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Who is responsible for the recent Oil price drop.

Posted on 2014-12-17
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I hear several explanations for the recent oil price drop. These include, decreased demand in the Asian markets, increased production by OPEC to destroy the US Fracking  industry, as well as increased supply specifically due to the US Fracking. And all of these by themselves and as a group are credible in explaining the current situation. However, there is one more factor that I would like to take into considerations and what would be a deliberate attempt by the West (mostly US) to destroy the Russian economy through low gas and oil prices, as a form of pressure for Russia's activity in Ukraine and Crimea.

How credible do you think that is?
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Question by:leonstryker
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by:paulmacd
paulmacd earned 25 total points
ID: 40504878
Gas prices have fallen due to fracking, primarily.  They've remained low because OPEC hasn't curtailed production  - something they typically do to drive prices up.  

OPEC's motivation for maintaining production appears primarily to be to make things uncomfortable for US producers.  Russia's economic pains are probably just a side effect.
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SunBow earned 13 total points
ID: 40504988
I agree - in kneejerk reaction, been wondering same, and wanting to pursue MQs concerning economy as main public issue when voting.

For one, controlling election, keeping prices higher to thwart opinion of Obama gov't (I be superstitious wonder of (not advocate of) conspiracy). Next to that be keystone pipeline. Now both of them off the table as winter approaches - price should go up.

For another, price increases typically blamed on latest media highlights, lately for Iraq & Syria having supply reduction. But no, it does not seem that, and they did not seem to blame that for higher prices. I also would not believe it. Similarly, report of ISIL selling oil - hardly seems worth reducing price on their account.

One change that could have contributed, at least a little, was US reducing restrictions on her east coast. That could be a start, along with judgements against prior oil spills going down, and China & Russia going after major increase in off shore drilling.

The timing itself, and substantialness of reductions point more at Russia. For one, the greater supply of Russia to China - India, (Asian market increasing demand) the economy of Europe purchase from Russia and ... local US stations smiling, where customers spend less on fuel (price fixed, profit low) then more in store for the more profitable items, like candy...

Last, Russia downscaled its money, said to be paying interest now at 17%, becoming more unstable for Putin management.

As such, I agree:

Q> How credible do you think that is?

Answer: very credible

PS. Given news on Cuba/US, possible to consider Venezuela among targets for destabilization; even a Nicaragua
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by:dhsindy
dhsindy earned 12 total points
ID: 40511904
I think it is a demand problem and and over supply problem.  I think the current US administration would be foolish to try to lower oil prices now with elections in two years.  I think the only chance the democrats have of keeping control of the executive branch is if the US economy continues to improve.  Witness the democratic resistance to the Keystone pipeline, it will just contribute to the over supply problem.
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by:paulmacd
paulmacd earned 25 total points
ID: 40511917
"I think the current US administration would be foolish to try to lower oil prices now..."
In the United States, the government does not control the price of oil or gasoline.

"Witness the democratic resistance to the Keystone pipeline, it will just contribute to the over supply problem."
I'm not sure what "democratic resistance" means, but the oil (and resultant products) carried by the Keystone pipeline would not be sold in the US.  In other words, the approval/disapproval of the Keystone pipeline would have no effect on gasoline prices in the United States.
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by:SunBow
ID: 40511963
Ditto.
There just happens to be ongoing unresolved local objections from those in the current planned path for keystone. It is more than a federal funding issue, and some report that it can deliver to some local US communities, but it is primarily an easier way to get Canadian oil to market.
On the world stage, some report Saudi's as main/major driver of lower pricing, to point of steering from OPEC. USA does not directly control global pricing of oil. But she is not without influence, for sure.

On US stage, consider size, and what it takes to transport products to stores: fuel (cost of distant wholesale to deliver at retail to citizens have embedded transportation cost). Ergo, less cost of fuel should mean reduction in cost of product to consumers, which should increase their buying power and opinion on economy more than currently published 'better'/"improved" numbers.

The same should apply to countries with stable/ balanced economy.

The opposite impact would be negative for countries relying too heavily on (only) fuel export to operate (reportedly Russia, Venezuela, ...) its budget.

I have not seen much news lately on handling US reserves.

Alexei Navalny, who is the most prominent opponent of Vladimir Putin inside Russia, faces sentencing on January 15 on what are widely held to be trumped-up fraud charges.
Putin and cronies reportedly manage funding through form of 'eminent domain' seizure of assets of opposition (criminals). Facebook under fire for bowing to Kremlin demands to censor news.
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by:leonstryker
ID: 40515619
"I think the current US administration would be foolish to try to lower oil prices now..."
In the United States, the government does not control the price of oil or gasoline.

Not directly, but they can surely manipulate it through their "friends" in OPEC and by manipulating distribution and supply (Fracking)
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by:paulmacd
ID: 40515634
"Not directly, but they can surely manipulate it through their "friends" in OPEC and by manipulating distribution and supply (Fracking)"
I can't speak for any OPEC alliances, but the US government doesn't control petroleum supply or distribution.

It's very common for people to think the President can raise or lower gas prices on a whim.  I'm not sure why that is, but it's entirely wrong.
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by:leonstryker
ID: 40515646
I can't speak for any OPEC alliances, but the US government doesn't control petroleum supply or distribution.

It's very common for people to think the President can raise or lower gas prices on a whim.  I'm not sure why that is, but it's entirely wrong.

I am not talking price at the pump, but rather oil and natural gas prices.  The US can easily influence both supply and price by even mentioning the intent of releasing or increasing the strategic reserve for example. They can achieve the same through taxation and/or permits.
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by:SunBow
ID: 40515789
She can even act behind scenes, in some smokey room/sauna - back room, back door setting.
Although were price to go up, it just has to be fault of Obama, no evidence needed, that can be made up.
I missed news on OPEC as well, but did see a bullet where Saudi said they are going their way (lower price) no matter what their fellows in OPEC are up to, which way they go.

Per my prior argument, the lower price could end up bad for those too solely dependent on oil.
That 'could' have included OPEC, but they are generally more oriented toward monarchy, rule by few, who have already made internal 'adjustments' for managing their populace overall. The disadvantage (harm) would be on those not as adept at budget management, population appeasement (or control), provisions for public works, etc.

As for fracking, methinks that may have been real, but dated, old news. currently I dunno, good for open discussion here. On US side of development, I doubt any foreign action would impact, the developers are on a roll, so price is less relevant than local public perception / rule of law. That does not mean outsiders would not try, were they less informed. Saudi's would be one to look at for maintaining observations on former and current US, and expectation for future. The do mucho research, remain rather 'friendly', and deal.

As for the strategic reserves, initially it was said that would take too long to do have too little impact. Then, they were (quietly?) released to point of going too low. As for now, I dunno. Maybe a buy low/sell high option in play. Rather try to google status, I'd rather see more discussion  among the international community of EE experts.

As for price at pump, that is, IMO more dependent on mood of big oil. They have had some rather costly issues regarding spills. Not to mention the issues with refineries. The greater impact IMO was the appearance of major end to battles for their liability ($ loss) concerning prior spills, and desire to limit future liability. This is in billions cold cash, and 'insurance'. At federal level there appears to have been headway to resolve. At least more so than some continuing or ongoing litigation at local level or more on international level. In that sense US can manage, at least through some back room 'agreements'.

US also influences by extending drilling rights, and I think that was indeed done, as for expectations that could be worth debate herein.

Another influence is for US subsidies for both natural fossil fuels and for the types of 'renewable' energy. In between lies cost of agriculture such as corn. In between lies cost of transportation - energy. US also has oversight of drilling on lands of Indians, which can have appearance of being poorly managed, but 'could' be included within a form of strategy to not 'have to' disclose to ... competitors.

US can claim to have influence, or disclaim, or be accused of, and it be a truism or not. Overall result IMO is that she 'can' influence, and hold cards to chest on whether attempting to do so or not.

Taxation is low, too low to have much a difference. Especially when contrasted to others. It could probably be doubled without much ado or notice if congress (and reporters/talking heads) would simply maintain alternative issues in the news/public eye.

On that I'll conclude that I'd like to know more on what it is that people refer to when suggesting US subsidizes big oil too much. Similarly, is there impact on this for 'free market' trade agreement(s)
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by:dhsindy
ID: 40515959
Seen regular unleaded in Indianapolis advertised today for less the $2.00.

In the news, the US economy grew 4.6% and 5.0% the last two quarters ending in September.  The price decline should help the global economies except for the oil producers.  I just think it would have been better if the decline was more gradual.  The decline is probably a complex combination of all the scenarios mentioned above and all the reasons given.
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by:tliotta
ID: 40517512
In other words, the approval/disapproval of the Keystone pipeline would have no effect on gasoline prices in the United States.

It definitely would have an effect, approximately equal to the effect that any increase in supply has. It's irrelevant whether it's sold in the U.S.A. or on an open world market. Any significant added production to the world market will tend to lower prices.

If world price falls at all in response, it'd be serious error on the part of energy interests for oil price in the U.S.A. not to fall equally. It would certainly cause negative effects for any supporters of Keystone.

Tom
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by:leonstryker
ID: 40518520
The only flaw in that logic Tom is that without the Keystone pipeline, that oil would still reach the world market albeit through other outlets. Therefore there is no net change in the supply of oil.
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by:dhsindy
ID: 40518777
My question is who will pay to remove the Keystone XL pipeline after it's supposed fifty year lifetime expires.  Will they be setting up a fund to pay for the disasters as they occur or for the removal.  Or, are we in the US taking all the environmental risks while the oil companies make a nice profit.  Nobody seems to think of the aftermath.  I am thinking of all the super-fund cleanup sites that were abandoned by our wonderful corporations in the past.
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by:leonstryker
ID: 40522040
I can answer that, but would like at least 50 points for it. :)
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by:leonstryker
ID: 40528280
If it was not for the decrease in demand for energy in Asia, I would put it totally on play by US government to punish some people. As is, I am not sure, but still possible.
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