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One factor that I don't quite understand is how the lower prices could possibly sway investors to continue to invest heavily in oil industries. I can imagine h

One factor that I don't quite understand is how the lower prices could possibly sway investors to continue to invest heavily in oil industries. I can imagine how it may slow the investment in alternative energy, but to convince savvy investors that the future of energy is in oil seems impossible to me. I read this whole situation as big oil finally realizing what they're up against, and deciding that they just need do everything they can to squeeze every last ounce of cash out of their oil. After the tides finally turn, the oil producing countries will likely have a lot of issues to deal with. Possibly for decades to come.

rhino369 12y ago
I've wondered if this is Saudi Arabia acknowledging that oil will be a dying market and trying to cash out now. Saudi's cornered the oil market, but their percentage of the market slips every time someone starts pumping more oil. If the Saudi's think that falling demand and increasing supply in the US will occur, they may just resort to taking a large portion of the market instead of trying to keep the price high.
- saryant 12y ago
  All of OPEC has been falling for the marketshare scramble for much of the last 30 years, this is a key reason why their ability to maintain pricing power has diminished. Whenever the price of oil falls below OPEC's established floor, Saudi Arabia (in theory) will be the OPEC member to cut their output. Historically Saudi Arabia has served as the world's swing producer. Each OPEC member had a specific quota they were allowed to produce with Saudi Arabia increasing and decreasing supply to maintain their target price. The problem is, as OPEC as a whole has lost marketshare to new reserves elsewhere in the world, individual OPEC members began to ignore their quota and go for marketshare, producing as much as they could. This was largely driven by local politics in the individual nations, since increased marketshare would deliver a short-term cash infusion. The Saudis are now tired of this. With US supplies now on the market, they've abandoned their role as the world's swing producer, leaving that task to America. America's producers are more market-sensitive, since they don't have sovereign reserves to fall back on, and more readily cut supply as projects become uneconomical in the face of falling prices. The great American oil boom of the past ten years has dramatically reshaped the power dynamics of the oil industry. So the Saudis have joined the rest of OPEC in the quest for marketshare, allowing the price of crude to enter a free-fall. They can outlast most of the rest of OPEC with their currency reserves so they're using this moment to slap the rest of them in the face for decades of defying OPEC policy. Oil isn't a dying market, conventional oil is a dying market.
saryant 12y ago
The industry refers to it as "prospecting for oil on the floor of the stock exchange." Moments like this will cause a lot of oil companies to become financially untenable as their market value falls below the long-term value of their assets (land leases, booked reserves, etc). Solvent competitors will buy them up as an alternative to starting new capital-intensive projects of their own.

rhino369 12y ago

I've wondered if this is Saudi Arabia acknowledging that oil will be a dying market and trying to cash out now. Saudi's cornered the oil market, but their percentage of the market slips every time someone starts pumping more oil. If the Saudi's think that falling demand and increasing supply in the US will occur, they may just resort to taking a large portion of the market instead of trying to keep the price high.

saryant 12y ago
All of OPEC has been falling for the marketshare scramble for much of the last 30 years, this is a key reason why their ability to maintain pricing power has diminished. Whenever the price of oil falls below OPEC's established floor, Saudi Arabia (in theory) will be the OPEC member to cut their output. Historically Saudi Arabia has served as the world's swing producer. Each OPEC member had a specific quota they were allowed to produce with Saudi Arabia increasing and decreasing supply to maintain their target price. The problem is, as OPEC as a whole has lost marketshare to new reserves elsewhere in the world, individual OPEC members began to ignore their quota and go for marketshare, producing as much as they could. This was largely driven by local politics in the individual nations, since increased marketshare would deliver a short-term cash infusion. The Saudis are now tired of this. With US supplies now on the market, they've abandoned their role as the world's swing producer, leaving that task to America. America's producers are more market-sensitive, since they don't have sovereign reserves to fall back on, and more readily cut supply as projects become uneconomical in the face of falling prices. The great American oil boom of the past ten years has dramatically reshaped the power dynamics of the oil industry. So the Saudis have joined the rest of OPEC in the quest for marketshare, allowing the price of crude to enter a free-fall. They can outlast most of the rest of OPEC with their currency reserves so they're using this moment to slap the rest of them in the face for decades of defying OPEC policy. Oil isn't a dying market, conventional oil is a dying market.

saryant 12y ago

The industry refers to it as "prospecting for oil on the floor of the stock exchange." Moments like this will cause a lot of oil companies to become financially untenable as their market value falls below the long-term value of their assets (land leases, booked reserves, etc). Solvent competitors will buy them up as an alternative to starting new capital-intensive projects of their own.