Thursday, April 2, 2015

So much for the Saudi's being the monopolist "price setters"

Looks like the Saudi's are no longer in control as monopolist price setters, at least according to Goldman, Sachs.

Goldman Sachs on oil: US needs to cut, not OPEC
Michele Della Vigna, head of European energy research at Goldman Sachs, said non-OPEC oil producers had created the oversupply in the market which has weighed on prices.
"I think the market has realized that where we need to find the adjustment is onshore U.S. and that's where the market is focused," he told CNBC Thursday.

Where we head from here really depends on U.S. producers, who show little signs of cutting back.

11 comments:

Ignacio said...

They keep pumping until they no longer can keep pumping (that is, until the open operations dry and they have to do new investments).

Like any other business once you have done the investment you may as well keep the operation running regardless, the fixed investment is already done even if you are losing money, as long as your income can cover the operating costs (which for operational plants should) you will be losing LESS so it's optimal to stay open.

And in the future, maybe the US Govt will bail them out and print trillions to save them, as long as USD zombies (Saudis and Chinese) are willing to buy dollars in exchange of US producers keep pumping no problem!

NeilW said...

My understanding was the saudis cap the price, i.e. they set the price on the upside due to their capacity capability.

Is there evidence they are cutting price rather than letting volume slide?


mike norman said...

They're not even capping anymore, Neil. And they're not able to support prices either. They raised prices two months ago and that didn't hold.

SDB said...

Hi MIke and others,

Can you recommend good books, websites, resources for understanding the oil market specifically and the energy markets more generally?

Thanks

Peter Pan said...

Saudi Arabia is a low cost producer, but if your competitors are willing to produce at a loss... well, that negates your advantage. Mad market economics.

Unknown said...
This comment has been removed by the author.
Unknown said...

What do you think of the idea that the drop in price is related to the almost commercialisation of cold fusion(LENR)?

Black rock already thinks that is the case:

http://www.blackrock.com/corporate/en-us/literature/whitepaper/us-shale-boom-us-version.pdf

p11:

"We are closely following start-ups experimenting with new technologies such as low-energy nuclear reaction and fusion. If successful, these efforts could completely change the current status quo and hurt traditional energy producers. It is worth watching this space. People tend to overestimate what can be done in a year, but underestimate what can happen in a decade. …

Alain_Co said...

The behavior of oil produced seems not yet reflecting their (probably schizophrenic) awareness of LENR.

Norway is considering the risk
https://portal.tekna.no/ikbViewer/Content/917462/LENR%20Seminar%20Oslo%205%20%20Nov%202014%20EN%20(2).pdf
http://energi.tekna.no/lavenergetiske-kjernereaksjoner/
http://www.lenr-forum.com/forum/news/index.php/News/27-Infinite-Energy-A-Trip-to-Norway-Michael-C-H-McKubre-Norway-searching-how-to-hed/

Shell and Amoco have replicated LENR in the 90s (and Shell made se serious review in 2012).
ENEA was aware of LENR developement in 2004 but refused by fear of bad press, while CEA refused to follow EDF demand in 2003...

I know that few decision makers in government are aware, but they cannot yet launch decisions.
I know LENRG have a plan to help those decision makers (Home they will explain how at G-Day 2015/04/10 in Milano)

The recent moves at Tohoku university, Texas TU (CEES), some that are not public, Current Science (a scientific P/R journal linked to indian academy of science) publication of an LENR special section, shows that it is a "critical moment" (chaos theory definition, anything can happen or not)

what I see is that basically everybody is still doing business as usual, because they cannot be blamed to be stupid with the crowd.

Some prepare for the reality of LENR, but they know they won't be backed until it is commercial. No scientific evidence will convince (there are already huge evidences), given current groupthink.

Peter Pan said...

After the previous cold fusion fiasco, the only legitimate response is "we'll believe it when we see it."

Alain_Co said...

so you did not read what is happening...

the myth is based on 2-3 bad experiments and huge ego
http://www.currentscience.ac.in/Volumes/108/04/0495.pdf

page 35 in that book, tells most what you have to know
http://iccf9.global.tsinghua.edu.cn/lenr%20home%20page/acrobat/BeaudetteCexcessheat.pdf#page=35

for the rest ask to Elforsk
http://elforsk.se/LENR-Matrapport-publicerad/
or to Blackrock
http://www.e-catworld.com/2015/02/10/blackrock-asset-management-comapny-closely-following-lenr/

or to Shell
http://nextbigfuture.com/2011/12/royal-dutch-shell-game-changer-program.html

...

technically some people call that a cognitive cascade created in may 1989...
I prefer the vision of Mutual assured Delusion as described by Roland Benabou in his Groupthink papers.

anyway it is something very common... sadly very common, and ancient.

http://invention.psychology.msstate.edu/inventors/i/Wrights/library/WrightSiAm1.html


Peter Pan said...

I read some of what is happening. The proof will be when a device is commercialized, which shouldn't be a problem if the technique can be reliably reproduced.

Until then, physicists will keep shitting on the concept because it does not conform to existing theory. Only a working prototype will force them to do an update.

Researchers working with high temperature superconductors faced similar derision, but in the end they succeeded and theories had to be updated to reflect the new reality.