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According to Wendover on YouTube, producers have not been increasing production and rather aiming for higher profits. https://www.youtube.com/watch?v=AQbmpecxS

by pkaye 4y ago

According to Wendover on YouTube, producers have not been increasing production and rather aiming for higher profits. https://www.youtube.com/watch?v=AQbmpecxS2w https://www.youtube.com/watch?v=AQbmpecxS2w

tommiegannert 4y ago
In the latest (few) Macrovoices podcast it's speculated that OPEC is actually out of capacity. It was mentioned that a Saudi minister also said something along those lines recently.
- cbg0 4y ago
  Well, would you expect him to say "oh we can do it, we just want to make big profits"?
dmos62 4y ago
That's monopolitic. If there were a producer that did not participate in the price-fix, and could scale his production up, he'd outcompete the price-fixers. I wonder what keeps this setup in place. Sounds like something you'd fight wars over.
- JumpCrisscross 4y ago
  > there were a producer that did not participate in the price-fix, and could scale his production up, he'd outcompete the price-fixers New production is capital intensive. It’s currently difficult for oil producers to justify that to investors. The higher prices are only accelerating secular trends towards long-term lower oil demand.
- usrusr 4y ago
  Think of it not as production, think of it as extraction, a conversion of crude safely stored in underground vaults to dollars. Holding back has the double benefit of rising prices now and increasing the amount you can sell in the future. The price-fix is not just about keeping it up, it also has an element of not outdoing each other in the "oil futures" speculation that would be implicit in not extracting now. No oil country (well, no oil country except Norway I suppose) would be happy to enjoy a dominant market share now at the cost of having to leave the market earlier than their peers. One might expect that all the talk about CO2 would shift the balance between those two sides within OPEC (and those that tag along?), but habits change slowly.
- thehappypm 4y ago
  Oil companies aren’t like software companies. Every barrel they pump is a barrel they can’t pump later on. In fact, the cost of oil extraction generally trends upward over time as “easier” wells are exhausted and more expensive ones are tapped. Sure, going full steam and selling every barrel available would make for a great 2022, but they may pay the price in the future if they suddenly are out of cheap oil
  - KptMarchewa 4y ago
    It differs wildly between producers. Saudi Arabia extracts oil for a few dollars per barrel, while it costs Russia 40-50$.
- foota 4y ago
  I think you're being sarcastic, but this is basically what OPEC and others do.
  - refurb 4y ago
    OPEC only controls 40% of all supply and often accuses its members of breaking quotas. Producers seek the profit maximizing price, not the highest price (those aren’t the same). Would you rather sell 1,000,000 barrels at a profit of $10 per barrel ($10M profit) OR 1,200,000 barrels at a profit of $9 per barrel ($10.8M profit)?
    - blagie 4y ago
      I would rather sell 1,000,000 barrels at a profit of $10 per barrel: - If I lowered prices to $9, my competitors would follow, and I'd likely sell only 1,000,000 barrels - I have a finite supply of oil. If I sell 1,000,000 now, I'll have an extra 200,000 to sell at some point in the future. I'd like each barrel to cost as much as possible. In other words, there are time dynamics. OPEC might only control 40%, but if everyone follows OPEC, everyone wins. If someone breaks from OPEC, other parties have an incentive to break as well. There are many silent cabals, where parties don't conspire in any explicit way, except by signalling through market prices.
      - refurb 4y ago
        I would rather sell 1,000,000 barrels at a profit of $10 per barrel Sure, and I'd love to have $1B, but that doesn't mean I'll get it.. Yes there are time dynamics - ramping up production, production delays due to maintenance, prices changes you can't predict. Nobody has a crystal ball. And OPEC can't even control it's own members, so I'm highly skeptical anyone else follows them. Humans are great at seeing patterns where there are none. Oil skyrocketed in 2008, everyone said it would never go down, then it crashed below $20. That doesn't seem like the kind of market where suppliers control the price.
        lesuorac 4y ago
- sieabahlpark 4y ago

by pkaye 4y ago

tommiegannert 4y ago

In the latest (few) Macrovoices podcast it's speculated that OPEC is actually out of capacity. It was mentioned that a Saudi minister also said something along those lines recently.

cbg0 4y ago
Well, would you expect him to say "oh we can do it, we just want to make big profits"?

dmos62 4y ago

That's monopolitic. If there were a producer that did not participate in the price-fix, and could scale his production up, he'd outcompete the price-fixers. I wonder what keeps this setup in place. Sounds like something you'd fight wars over.

JumpCrisscross 4y ago
> there were a producer that did not participate in the price-fix, and could scale his production up, he'd outcompete the price-fixers New production is capital intensive. It’s currently difficult for oil producers to justify that to investors. The higher prices are only accelerating secular trends towards long-term lower oil demand.
usrusr 4y ago
Think of it not as production, think of it as extraction, a conversion of crude safely stored in underground vaults to dollars. Holding back has the double benefit of rising prices now and increasing the amount you can sell in the future. The price-fix is not just about keeping it up, it also has an element of not outdoing each other in the "oil futures" speculation that would be implicit in not extracting now. No oil country (well, no oil country except Norway I suppose) would be happy to enjoy a dominant market share now at the cost of having to leave the market earlier than their peers. One might expect that all the talk about CO2 would shift the balance between those two sides within OPEC (and those that tag along?), but habits change slowly.
thehappypm 4y ago
Oil companies aren’t like software companies. Every barrel they pump is a barrel they can’t pump later on. In fact, the cost of oil extraction generally trends upward over time as “easier” wells are exhausted and more expensive ones are tapped. Sure, going full steam and selling every barrel available would make for a great 2022, but they may pay the price in the future if they suddenly are out of cheap oil
- KptMarchewa 4y ago
  It differs wildly between producers. Saudi Arabia extracts oil for a few dollars per barrel, while it costs Russia 40-50$.
foota 4y ago
I think you're being sarcastic, but this is basically what OPEC and others do.
- refurb 4y ago
  OPEC only controls 40% of all supply and often accuses its members of breaking quotas. Producers seek the profit maximizing price, not the highest price (those aren’t the same). Would you rather sell 1,000,000 barrels at a profit of $10 per barrel ($10M profit) OR 1,200,000 barrels at a profit of $9 per barrel ($10.8M profit)?
  - blagie 4y ago
    I would rather sell 1,000,000 barrels at a profit of $10 per barrel: - If I lowered prices to $9, my competitors would follow, and I'd likely sell only 1,000,000 barrels - I have a finite supply of oil. If I sell 1,000,000 now, I'll have an extra 200,000 to sell at some point in the future. I'd like each barrel to cost as much as possible. In other words, there are time dynamics. OPEC might only control 40%, but if everyone follows OPEC, everyone wins. If someone breaks from OPEC, other parties have an incentive to break as well. There are many silent cabals, where parties don't conspire in any explicit way, except by signalling through market prices.
    - refurb 4y ago
      I would rather sell 1,000,000 barrels at a profit of $10 per barrel Sure, and I'd love to have $1B, but that doesn't mean I'll get it.. Yes there are time dynamics - ramping up production, production delays due to maintenance, prices changes you can't predict. Nobody has a crystal ball. And OPEC can't even control it's own members, so I'm highly skeptical anyone else follows them. Humans are great at seeing patterns where there are none. Oil skyrocketed in 2008, everyone said it would never go down, then it crashed below $20. That doesn't seem like the kind of market where suppliers control the price.
      - lesuorac 4y ago
sieabahlpark 4y ago