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Should we temporarily subsidize oil shale production in response to OPEC

Should we temporarily subsidize domestic oil shale production in response to OPEC?

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ALiberalModerate

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OPEC is currently using their market power to engage in a price war with the United States in the hopes that it will put our tight oil suppliers out of business. If oil prices drop to a point that oil shale production is no longer profitable (below 60 dollars a barrel), do you think the United States should temporarily subsidize producers in order to keep that production and all of the infrastructure supporting it online for when oil prices inevitably rise again?

Oil prices keep plummeting as OPEC starts a price war with the US - Vox
 
No, we should release oil out of the strategic reserves to maintain lower prices to really stick it to OPEC.
 
I would have thought this move to be expected from OPEC. No, I dont think we should subsidize oil producers.
 
SouthernDemocrat said:
OPEC is currently using their market power to engage in a price war with the United States in the hopes that it will put our tight oil suppliers out of business. If oil prices drop to a point that oil shale production is no longer profitable (below 60 dollars a barrel), do you think the United States should temporarily subsidize producers in order to keep that production and all of the infrastructure supporting it online for when oil prices inevitably rise again?

Oil prices keep plummeting as OPEC starts a price war with the US - Vox
Click to expand...

Actually this not true. OPEC cant manipulate the prices anymore .. hell it has not been able to do that for decades. What you should be worried about is the speculators who control 60-70 of the market and are driving down prices at the moment. Some think it is to test the break-even level of US shale oil production.

Blaming OPEC is the go to excuse these days and it works because people dont realize the power speculators have gotten over commodities and actually think that OPEC, who does not even produce a majority of oil on the planet, can in fact manipulate prices in this way. They cant even agree internally and have not been able for years.
 
Declan said:
No, we should release oil out of the strategic reserves to maintain lower prices to really stick it to OPEC.
Click to expand...

Given the amount of instability in the Middle East right now, I think that could be a bad idea. We need those reserves in the event that it just completely blows up over there and there are massive supply disruptions as a result. Moreover, by releasing those strategic oil reserves into the market, we only make the situation worse for domestic producers. The Saudis can profitably produce oil at very low oil prices, we can't.
 
PeteEU said:
Actually this not true. OPEC cant manipulate the prices anymore .. hell it has not been able to do that for decades. What you should be worried about is the speculators who control 60-70 of the market and are driving down prices at the moment. Some think it is to test the break-even level of US shale oil production.

Blaming OPEC is the go to excuse these days and it works because people dont realize the power speculators have gotten over commodities and actually think that OPEC, who does not even produce a majority of oil on the planet, can in fact manipulate prices in this way. They cant even agree internally and have not been able for years.
Click to expand...

I agree that speculators manipulate the market a lot, but they can't do it indefinitely. They can cause temporary spikes and declines in oil prices, but eventually market fundamentals still rules out. If you have a glut of supply, eventually oil prices will drop no matter what the speculators do. If you have more demand than supply, eventually oil prices will spike no matter what the speculators do.
 
SouthernDemocrat said:
I agree that speculators manipulate the market a lot, but they can't do it indefinitely. They can cause temporary spikes and declines in oil prices, but eventually market fundamentals still rules out.
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Depends if there is collusion... and we have seen that there is. LIBOR and other cases.

If you have a glut of supply, eventually oil prices will drop no matter what the speculators do. If you have more demand than supply, eventually oil prices will spike no matter what the speculators do.
Click to expand...

We have had more supply than demand for years and yet prices have remained high and gone higher. Why? Speculation and manipulation. When a market like oil, is 60-70% run by speculators, then "normal market forces" are taken out of the picture.
 
SouthernDemocrat said:
Given the amount of instability in the Middle East right now, I think that could be a bad idea. We need those reserves in the event that it just completely blows up over there and there are massive supply disruptions as a result. Moreover, by releasing those strategic oil reserves into the market, we only make the situation worse for domestic producers. The Saudis can profitably produce oil at very low oil prices, we can't.
Click to expand...

So? They will run out of oil before we will. We do not have to sell on the international markets to maintain our oil producing capacity. We can just change our laws to alter the markets if need be, effectively nationalizing domestic production and consumption. Money is ephemeral. Natural resources are the only thing that matter and they only have 1.
 
SouthernDemocrat said:
Given the amount of instability in the Middle East right now, I think that could be a bad idea. We need those reserves in the event that it just completely blows up over there and there are massive supply disruptions as a result. Moreover, by releasing those strategic oil reserves into the market, we only make the situation worse for domestic producers. The Saudis can profitably produce oil at very low oil prices, we can't.
Click to expand...

There is no more instability in the Middle East than there was 20 years. Iraq is a mess now and then. Syria is insignificant in the world oil market. That leaves Iran and the other Gulf Nations and they are pretty much the same. Then you have Libya as the only real change but even they are producing oil now days.
 
Declan said:
So? They will run out of oil before we will. We do not have to sell on the international markets to maintain our oil producing capacity. We can just change our laws to alter the markets if need be, effectively nationalizing domestic production and consumption. Money is ephemeral. Natural resources are the only thing that matter and they only have 1.
Click to expand...

I think you are unfortunately ignorant of the economics of oil production. It costs us a lot more to produce our tight oil than it does OPEC to produce oil. If we tried to rely just on our domestic oil production all it would accomplish is us paying a lot more for gas at the pump than we ever have before and thus destroying our economy in the process.
 
SouthernDemocrat said:
I think you are unfortunately ignorant of the economics of oil production. It costs us a lot more to produce our tight oil than it does OPEC to produce oil. If we tried to rely just on our domestic oil production all it would accomplish is us paying a lot more for gas at the pump than we ever have before and thus destroying our economy in the process.
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No it would not. Hyperbole much? US shale is still viable at $45 a barrel. It is still an underdeveloped part of production because of the US ban on unprocessed exports discourages production capacity.
 
Declan said:
No, we should release oil out of the strategic reserves to maintain lower prices to really stick it to OPEC.
Click to expand...

They would just refill them immediately and we'd be back to square one. [it's a 37 day supply based on 2013 consumption numbers]
 
Declan said:
No it would not. Hyperbole much? US shale is still viable at $45 a barrel. It is still an underdeveloped part of production because of the US ban on unprocessed exports discourages production capacity.
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At current costs, most estimates put oil shale production only economically viable at oil prices of $60 dollars a barrel or more. Oil shale economics - Wikipedia, the free encyclopedia
 
WCH said:
They would just refill them immediately and we'd be back to square one. [it's a 37 day supply based on 2013 consumption numbers]
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Driving falling prices will make it cheaper to refill them
 
SouthernDemocrat said:
At current costs, most estimates put oil shale production only economically viable at oil prices of $60 dollars a barrel or more. Oil shale economics - Wikipedia, the free encyclopedia
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"Only about 4 percent of U.S. shale production needs $80 or more to be profitable, according to the Paris-based International Energy Agency. Most production in the Bakken formation, one of the main drivers of shale oil output, remains profitable at or below $42 a barrel, the IEA estimates. The agency expects U.S. supply to rise by almost 1 million barrels a day next year, with increasing flows to international markets. " Oil Enters New Era as OPEC Faces Off Against Shale; Who Blinks as Price Slides Toward $70? - Bloomberg
 
Declan said:
"Only about 4 percent of U.S. shale production needs $80 or more to be profitable, according to the Paris-based International Energy Agency. Most production in the Bakken formation, one of the main drivers of shale oil output, remains profitable at or below $42 a barrel, the IEA estimates. The agency expects U.S. supply to rise by almost 1 million barrels a day next year, with increasing flows to international markets. " Oil Enters New Era as OPEC Faces Off Against Shale; Who Blinks as Price Slides Toward $70? - Bloomberg
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That's actually very good news. [since SA is holding their prices steady]
 
Declan said:
"Only about 4 percent of U.S. shale production needs $80 or more to be profitable, according to the Paris-based International Energy Agency. Most production in the Bakken formation, one of the main drivers of shale oil output, remains profitable at or below $42 a barrel, the IEA estimates. The agency expects U.S. supply to rise by almost 1 million barrels a day next year, with increasing flows to international markets. " Oil Enters New Era as OPEC Faces Off Against Shale; Who Blinks as Price Slides Toward $70? - Bloomberg
Click to expand...

You realize you just linked to an article warning of a crash in domestic production if OPEC keeps prices low?? The problem is that if oil prices stay low then future projects will be mothballed. Oil shale needs constant investment in future production to stay viable. Tight oils peak fast, you can't just drill a well like they do in Saudi Arabia and draw off it for years.
 
SouthernDemocrat said:
OPEC is currently using their market power to engage in a price war with the United States in the hopes that it will put our tight oil suppliers out of business. If oil prices drop to a point that oil shale production is no longer profitable (below 60 dollars a barrel), do you think the United States should temporarily subsidize producers in order to keep that production and all of the infrastructure supporting it online for when oil prices inevitably rise again?

Oil prices keep plummeting as OPEC starts a price war with the US - Vox
Click to expand...

Absolutely not! The huge Energy Corporations have conspired to prevent Renewable Energy Initiatives and Energy Conservation projects in the USA. I realize that from their point of view it is good business. Once again, it is what is good for Corporations is bad for humans. We should have ended our realiance on OPEC crude decades ago, but allowed Big Energy to influence the policies that prevented it. This really just troubles the Frackers as the Exxon/Mobils and Chevrons make just as much with refining and distribution and transportation. The banks that they rest their profits in do well also.
 
SouthernDemocrat said:
You realize you just linked to an article warning of a crash in domestic production if OPEC keeps prices low?? The problem is that if oil prices stay low then future projects will be mothballed. Oil shale needs constant investment in future production to stay viable. Tight oils peak fast, you can't just drill a well like they do in Saudi Arabia and draw off it for years.
Click to expand...

No "crash" just because some shale companies go under. It is how the market works. The winners win and the losers lose. All oil needs "constant investment". Crap breaks. An offshore platform alone costs billions of dollars. These are all risks of investment.
 
No, we should not subsidize shale oil production at any point. The main reason is the oil industry already has a series of complications allowing for prices to experience the sways that we have seen just this year, let alone historically.

This is something that eventually will even out in the coming month's oil settlement dates somewhere in Q1 or Q2 of 2015. We can hope in the process put to bed some of the theories on why OPEC made the move, when it appears as of today the underline reason was so OPEC could defend their market share in consideration of their break even price in response to shale oil production's break even price.

Besides, the Oil Industry in the US gets a series of tax breaks and I see little reason to add a subsidy into the mix.
 
SouthernDemocrat said:
OPEC is currently using their market power to engage in a price war with the United States in the hopes that it will put our tight oil suppliers out of business. If oil prices drop to a point that oil shale production is no longer profitable (below 60 dollars a barrel), do you think the United States should temporarily subsidize producers in order to keep that production and all of the infrastructure supporting it online for when oil prices inevitably rise again?

Oil prices keep plummeting as OPEC starts a price war with the US - Vox
Click to expand...
I'd be against such a move anyway, but even if it did make good economic sense, I also know that subsidies are like taxes in that once started "temporary" morphs into permanent.
 
No to the suggestion to subsidize the oil producers.
Prices and exploration should follow the market.
OPEC is a house divided and not much of a threat.
 
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