How low can it go

[TPFKA@W]

My gut tells me that this thing going on with oil is a deliberate attempt to bitch-slap and rein in the mad Russian and bring down Venezuela, Iran and a few other unruly oil based economy types.
I believe the US and Saudi Arabia are in cahoots.

What do you think?

[oldr_n_wsr]

Don't know if they are in cahoots, but it seems that's the result.
I read somewhere that under $60 a barrel, much of the USA's recent drilling becomes too expensive to continue and be profitable. I think the Saudi's know that and might be trying to push the price down so the we stop some of our production.

[Lord Jim]

The Saudis may be playing a complicated game...(they usually do)

Even if oil drops to $30 a barrel, they make a profit...

For the Russians, the Venezuelans and the Iranians (who they undoubtedly want to undermine, especially the Iranians) the price of oil needs to be in the $120 dollar per barrel range...

For the new US fracking production, it needs to be about in the $70-$75 per barrel range to remain profitable...

Currently it's just below that...

If the Saudis think that by driving oil prices below the profitability level of oil production in the US they'll somehow shutdown US energy production, they're making a mistake; part of what's driving down the value of oil is also our more efficient tapping of natural gas, which we have even greater reserves of...

Bottom line is, if oil stays at bellow $70 a barrel for a sustained period of time, it undermines our production sector, but it still remains a huge boost to consumer spending, business expansion, job creation, and deficit reduction...

At 70-75 dollars a barrel, we can have both, and see the Iranians and the Russkies take it in the chops to boot...

So as much as I would like to see gas go back down to $1.25 a gallon, that's probably not in our best interests...

[TPFKA@W]

The Saudis may be playing a complicated game...(they usually do)

Even if oil drops to $30 a barrel, they make a profit...

For the Russians, the Venezuelans and the Iranians (who they undoubtedly want to undermine, especially the Iranians) the price of oil needs to be in the $120 dollar per barrel range...

For the new US fracking production, it needs to be about in the $70-$75 per barrel range to remain profitable...

Currently it's just below that...

If the Saudis think that by driving oil prices below the profitability level of oil production in the US they'll somehow shutdown US energy production, they're making a mistake; part of what's driving down the value of oil is also our more efficient tapping of natural gas, which we have even greater reserves of...

Bottom line is, if oil stays at bellow $70 a barrel for a sustained period of time, it undermines our production sector, but it still remains a huge boost to consumer spending, business expansion, job creation, and deficit reduction...

At 70-75 dollars a barrel, we can have both, and see the Iranians and the Russkies take it in the chops to boot...

So as much as I would like to see gas go back down to $1.25 a gallon, that's probably not in our best interests...

As good as it feels going down, it is going to hurt like heck when it inevitably goes back up. I would like to see the floating tax you mentioned some eons ago, keeping it at $4 a gallon and using the money for roads or some-such. It would keep John Q. interested in energy alternatives. Whatever the cause of this game I imagine the little guy will take it on the chin eventually.

[Gob]

If it gets any lower we'll be paying US prices* here.





*The sort of prices you fuckers pay when it's $120 a barrel that is.

[Lord Jim]

I just checked AAA's national average, and it's down to $2.39...

http://www.fuelgaugereport.com/

(At our neighborhood 76 station it's down to $2.87, and I can't remember the last time it was below 3 bucks a gallon in this over priced burg...)

Considering all the factors involved, that's probably too low...

We can't have a low gas price based on when the Saudis decide to cut production and then send the price back up again...that's not sustainable...

The "Goldilocks Zone" is probably at $75-$80 a barrel, and an average of around $3.00 a gallon at the pump....

At that price, consumers still get relief and more dollars to spend, and our domestic production market is sustained, but the bad guys (Like Russia, Venezuela and Iran) still take it in the shorts...

[Econoline]

As good as it feels going down, it is going to hurt like heck when it inevitably goes back up. I would like to see the floating tax you mentioned some eons ago, keeping it at $4 a gallon and using the money for roads or some-such. It would keep John Q. interested in energy alternatives.

I don't recall Jim ever mentioning that idea, but I do recall mentioning it myself some time ago. (I think I may have suggested $5/gal.at the time...'cuz you know it's going to go up to that price at some point anyway...) It would be a great idea--impossible in our present political situation, but a great idea nevertheless. And if the money were used for research into alternative sources of energy, that would be even better.

[Lord Jim]

No, my theory was that we should take a percentage of increased tax revenues, and dedicate them to the highway fund...

My proposal was to get away entirely from funding road improvement and infrastructure improvement by nickle and dime taxes, and take a completely different approach...

[Lord Jim]

Here's the proposal I suggested:

What we ought to do is chuck the outmoded, misdirected "user fee" model for funding federal highway monies entirely. The fact is that every single person in this country who uses any deliverable good or service, and/or who travels by any means other than by foot for any reason (which would be everybody) benefits from well kept up roads.

The gas tax is a regressive tax, hurting lower income people the most; it should be eliminated completely. Anything that can be done to reduce energy prices boosts the economy; low energy costs are just about the best bang for the buck stimulus for the economy we can have. Government at all levels should aggressively pursue polices designed to drive energy costs as low as possible. Raising taxes on gas or any other energy source is exactly the wrong approach.

To raise money for the federal highway fund, I would replace the dollars brought in by that ill advised tax with a novel approach; I would take a percentage of the dollar increase in overall annual tax revenue and dedicate it to the highway fund. (I'd have to look at the dollars involved more closely to know what that percentage would be, but that's the model I'd use)

It makes perfect sense; government revenues rise when the economy is growing, more people are working, production and construction are rising, etc. All of these things also increase highway use, and the need for up- keep dollars.

Overtime this would also create a "bank" of funding in good times that would be available during recessions when government revenues aren't rising. This approach would also build into the system an affirmative incentive for the government to pursue pro-growth policies, which would be another benefit. (As opposed to the anti-growth, regressive strategy represented by the gas tax)

This may be one of those ideas that just makes too much sense to ever be implemented by our dysfunctional government. Many Republicans would love the idea of eliminating the gas tax, but would balk at the idea of dedicating a fixed percentage of revenue increases, regardless of the deficit, and without any corresponding spending cuts.

Many Democrats would love to have more government money to spend without having to cut anything, but would squeal like stuck pigs over the idea of eliminating a tax, since reducing the tax burden is something that they apparently see as morally repugnant.

[Guinevere]

I'm all for more investment in our infrastructure and I don't understand why more isn't being done - esp at the federal level. I live on a street in awful condition that the town and state have given up on, that is eligible for federal tif funding - but we've been waiting over 5 years for the dollars and no end in sight (but the prelim design and engineering work is done). Build (or rebuild) that road. It will bring good jobs, and ultimately more people, to my town.

MA rejected the automatic indexing of the gas tax this last round of elections, so our funds for our own road projects aren't going up.

Also agree we need to find a sweet spot where conservation is still important and gains in efficiency and alternative technologies are still driving the bus. Not sure where that is but it's certainly closer to $4/gallon than $2/gallon

Finally, and I meant to post on this earlier but no time - Cuomo has banned fracking in NY State - fabulous news!!

[Guinevere]

Interesting:

http://www.forbes.com/sites/christopher ... il-prices/

Oh and the barrel price for light sweet crude was $55 and change yesterday.

[Crackpot]

I paid 2.15 this am

[TPFKA@W]

As good as it feels going down, it is going to hurt like heck when it inevitably goes back up. I would like to see the floating tax you mentioned some eons ago, keeping it at $4 a gallon and using the money for roads or some-such. It would keep John Q. interested in energy alternatives.

I don't recall Jim ever mentioning that idea, but I do recall mentioning it myself some time ago. (I think I may have suggested $5/gal.at the time...'cuz you know it's going to go up to that price at some point anyway...) It would be a great idea--impossible in our present political situation, but a great idea nevertheless. And if the money were used for research into alternative sources of energy, that would be even better.

I am deeply sorry I gave credit for your brilliant idea to someone else. I hope you can find it in your heart to forgive me.
I still think it would do more good than going back to low prices.

[oldr_n_wsr]

Too bad the gov does not have the discipline needed to not use money allocated for "whatever" on other things (like the general budget). Re. social security.

$2.75 at the gulf on the service road of the LIE, but I have seen lower.

[TPFKA@W]

It was $1.99 here last night.

[Sue U]

It was $1.99 here last night.

Wow.

I haven't been to the gas station this week, but last time I checked the price around here was $2.23. I 'll probably be filling up tonight; hope to get that kind of a price break here, as we're traveling later this week.

[Lord Jim]

Econo can have all the credit he wants for the idea that gas should be $5.00 a gallon...

Since I think that's a terrible idea, and it would have a devastating impact on the economy.

I really couldn't care less if low oil prices make the greenie "feel good" boutique energy sources that don't produce any meaningful amount of US energy needs and won't for decades less economically viable. They don't play any important role in any of this, so it's not really significant.

I do however care if the prices stay so low that it begins to affect meaningful domestic energy production in the two areas that really count; oil and natural gas.

Natural gas is America's true "energy source of the future"; in just the past few years it's taken a 40% larger share of US electricity energy needs, and will soon pass coal as the number one electricity provider.

In 2013, energy sources and percent share of total electricity generation were

Coal 39%
Natural Gas 27%
Nuclear 19%
Hydropower 7%
Other Renewable 6%
Biomass 1.48%
Geothermal 0.41%
Solar 0.23%
Wind 4.13%
Petroleum 1%
Other Gases < 1%

http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3

I'd also like to see a crash program to build a new generation of nuclear power plants; (there's an infrastructure job creating program for you) it's pretty impressive that despite all the wailing and gnashing of teeth by the neo-luddites, nukes still account for nearly 20% of US electricity needs. Just think how much better that number could have been were it not for the alarmist, hair-on-fire crowd...

In contrast as you can see, windmills only provide about 4% and sunbeam power doesn't amount to a spit in the ocean as far as US energy needs are concerned.

[Big RR]

Sue--Just don't waste those savings by going out and buying hummer, since we all know gas will never go up in price again.

jim--while not a "greenie" alternative energy source, nuclear is a source that's affected by cheap petroleum as well. I think the government and business communities should be mature enough to invest in all alternative energy sources (including nuclear) even if they are not economically viable, if only in anticipation of the day that they will be. But the idea of investing in the long term future without expecting to the current (or near future) bottom line being positively affected seems to be a quaint notion in this world of EVA and other shortsighted economic policies.

[TPFKA@W]

$1.96 today.

[Econoline]

Just paid $2.089 near Joliet IL this afternoon.

It appears that Jim's and my ideas were two completely different proposals; the thing they have in common is setting a (high, but not too high) target price and then floating the tax to maintain a steady price. I really had forgotten Jim's posts on the subject until he jogged my memory, and I really was not complaining about @W mis-attributing the idea. Like I said: two different, slightly similar ideas.

One thing which has me really perplexed is the way the price of diesel fuel has soared in relation to the price of gasoline. Long, long ago, in a galaxy far, far away, diesel was always consistently cheaper than gas. But for the past dozen years or so, the price of diesel has fluctuated within a certain range: from equal to (or even slightly less than) gas during the summer ("driving") season to 10-25% higher than gas during the winter ("heating") season. But now, this year, the price of gasoline has plummeted and the price of diesel is now 50 or even 60 percent higher than the price of gasoline!

So, WTF????? Yeah, the cost of crude oil has gone down...but why wouldn't the ratio between gasoline and diesel prices remain roughly the same regardless of the price of crude? I might be seriously considering a new diesel van to replace my 11-year-old Dodge Sprinter...but even if a diesel vehicle would get ~50% better mileage, at the current price of gasoline and diesel fuel the extra cost of the diesel engine option makes absolutely *NO* economic sense.