would start with replacing the one with the duty cycle that best fits electric range and charging capability. But you know your situation best, of course. Shame there aren't 10-15 year old electric cars on the used market. Maybe in another 10 years there will be reasonable used electric options.
    - WarOnPrivacy 5y ago
      > Presumably you would start with replacing the one with the duty cycle that best fits electric range and charging capability. We've considered it but the joy in driving these things is largely due to their ICUs. You're probably right about waiting for used electrics. Need to see what the repercussions are of EoL battery packs.
      - wffurr 5y ago
        I bought a 2017 Bolt and am eagerly awaiting a brand new battery pack with extended warranty. Also, I forgot to say in my initial comment, I'm sorry you had to move so far from where you'd clearly rather be. That sucks. :(

mrfusion 5y ago

Shouldn’t we be looking at the inflation adjusted price before declaring a new record?

ohyes 5y ago
I've long thought that maybe we should just measure everything in joules and call it a day.
deleted 5y ago
[deleted]

lordentropy 5y ago

Lets not forget about OPEC+. They reduced the supply significantly due to the pandemic and haven't increased the oil supply back to the normal levels. Higher oil prices is causing inflation, not the other way around.

epistasis 5y ago
Very true. And, "inflation" means a lot of different things, and almost never the thing that is of real concern: hyperinflation. Cost push inflation is different from demand pull inflation, but if we are talking about only isolated sectors of the economy increasing in price, like oil, I don't know why we are taking about "inflation" in general.
- mc32 5y ago
  Energy powers everything so of course it needs to be considered as part of inflation in general.
- kijin 5y ago
  Everything except organic local produce is either made of oil, need oil during production, or need oil for shipping. Hardly an isolated economic sector. Edit: Even the organic local produce was probably brought to you on a gas-guzzling truck.
  - epistasis 5y ago
    This is increasingly untrue, as we diversify our energy sources. There's also at least three other things that are very different from the 1970s when inflation did seem to be caused by an oil shortage: 1) we have made massive gains in efficiency in the oil that we do use, and 2) we are unlikely to institute price controls, like Nixon did in the 1970s, and 3) we have a massive amount of fracking capacity that will come online if prices stay as high as they are now.
deleted 5y ago
[deleted]

bfrog 5y ago

The artificial inflation rate finally starts to show some leaks now that oil is going up. If the CPI actually included the things that cost the most, it would have been 5% for a decade. Housing, healthcare, university. Easily the triad of debt burden.

onlyrealcuzzo 5y ago
Housing, healthcare, and university are all included in the Fed's measurement of inflation. Housing is based on rent & the FINANCING cost of owning a home. If house prices and rent go up a ton and interest rates go down - it is possible the way they measure housing costs could be negative. Since non-homeowners are close to 40% of the population and rent is their biggest expense and many of them are trying to buy a home - this metric is pretty obviously broken for them. University prices don't have a high weight because they only affect the people currently paying for college (~18M US students - some of them are graduate students going to school "for free" = <5.5% of the population).
- imtringued 5y ago
  Until 2019 housing costs was one of the main drivers of inflation. The CPI had something like 3%-4% housing inflation but there are lots of products with barely any inflation which dragged the numbers to 2% or below. The amount you pay on your mortgage and the amount that the previous homeowner gets are two different numbers because you have to pay interest on your mortgage. Low interest rates don't really change your monthly payment people the bank simply charges less interest which lets you bid for higher prices on homes. You get a more expensive home without paying more on your mortgage.
  - onlyrealcuzzo 5y ago
    You're forgetting that >60% of homeowners don't own their home outright and can refinance at lower rates. <7% of homeowners have owned their home for <1 year - the rest can refinance to take advantage of lower rates.

jeffbee 5y ago

Big yawn. Real oil prices were higher continuously from 2005 to 2014 and somehow life continued. $50/barrel should be the carbon severance tax anyway.

xyst 5y ago

On the flip side, the rising cost of crude oil means more demand for alternatives (ie, electric) and investment in non-fossil fuel energy sources.

idiotsecant 5y ago
How so? Almost no energy production in the west uses crude. It's nearly all natural gas, coal, nuke, or hydro. You might make the argument that rising fuel prices raise the price of everything else, but you can make that argument about literally everything, renewables included.
- xyst 5y ago
  I was referring to transportation sector, not the energy production. IIRC, 70% of crude oil is used in the residential (truck/car) and commercial sectors. There are some other applicable sectors like roads and lubricants but account for a few percentage points. In the past increases in crude oil would cause increases in sales of high mpg vehicles. I remember when crude was $100 a barrel, the prius was flying off the dealerships. With newer technologies and alternative fuel sources (electric), we should see similar trends with electric vehicle adoption if the price of crude should continue to climb.
- gonzo 5y ago
  Have you looked at Hawaii?