Crude Oil Bear Market

Discussion in 'Fred's House of Pancakes' started by wjtracy, Jul 14, 2017.

  1. wjtracy

    wjtracy Senior Member

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    My economics guru is A. Gary Shilling, and here is his latest thinking. Oil prices heading down, and so I am again making my prediction of $1/gal gaso some places by Feb_2018...I missed the prediction this year, but keep in mind, Shilling has often been quite accurate giving overall direction, but exact timing is variable depending on circumstances (OPEC actions, etc).

    Shilling is cautious on stocks and has been the leading voice in correctly predicting the 35-yr bull market in bonds, most notably the 30-yr Treasury is his weapon of choice.

    Oil's in a Bear Market, and Stocks Will Soon Follow - Bloomberg
     
  2. bisco

    bisco cookie crumbler

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    perfect opportunity for me to get about 10k off a new prime.(y)
     
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  3. Zythryn

    Zythryn Senior Member

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    And the stock market is going to crash... at some time between later this year and 20 years from now.
    As a nationwide average, we won't see $1 gas until demand falls through the floor. Half the oil we use is for non-transportation uses.
    So even if gasoline stopped being used, $1 oil is a stretch.
    Once carbon pricing is started up, that is pretty much the end of $1 gas ever being a possibility. I'm guessing that will happen within 2-7 years.
     
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  4. JimN

    JimN Let the games begin!

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    Did he predict the $20 oil that didn't happen? Yes he did: "My earlier forecast of a bottom oil price of $10 to $20 per barrel -- the marginal cost of production in efficient locales -- still seems valid."

    The oil patch has been in a bear market since September 2014 and I believe we've hit a bottom.

    I don't believe his correlation theory. How many index highs have been made in these almost 3 years? Do you remember the "experts" saying oil would recover then climb with a vengeance by 2016? Then the cry was "lower for longer..."

    From CNN May 31:
    Saudi Aramco, the kingdom's state-owned oil behemoth, took 100% control of the sprawling Port Arthur refinery in Texas on Monday, completing a deal that was first announced last year.

    Port Arthur is considered the crown jewel of the US refinery system. The Gulf Coast facility can process 600,000 barrels of oil per day, making it the largest refinery in North America.

    Aramco previously owned 50% of Port Arthur through a joint venture co-owned with Royal Dutch Shell (RDSA) called Motiva Enterprises.

    But the two oil giants had a rocky relationship and reached a deal in March 2016 to separate their assets. Shell put out a statement on Monday confirming the "completion" of that break-up.

    In addition to Port Arthur, Aramco is acquiring full ownership of 24 distribution terminals. Aramco also gets the exclusive right to sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland, the eastern half of Texas and the majority of Florida.

    Aramco's deal allows the oil giant to shore up one of its best customers -- the US -- ahead of next year's planned IPO. Now that it controls the largest American refinery, Aramco can send more Saudi crude into the US for refining to sell to North American drivers.

    Saudi Arabia is already America's second-largest source of crude, behind only Canada. The US imported 1.3 million barrels of Saudi crude a day in February, up 32% from last year, according to the Energy Information Administration.

    My bottom may have been a bit too high. A lot can happen in a week so I won't have an answer until Friday night.
     
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  5. fuzzy1

    fuzzy1 Senior Member

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    Don't forget that in the Continental 48 states, combined federal and state excise tax is $0.35 to 0.76/gallon, so getting the total pump price down to $1.00 will be a very steep order.

    In Alaska, those taxes leave more room at $0.3065, but I don't ever expect Alaska to have the cheapest anything.
     
  6. wjtracy

    wjtracy Senior Member

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    I know its hard but I think we got as low as $1.25 a few places in Feb_2016. Some higher price places getting close to $1/gaso tax so they will not make it. Don't forget I correctly predicted $2/gal when that looked like a crazy prediction. January this year GasBuddy predicted high gaso prices for 2017 by now, and I told them in the comment section that was an unwise prediction, why should GasBuddy bother making a wrong prediction? and now they agree they were wrong (of course they did not give me credit for the January comment).

    Of course, Shilling is talking about a spike down that will head back up to equilibrium, $40/barrel he thinks. Shilling's overall point is that cartel upward price pressure over "true" price is probably no longer possible.

    I think that's probably correct idea, weak green car prices this Fall or maybe into 2018..
     
    #6 wjtracy, Jul 15, 2017
    Last edited: Jul 15, 2017
  7. Trollbait

    Trollbait It's a D&D thing

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    This all depends on whether the production of tight oil from shale can continue. I know overall production is going up, but production per well is dropping. So we have to continually drill new wells to keep up production. Eventually, the cost of of making those new wells will force up the production cost.

    Then the low oil price means the oil companies invest less in prospecting. With less potential new sources for crude on hand, an event that disrupts the supply will lead to even larger price increases. It's not unlike what GM went through with the price spike in 2008 by not having any fuel efficient models available.
     
  8. bisco

    bisco cookie crumbler

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    if we knew the answer, we'd all be rich.
     
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