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  1. #1

    Plummeting oil prices a bad thing?

    I need someone much smarter than than myself to explain why all the news sites are talking a out oil prices dropping as if its the end of the world. Let me explain it how I see it and you can call me stupid and tell me how it really is.

    1. Oil prices go down due to huge supply of crude outpacing demand
    2. As a result, gas prices go down, causing huge savings for the average American and a loss of profit for shitty money grubbing oil companies
    3. Americans turn around and pump extra money into the economy or start to save a little more.
    4. Economy grows. Oil execs make a little less profit (probably not enough to hurt their business. But maybe enough to only get a 5 million dollar bonus instead of 10 million)
    5. More spending across the economy leads to higher wages and more jobs in non energy sectors


    Obviously I'm missing something cause the doom and gloom seems really stupid to me. Can someone explain how all of america saving a little dough is the end of the world?

    Excuse my grammar and spelling errors. Typing on a small phone screen.

  2. #2
    Yes if you're Saudi Arabia, Iran, Russia, Venezuela or some other country dependent on oil.
    .

    "This will be a fight against overwhelming odds from which survival cannot be expected. We will do what damage we can."

    -- Capt. Copeland

  3. #3
    Deleted
    Driving a gas guzzlin' mercury grand marquis, no!

  4. #4
    Should have specified. Everything I am reading seems to point toward a collapse or a major issue in the american economy. I could see how oil producing nations would suffer, but the USA?

  5. #5
    Banned GennGreymane's Avatar
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    Everything is doom and gloom these days, even ponies.

  6. #6
    Oil prices going down is good. Cheap fuel means less mark up on products like food and other goods. Also in theory lowers the cost to make things that are heavily made of plastic. Factor in that people spend more when they have more to spend too and it's a good thing. What I mean is if you don't have to spend your whole paycheck on Gas and Food you spend more on other 'luxury' items.

  7. #7
    Merely a Setback Reeve's Avatar
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    Volatility in the oil market is a bad thing. The oil market is like a pendulum, and the harder it swings one direction, the harder it usually swings back the other way, which is really bad for something that affects all aspects of the global economy. This is a temporary boon to the economy that will come back around the other way in a few years.

    And Ayaz, the US IS an oil producing nation. One of the biggest.
    'Twas a cutlass swipe or an ounce of lead
    Or a yawing hole in a battered head
    And the scuppers clogged with rotting red
    And there they lay I damn me eyes
    All lookouts clapped on Paradise
    All souls bound just contrarywise, yo ho ho and a bottle of rum!

  8. #8
    Quote Originally Posted by Reeve View Post
    Volatility in the oil market is a bad thing. The oil market is like a pendulum, and the harder it swings one direction, the harder it usually swings back the other way, which is really bad for something that affects all aspects of the global economy. This is a temporary boon to the economy that will come back around the other way in a few years.

    And Ayaz, the US IS an oil producing nation. One of the biggest.

    Interesting response. I kind of assumed we wouldnt be hit all that hard. I don't know much about oil, but I always assumed what we produced stayed here at home. In which case, oil prices dropping would hurt a few american companies, but not so much that theyre whole corporate empire would be in danger. Just the way I picture it anyway.

  9. #9
    Stood in the Fire mrpopos10's Avatar
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    Quote Originally Posted by Ayaz2810 View Post
    I need someone much smarter than than myself to explain why all the news sites are talking a out oil prices dropping as if its the end of the world. Let me explain it how I see it and you can call me stupid and tell me how it really is.

    1. Oil prices go down due to huge supply of crude outpacing demand
    2. As a result, gas prices go down, causing huge savings for the average American and a loss of profit for shitty money grubbing oil companies
    3. Americans turn around and pump extra money into the economy or start to save a little more.
    4. Economy grows. Oil execs make a little less profit (probably not enough to hurt their business. But maybe enough to only get a 5 million dollar bonus instead of 10 million)
    5. More spending across the economy leads to higher wages and more jobs in non energy sectors


    Obviously I'm missing something cause the doom and gloom seems really stupid to me. Can someone explain how all of america saving a little dough is the end of the world?

    Excuse my grammar and spelling errors. Typing on a small phone screen.

    The thing you are "missing" is an appreciation for non-universal claims.

    What you listed above is definitely true, and is good for "some."

    What you are also missing is (or I assume you to be ignoring) is that Hurt oil companies dont just hurt "fat-cat" oil executives. MILLIONS are invested into big oil companies(like EOG) , including 401ks and other pension plans to the tune of hundred of MILLIONS if not billions, to stay on the safe side without trying to track down the real #s.

    The other aspect is there are certain local oil-centric hubs or boom-zones in shale-plays across the country, I live in one area - the Eagle Ford. But there are others, such as the Bakken in N. Dakota and the Marcellus. Huge numbers of jobs will be lost in those areas (and some have already been laid off now) if the oil prices keep going down.

    These arent crap-making outsourcing to china companies, they are primarily US based companies harvesting US resources and providing huge numbers of US jobs.

    So yeh, random citizen#0000392 has an extra 20$ a month to spend on something other than gas - but random citizen#000039393 has just lost 10% of their retirement portfolio (hopefully temporarily).

    So, basically - it just depends who you are and what you care about. Being where I am, I would prefer 10$ gallons of gas and 200$ barrels of Oil.

    But the major detriment is the loss to investors and big US oil/gas harvesting entities and the jobs they create in the US.

  10. #10
    Banned GennGreymane's Avatar
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    Quote Originally Posted by Reeve View Post
    Volatility in the oil market is a bad thing. The oil market is like a pendulum, and the harder it swings one direction, the harder it usually swings back the other way, which is really bad for something that affects all aspects of the global economy. This is a temporary boon to the economy that will come back around the other way in a few years.

    And Ayaz, the US IS an oil producing nation. One of the biggest.
    Yeah I expect prices to rise back up within the next 2 years. I base this on a hunch I have and no other data.

  11. #11
    The Patient Sut's Avatar
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    Quote Originally Posted by Ayaz2810 View Post
    Should have specified. Everything I am reading seems to point toward a collapse or a major issue in the american economy. I could see how oil producing nations would suffer, but the USA?
    From what I understand, the USA is a major oil producing nation currently.

  12. #12
    Banned GennGreymane's Avatar
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    Also I hate to be that guy buuuuutttt

    Ya know, oil used to be under 2 dollars for a looong time, in fact it was pretty recent that prices went up so much. So the doom and gloom based on the industry itself is meh to me.

    And woulda ye believe how many people they still employed, etc?

  13. #13
    Merely a Setback Reeve's Avatar
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    Quote Originally Posted by Ayaz2810 View Post
    Interesting response. I kind of assumed we wouldnt be hit all that hard. I don't know much about oil, but I always assumed what we produced stayed here at home. In which case, oil prices dropping would hurt a few american companies, but not so much that theyre whole corporate empire would be in danger. Just the way I picture it anyway.
    It won't kill Exxon or Chevron, but it will likely shutter small oil companies, or cause them to merge with other companies. There will be lots of jobs lost over this, but the boost to the rest of the economy will probably make up for that. The problem is that with the smaller oil companies shuttered and exploration dropping to a standstill, we'll be hit with a supply shock in a year or two that will hurt bad for anyone not in the oil industry. The oil industry doesn't like wild swings in price, whether it's too high or too low, because they know the other shoe will drop, and it's hard to completely redimension your company every few years.

    - - - Updated - - -

    Quote Originally Posted by GennGreymane View Post
    Yeah I expect prices to rise back up within the next 2 years. I base this on a hunch I have and no other data.
    I base it on history. Who knows? Maybe this time the access to shale resources en masse will keep a dampening effect on the market. It's possible, but history suggests we're much more likely to have a massive upward swing in 2-5 years, particularly if a war or other disruption occurs in a major producing country.
    'Twas a cutlass swipe or an ounce of lead
    Or a yawing hole in a battered head
    And the scuppers clogged with rotting red
    And there they lay I damn me eyes
    All lookouts clapped on Paradise
    All souls bound just contrarywise, yo ho ho and a bottle of rum!

  14. #14
    In the long run it could be. You'll have a good deal of production stoppage in places where the cost to get a barrel of oil is above what the selling price is. Once these sites are shutdown there will be a time and financial cost in order to get them running again. Saudis are pretty much banking on their financial reserves and playing the long game . They are probably one of the few nations dependent on oil revenues that can survive a long term price drop. Once a number of the smaller players are out of the industry and you see renewed demand from places like China, India, and other developing regions you'll likely see gas prices that will make people miss $4~5 a gallon in the US.

  15. #15
    From what angle are we trying to objectify "bad"? Consumers'? No. Producers? Depends. Long term? Could be. Short term? Nope.

  16. #16
    Banned GennGreymane's Avatar
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  17. #17
    Quote Originally Posted by GennGreymane View Post
    <snip>
    For a moped.

  18. #18
    In 2011, 9.8 million jobs in the US were directly or indirectly supported by the oil and gas industry. When oil prices drop, it's not the 500 or so guys at the top of the oil companies who will suffer...

  19. #19
    Elemental Lord Templar 331's Avatar
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    Quote Originally Posted by GennGreymane View Post
    snip
    I know. I can fill up my tank for under $40 now.

    Quote Originally Posted by Rochana View Post
    Derivatives explained simply:

    A farmer every year has to sell his yield but depends on the gamble of the market in relation to what his sale prices will be. Investors will come and tell the farmer he'll get a fixed amount of money for his yield, while gambling that the yield will actually sell for more once the market price is settled.
    This is why I hate stock market BS....

    This is what many banks did with oil. They didn't see the price drop coming. Banks are about to collapse once more. Combine that with the new G20 resolution of bail-ins and many people who have their money stored on the bank are going to see it vanish (or big parts of it).
    And this is why banks need to be on tighter leashes.

  20. #20
    Deleted
    If for some weird reason you believe in supply-driven economics, it might not seem bad.

    However, if you realize that the prize is a result of (virtually) unchanging supply, the reason is obviously a plummeting demand. Which is no surprise since the world is still tumbling towards a recession and most of the european countries are still in shambles economically with no end it sight.

    It just shows that no one wants to buy oil, because they don´t neet it to produce etc. It also means jack shit that people may "save money" (if they really do), because again: when there is no one to buy stuff, no one is investing either, so saving actually does nothing to drive the economy.

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