Oil falls to 3 year low.

[Pete]

Originally Posted by Cowgirl

Can someone please explain why OPEC would want to cut production to raise prices? Seems to me that the low prices can only HELP these failing economies.

Because OPEC is short sighted and only worry about their profit. They don't care about anyone's "failing economies" as long as they get theirs.

[Larry Gude (Premo)]

Originally Posted by Pete

Because OPEC is short sighted and only worry about their profit. They don't care about anyone's "failing economies" as long as they get theirs.

...let's think about that for a moment; WHO is shortsighted? The guys who control the majority of the product and it's distribution? Or, maybe, the biggest user who sticks his neck under their sword?

It doesn't do us any good to think they're dumb. It costs them about $10-15 a barrel or so to break even. And they have been instrumental in keeping production up thus helping their biggest user, dontcha think?

[Gtmustang88]

Originally Posted by Cowgirl

Can someone please explain why OPEC would want to cut production to raise prices? Seems to me that the low prices can only HELP these failing economies.

The countries apart of OPEC rely heavily on oil for there profits and there economies. They were spending money counting on oil staying high and the price increasing.

[Larry Gude (Premo)]

Originally Posted by Pete

Good point, with gas $1.75 he could slap a quarter tax per gallon and pay for the bailout in 2 years and put a chicken in every pot.

.

....uh, a quarter is only about $36 billion a year. Try 28 years to cover a trillion, without interest.

[SamSpade]

Originally Posted by Larry Gude

It doesn't do us any good to think they're dumb. It costs them about $10-15 a barrel or so to break even. And they have been instrumental in keeping production up thus helping their biggest user, dontcha think?

Some of them have their national economy built and budgeted with the assumption of certain oil prices. Their nation's revenue depends on high oil prices, to keep their overpriced government programs afloat. Some of these are nations like Venezuela, who I believe need prices above $75 to maintain - others, like Canada, who depend on even higher oil prices to sustain their costs.

I'm hoping that as the world's economies shrink and fail, OPEC's ability to manipulate markets will shrivel. They've already cut production once since the downturn, and it had no effect. With consumption down in the U.S. and China, they might find that cutting production might bite them in the ass in the long run. They'll push up prices but get beat in volume and sales by competitors.

[Pete]

Originally Posted by Larry Gude

...let's think about that for a moment; WHO is shortsighted? The guys who control the majority of the product and it's distribution? Or, maybe, the biggest user who sticks his neck under their sword?

It doesn't do us any good to think they're dumb. It costs them about $10-15 a barrel or so to break even. And they have been instrumental in keeping production up thus helping their biggest user, dontcha think?

If you voluntarily wreck your customers thus driving demand down significantly you have hurt yourself have you not?


If they had been proactive and not allowed the price to skyrocket out of control to $175 a barrel and kept it at a moderate price it would not be suffering like it is now. We are not suffering, they are.

[Larry Gude (Premo)]

Originally Posted by Cowgirl

Can someone please explain why OPEC would want to cut production to raise prices? Seems to me that the low prices can only HELP these failing economies.

...OPEC doesn't want to cut production right now for the very reason you cite; they NEED world economies to be doing OK. Besides, they're still making 'windfall' profits at anything over $30.

Right now, they are the casino that has people getting hernias carrying all the money to the bank yet also facing all their customers feeling poorly and not in a gambling mood. It is in their interest to get a good bit of action at a lower price rather than a good bit less at a higher price.

[Larry Gude (Premo)]

Originally Posted by Pete

If you voluntarily wreck your customers thus driving demand down significantly you have hurt yourself have you not?


If they had been proactive and not allowed the price to skyrocket out of control to $175 a barrel and kept it at a moderate price it would not be suffering like it is now. We are not suffering, they are.

....you make the incorrect assumption that high oil prices caused the global downturn, yes?

Housing killed the US, people stopping paying $2,000 a month mortgages, not an extra $200 a month for gas. Everything else crashed from there; construction, appliances, consumables, imports, etc.

Oil producers merely took the drunks money as they ordered another round for the house. The suffering they could have alleviated is marginal, so, why not take the cash?

[Larry Gude (Premo)]

Originally Posted by SamSpade

Some of them have their national economy built and budgeted with the assumption of certain oil prices. Their nation's revenue depends on high oil prices, to keep their overpriced government programs afloat. Some of these are nations like Venezuela, who I believe need prices above $75 to maintain - others, like Canada, who depend on even higher oil prices to sustain their costs.

I'm hoping that as the world's economies shrink and fail, OPEC's ability to manipulate markets will shrivel. They've already cut production once since the downturn, and it had no effect. With consumption down in the U.S. and China, they might find that cutting production might bite them in the ass in the long run. They'll push up prices but get beat in volume and sales by competitors.

...that's totally true BUT a $75 plus price point is a new deal for them. It is worse to be used to paying $30 and then pay $150 and back down to around $50 than it is to be GETTING $30, then $150 and then back down to around $50 or so.

They face the pain of lower profits, yet still better than it was not too long ago. We face the pain of still not being back down to what we need it to be.

[Pete]

Originally Posted by Larry Gude

....you make the incorrect assumption that high oil prices caused the global downturn, yes?

Housing killed the US, people stopping paying $2,000 a month mortgages, not an extra $200 a month for gas. Everything else crashed from there; construction, appliances, consumables, imports, etc.

Oil producers merely took the drunks money as they ordered another round for the house. The suffering they could have alleviated is marginal, so, why not take the cash?

Your last point is exactly what I was arguing to you a month ago and you kept disagreeing Pennies today might mean dollars next week.

No I am not really assuming the economic down turn was caused by oil prices but it contributed. Increased energy prices took away disposable income which domino'd into other things.....not the root cause but it did contribute.

What hurt them was that they allowed prices to get too high and it triggered conservation and demand dropped, that triggered the speculators to get nervous and they got off the cash cow of oil futures.

Everything is so intertwined it is hard to predict but I bet if oil had creeped slowly to $75 and hung out there it would still be close to that right now instead of $49. Of course they didn't set the price they just cash the checks. The problem is if they have obligated revenue up to $75 like Sam says they are going to be in the hurt locker and trying to get the price up soon.