Economy 53,130 Posted January 6, 2016 Share Posted January 6, 2016 http://www.bbc.com/news/business-35243442 Hopes of an oil price stabalization in 2016 are quickly evaporating as the latest feud between Iran and Saudi Arabia not only reinforce that OPEC wont agree among itself on production cuts, but Saudi Arabia and Iran have started an oil war. Saudi Arabia is said to have raised oil production by 1.5 Million barrels a day last month to lock in contracts and win customers before Iran increases oil production by an additional 1 million barrels a day after lifted sanctions. Both are also cutting prices to same customers trying to take their slice of the pie In the mean time US Shale may only drop 0.5 Million barrels this year and other non-OPEC Nations a few hundred thousand more Canada's oil production will keep rising until 2020 even with low prices and no new investment due to Oil Sands long investment cycles. Many projects already under contruction will keep coming online. Additionally Russia is raising output to record levels. Canada & Russia alone may prevent over-all non OPEC supply from falling Due to storage hubs being almost full, oil prices may fall as low as $20/barrel if forecasts are correct putting industry in severe stress. Link to post Share on other sites More sharing options...
eifulien 3,044 Posted January 6, 2016 Share Posted January 6, 2016 As a flop Economics BA I never really managed to understand why consumer prices of oil can rise so fast but decrease rather slow? Is it something related to elasticity? Is it a regional thing (maybe some specific things comprise the prices across Europe)? Anybody knows? Link to post Share on other sites More sharing options...
Economy 53,130 Posted January 6, 2016 Author Share Posted January 6, 2016 1 hour ago, Son of ARTPOP said: As a flop Economics BA I never really managed to understand why consumer prices of oil can rise so fast but decrease rather slow? Is it something related to elasticity? Is it a regional thing (maybe some specific things comprise the prices across Europe)? Anybody knows? What do you mean by consumer prices? Do you mean like Gasoline, Diesel etc? If thats what you mean... The reason is because these have a seperate market from oil itself... Gasoline for example is not oil, its made FROM oil. A surge in oil production and an oil oversupply doesnt change how many oil refinaries making finished refined products exist and how much gasoline can be made at once regardless of how much oil there is So lets say oil production rises 2 million barrels next year but few new refinaries opened... You will have an oversupply of oil but you wont have an oversupply of gasoline. As a result, gasoline wont fall as much as oil itself However if theres an oil shortage, gas prices usually rise just as much as oil because there isnt enough oil to feed refinaries so gasoline production falls along with oil Oil products are influenced by oil prices because it affects the cost of making them since they are made out of oil. But since they have their own seperate market, dont expect refined products to follow oil prices exactly everytime. They are merely influenced by it like does that make sense? Link to post Share on other sites More sharing options...
eifulien 3,044 Posted January 6, 2016 Share Posted January 6, 2016 5 minutes ago, Economy said: What do you mean by consumer prices? Do you mean like Gasoline, Diesel etc? If thats what you mean... The reason is because these have a seperate market from oil itself... Gasoline for example is not oil, its made FROM oil. A surge in oil production and an oil oversupply doesnt change how many oil refinaries making finished refined products exist and how much gasoline can be made at once regardless of how much oil there is So lets say oil production rises 2 million barrels next year but few new refinaries opened... You will have an oversupply of oil but you wont have an oversupply of gasoline. As a result, gasoline wont fall as much as oil itself However if theres an oil shortage, gas prices usually rise just as much as oil because there isnt enough oil to feed refinaries so gasoline production falls along with oil Oil products are influenced by oil prices because it affects the cost of making them since they are made out of oil. But since they have their own seperate market, dont expect refined products to follow oil prices exactly everytime. They are merely influenced by it like does that make sense? Thanks a lot. You clarified it perfectly! Link to post Share on other sites More sharing options...
Economy 53,130 Posted January 6, 2016 Author Share Posted January 6, 2016 22 minutes ago, Son of ARTPOP said: Thanks a lot. You clarified it perfectly! Oh and i forgot to mention 1 thing... since oil is the raw material but Gasoline, Desiel, Jet Fuel etc are the secondary products, the pricing screws over the consumer It is possible to have an oversupply of oil but not gasoline if too much oil is being produced but there arent enough refinaries to process it all But you CANT have an oversupply of gasoline with a shortage of oil because thats the raw material you need to make the refined products So gas usually skyrockets with oil when it goes up cause both will be im shortage... but most of the time doesnt fall as quickly as oil if refinary capacity isnt there So we the consumers loose out. Right now the only oil companies to be highly profitable are the ones that also own refinaries cause right now refining is super profitable. Tones of cheap oil but gasoline market is only slightly oversupplied Link to post Share on other sites More sharing options...
Woolfsmck 2,763 Posted January 7, 2016 Share Posted January 7, 2016 22 hours ago, Economy said: Oh and i forgot to mention 1 thing... since oil is the raw material but Gasoline, Desiel, Jet Fuel etc are the secondary products, the pricing screws over the consumer It is possible to have an oversupply of oil but not gasoline if too much oil is being produced but there arent enough refinaries to process it all But you CANT have an oversupply of gasoline with a shortage of oil because thats the raw material you need to make the refined products So gas usually skyrockets with oil when it goes up cause both will be im shortage... but most of the time doesnt fall as quickly as oil if refinary capacity isnt there So we the consumers loose out. Right now the only oil companies to be highly profitable are the ones that also own refinaries cause right now refining is super profitable. Tones of cheap oil but gasoline market is only slightly oversupplied secondary = processed ... Gasoline can be in oversupply with an oil shortage ... for short periods.. But the fuel will diminish as production drops from a raw material shortage... that's true. Also, supply and demand for the finished product is separate but a determing factor for the raw materials....they will fluctuate separately but depend on consumer demand. like a cat in a sil, I observe life, moving and still. My words give a clue,look inside to see whats true Link to post Share on other sites More sharing options...
Economy 53,130 Posted January 7, 2016 Author Share Posted January 7, 2016 16 minutes ago, Woolfsmck said: secondary = processed ... Gasoline can be in oversupply with an oil shortage ... for short periods.. But the fuel will diminish as production drops from a raw material shortage... that's true. Also, supply and demand for the finished product is separate but a determing factor for the raw materials....they will fluctuate separately but depend on consumer demand. Theres always exeptions for short periods of time. I was generalizing... usually a shortage of oil will result in a shortage of refined products shortly after and just the anticipation of that alone is enough to make gasoline, diesel etc go up with oil almost instantly but gas drop as fast as raw oil... That like never happens Link to post Share on other sites More sharing options...
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