A very good response STH But the truth is that the oil is at its...

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retep

127 Posts.

11/12/14

16:20

Post #: 14446555
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Originally posted by szaba_the_hut ↑

Producing vs producing at a profit is a different question.

Generally if competitors are profitable at a lower cost of production then you will not beat them in a price war. Politics in this situation then comes into play to turn the paradigm on its head. Oil royalty is a much greater % of middle eastern govt revenue than US govt. Mid east govt social programs depend almost entirely on healthy tax take from oil sales. Very cheap oil puts pressure on govt spending capacity and cuts to social programs lead to civil unrest/unhappiness with govt in the middle east much more so than in the US with its diverse economy.

The arab nations are not generally good at peaceful solutions to social unrest. This is why the US oil is a bit of a game changer. Surplus production to world demand makes for depressed price and OPEC in the short term decided to call the bluff of higher cost US producers with continuing volume production - who will blink first? Will US producers shut down wells helping the price rebound ? Will middle east budgets hit a wall and cause further destabilisation?

Either way for UCG or big alaskan oil projects - low and depressed energy prices do not help project feasibility.

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A very good response STH But the truth is that the oil is at its current price on order to bring Russia into line in the former Soviet Union. Once there is stability there the price will go back up irrespective of how much can be produced by whom. The price will increase before the end of March 2015.Retep[

LNC Price at posting: 99.5¢ Sentiment: Buy Disclosure: Held
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0 Great analysis

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