winston_1

Exactly. Gas is a vapour unlike petrol, which is liquid.

winston_1

Are you talking about yourself alone in a car? If you filled your car, say 5 people, would it still be cheaper than 5 airline tickets?

lansbury

My local has been stuck at $2.829 for a week now. Cheapest locally is Costco at $2.759.

scrubbedexpat091

I suppose driving with 5 people would be cheaper, but isn't relevant to our situation since we are a couple and would not be travelling with 5 people.

Beaverstate

My local small town station still gets $3.19, just down the road its in the $2.90's.

Michael

Why oil is more likely to test $50 than $100 again next year

Beaverstate

I have read a few articles of that same opinion. It seems likely that if the Saudis want to allow the price to fall that far it is possible even likely.
OPECs problem is that US shale wont go away, as soon as prices rise again US production can re-boost. OPEC is dead.

Michael

It's a matter of pride and loss of power for the Saudis. They were always the 800 pound gorilla when it came to crude oil but the US is going to surpass them in crude oil production next year and if crude oil remains at $100 per barrel, they'll be nothing but a bit player in 5-6 years. It's about who can hold their breath the longest but either way, consumers and businesses around the world are the beneficiaries.

scrubbedexpat099

Seems like the Saudi's would be better off spending their money in Washington to block US production.

Michael

That would probably be much more effective.

Pulaski

I suspect the bigger shock to the Saudis is that Venezuela now has more reserves than they do.

Michael

And the US has more reserves in just the Monterey Basin but the problem is figuring out a way to get it out. The problem with the Monterey Basin is that when they frack, the oil just drains down though the fissures.

Sheepdip

$2.539 - keep going!

Mr Weeze

I'd be especially careful using OPEC reserves for much anything. They are self reported. This wikipedia article sums it up well, and it is nothing new there.

I would suspect that is more of a resource than a reserve number - there is a big difference between the two. USGS typically reports resource or in place. Neither of those should be used as reserve.

And as for the oil just draining away, unless it's API is less than about 8 then the relative density of the fluids will prevent that.

Oil is in a bit of a spiral right now, but until 27th November nothing will really change. I'm just waiting to see if it (WTI) drops below $70 this week. Nothing will really happen early next week as the majority of analysts will be off for Thanksgiving week.

But Thursday is very interesting. Saudi is anything but irrelevant. If Saudi really wanted to mess with things they could leave OPEC - that would make OPEC irrelevant and they would then pretty much have to cut production, but it may not make a difference. Saudi produces about 10 MMBBL of the daily 90 MMBBL currently. Saudi could get that number up to 15 MMBBL pretty easily, if they wanted - much easier than the USA can, and faster too.

If you want my guess, I believe OPEC will do something to shore up price, but it will not be Saudi bearing the brunt. I think this is a game of chicken within OPEC for market share - Saudi don't want to be the one to always give up production. Historically when cuts have been agreed others have then ignored them and Saudi have taken up the slack.

Various price forecasts for next year have a 20% probability of <$60 and a 20% probability of >$100 as part of the analysis.

Some of the US-based independents are starting to cut capital programs for next year too - Continental has taken $0.6bn out of their 2015 program, after previously stating it would be increased by 15% to $5.2bn in September. But the oil rig count is currently holding up, according to the weekly rig count provided by Baker Hughes.

It's certainly interesting times right now.

Michael

It's just an estimate and not reserves. Initially the estimate was 400 billion barrels but that dropped to 15 billion barrels of recoverable oil. After further test wells, the current estimate is about 700 million barrels of recoverable oil with current technology due to the fissures in the area. I suspect the fissures are very large in California.

I agree except as you say, the other OPEC members always cheat and I don't think there will be any difference this time. Unless the Saudis cuts production to about 7 million barrels per day, it highly unlikely that the price will get back to $100 per barrel in the near future.

I also agree that the Saudis can increase production very quickly where as the US can currently only increase production by about 125,000-175,000 barrels per month. Also the cost of extraction of Saudi oil is significantly below that of the US.

However if oil production is cut by OPEC, that will likely only make increases in oil production faster in the US so I'm not sure what the Saudis want to do.