December 2, 2014

"Tumbling oil prices are draining hundreds of billions of dollars from the coffers of oil-rich exporters and oil companies..."

"... and injecting a much-needed boost for ailing economies in Europe and Japan — and for American consumers at the start of the peak shopping season. The result could be one of the biggest transfers of wealth in history, potentially reshaping everything from talks over Iran’s nuclear program to the Federal Reserve’s policies to further rejuvenate the U.S. economy."

38 comments:

Rusty said...

Free markets always win.

Joe Schmoe said...

So the WaPo finally notices the positive effects of falling gas prices after ignoring the harmful effects of high prices for the last 6 years.

tim in vermont said...

Excuse me, I was told by endless numbers of people on the internet that we were running out of oil any day.

Bob R said...

So, if a government tried to drastically raise energy costs by taxation and regulation would that be a massive transfer of wealth in the other direction?

David Hampton said...

Now that is wealth redistribution I can live with.

AJ Lynch said...

Rejuvenate the economy? Nah - Obama will continue to screw that up.

Greg Hlatky said...

Well, with all that renewable energy coming on line thanks to the far-seeing policies of our grrrrreat president, what would you expect? Oh, wait...

Hagar said...

But the State of New Mexico is hurting for lack of oil revenues.
And then so must the other oil and gas states.

JMS said...

The Administration and Congress called for investigations into speculators, who were responsible for this price drop, right?

Hagar said...

All silver linings have dark center.

rwnutjob said...

The side story is that the Saudi's are doing this to hurt fracking in the US, a much more expensive extraction method. If costs go below 80 per barrel, it would impact US drilling.

Of course they underestimate capitalism. The drillers here will just slow drilling in marginal areas & increase output in others. They will also find more economic methods of fracking.

phantommut said...

So, if a government tried to drastically raise energy costs by taxation and regulation would that be a massive transfer of wealth in the other direction?

Rob R. wins the prize.

rehajm said...

At the US household level lower fuel prices will not be enough to offset higher healthcare costs.

rehajm said...

Of course they underestimate capitalism. The drillers here will just slow drilling in marginal areas & increase output in others. They will also find more economic methods of fracking.

This. There are already some losers in US production but the industry as a whole will be fine. The Saudis will be fine. Venezuela is in big trouble..

Rusty said...

rwnutjob said...
The side story is that the Saudi's are doing this to hurt fracking in the US, a much more expensive extraction method. If costs go below 80 per barrel, it would impact US drilling.


The cost of a barrel of oil was just over 68$ this morning. If OPEC wants to plumb the bottom, fine. We're just finding out how much oil we have. Turns out it's a shitload more than we thought. Fewer VLCCs waiting outside Long Beach to unload.
A good thing.

Rumpletweezer said...

This has the potential to rewrite the power balances in the Middle East and, by extension, all over the world. Too bad we don't have a President who sees the possibilities.

Browndog said...

If costs go below 80 per barrel..

Bakken Shale Oil Is Profitable at Over $42 a Barrel

DanTheMan said...

Wait a minute... I was told during the GWB administration that gas prices were set by greedy oil company executives.

Are we suggesting that it's more complex than that?

Rusty said...

OPEC thought they had a monopoly, Dan. And for awhile they did, but monopolies invite competition and dispite their best efforts market forces always win in the end.

NotquiteunBuckley said...

Bill O'Reilly finally broke the OPEC cartel wide open for us folks.

Thanks Bll! Next time don't wait a few decades though, crush the enemy quicker.

Browndog said...

Politicians from Sea to Shining Sea have but one thing on their minds: GAS TAX.

All "cheap gas" means to them is "lost revenue" via sales tax.

MartyH said...

Of course, here in California starting Jan 1 our gas and diesel prices will go up an estimated dime a gallon because we implemented a pointless cap and trade system to prevent global warming that isn't happening. The free market giveth, the government taketh away...

MartyH said...

I should add that the dime/gallon is the government's estimate. Oil industry analysts (who have their own biases) predict it may be as much as seventy six cents a gallon. I doubt it will go that high, but then again I remember the rolling blackouts the last time CA messed around in the markets like this.

Original Mike said...

"The Saudis will be fine. Venezuela is in big trouble.."

Venezuela would be in trouble if we built Keystone. Canadian heavy oil is similar to Venezuela's, and many Gulf Coast refineries are built to handle it. But because our President has his head up his ass we'll keep buying oil from a thug state instead of Canada.

paminwi said...

"and for American consumers at the start of the peak shopping season"

Except that it sounds like Black Friday was not so great and even Cyber Monday was down from last year. The one bright spot was that Wal-Mart had an 11% increase in sales this Cyber Mobday as compared to last year. But.....that is going to drive liberals crazy because Wal-Mart is inherently evil and.........!

The Drill SGT said...

The result could be one of the biggest transfers of wealth in history,

Despite everything that the WH, the EPA, the Dims, and the Enviro lobby have done to stop drilling on Federal leases, kill fracking, shut down refineries, and kill KXL.

Pianoman said...

I work with a guy who is convinced that the recent reductions in gasoline prices are solely the result of President Obama's policies.

Seriously -- you can't make this up.

I'm reminded of that line from Cool Hand Luke: "Some men, you just can't reach."

#StuckOnStupid
#ObamaIsLikeGod

Darrell said...

What did it suck out of the Western economies as it rose from $28 to over $120/bbl on the way up? That was the largest wealth transfer in history.

Gahrie said...

If we were smart, we'd be buying up all the $68 a barrel oil we could from the Saudis and storing it in our strategic reserve and every other empty salt mine we can find.

Pianoman said...

@Gahrie: If we were REALLY REALLY smart, we'd buy all the $68/barrel oil we could from Canada/Mexico, and store it in the Strategic Reserve.

Stop giving the Saudis the money that they use for funding terrorism. Starve the beast. Buy oil from our NAFTA partners. (I'm not too worried about Canadian terrorism.)

virgil xenophon said...

The Drill Sgt@8:43am/

Beat me to it...

Gahrie@1028am/

Yes, and continue to dollar-cost average all the way down until the mkt bottoms.

Gahrie said...

I bet Putin is really flipping out right now.

Anonymous said...

If costs go below 80 per barrel..

Bakken Shale Oil Is Profitable at Over $42 a Barrel


I was going to post something similar (Although I thought it was $45). But I keep seeing the $80 number.

I wonder why that is.

Joe said...

Falling prices aren't draining billions "from the coffers", but from future earnings.

rehajm said...

I was going to post something similar (Although I thought it was $45). But I keep seeing the $80 number.

I wonder why that is.


The range of breakeven for getting the oil from Bakken shale is $40 to $70. Tack on debt and rising extraction costs as more wells come on line. $80 is a good rule of thumb to predict when the economics of production begin to alter behavior. new wells slow, some start shutting down, etc. Above $80 and things hum along as before.

rehajm said...

Venezuela would be in trouble if we built Keystone.

Moot point- Venezuela can get oil out of the ground for less than $30/barrel. But they rely on oil money to run things, and they need $160+ oil to run their government without a budget deficit. Their slow economic death march is now a sprint.

JamesB.BKK said...

They say the cure for high prices is high prices. Assuming govt does not intervene.

Abundant low cost energy is a positive good. However in our screwy world falling prices of inputs is seen to reduce output "value", percentage based margins, top line revenue numbers, and percentage measured profits of all businesses given energy's paramount importance. GDP numbers will fall. So get ready to be told how bad this is for you and get ready to see stock prices at various casinos, er, bourses fall. The game is nearly up for the central bankers' sleight of hand to conjure "wealth" as years of global govt directed malinvestments and misallocations of capital via cheap credit and fiat are finally remedied - through debt destruction and hardship for many of us. The debt wagon's full but keeps getting stuffed by MIT types and others of that ilk. They will steal from us (again) before it's over via more overt means than inflation.

n.n said...

The Federal Reserve's policy is not to rejuvenate the economy, but to sustain the federal government's deficits.