oil- the highs and lows

[CristyCurves 169032]

There is much talk about the lowering oil prices, for some this is welcoming news. Finally, many can fill their tanks without doing without something else. But as the news will lead us to believe, it isn't a good thing for our economy. What's your opinion. Have the lower prices helped you, do you think they'll last?

 

http://www.cbc.ca/news/business/oil-price-drop-creates-winners-and-losers-1.2856237

 

http://www.bankofcanada.ca/2015/01/drilling-down-understanding-oil-prices/

[Guest D***el B***e]

Lol, good thread discussion. Strictly from an investment perspective, oil and anything related to it isn't doing well at all. My portfolio is a mix of large and small cap, banks, telecom, oil, and general goods companies. Large caps are all dividend bearing stocks so I'm not too concerned there. My oil stocks (smaller cap, higher risk) are dragging my portfolio south at a rather quick pace. The only good thing about the low price of oil is that it's putting a lot more money in people's wallet to save or spend somewhere else. The only problen is the governemt(s) are just about to take it all back from you with the new carbon tax. Price at the pump will be going up soon. We never seem to win.

[C**ab****a 6401]

A complicated question Crissy for sure.

 

Well the answers is...it depends... it depends.... first and foremost how much OPEC wants to assure that China will be its client for a long time and this is one way of assuring that..Keeping the competition out and prices low.with new contracts in place.

 

The next aspect has to do with supply and an over supply at that..Last year there were 3 million bbls of oil a day produced in the United States , from Fracking and by all projections that is expected ( or rather was ) expected to exceed 11 million bbls a day...Needless to say when you increase the source of supply by that much price has to come down...

 

Most of the top end frackers are at about $65 break even...Our Oil Sands are in a similar problem. Others dont break even til about $85. Thats fine when oil is at $120 and climbing , but that is now longer the case.

 

Then there is the question of Russia and Mr Putin...who sure does not like the low price as it hurts his economy by a multiple effect , and if the US wanted to direct some of its control towards the Russian economy and Mr. Putin, this would be a round about way to do it...

 

To answer the final point of your question is it good..In the short term yes, as lower prices will be felt at the pumps and then we will all have more money available for our favorite activity......but long term..no so good as the economy will shrink... and we all know that shrinkage is not a good thing...lol

 

Just an opinion....

[CristyCurves 169032]

DB, I don't mind a carbon tax, we have to be aware of climate change and this is one way the government can impose fees for emitting green house gases into the environment. I believe low income families can get a rebate for this, if I'm not mistaken as can some business that are known to be low producers.

I do think those who rely on and supply and fuel factory farming should pay the heaviest, but that's just my opinion.

[Ice4fun 78407]

We tend to look at Energy costs as consumers so we are generally interested in the current cost to us so many of us will be happy with the recent reductions... happy that I can now fill up my truck for under $100.00.

 

From a broader economic perspective we are seeing a general correction in the cost of oil resulting from two major issues:

 

First a significant increase in supply resulting from technology allowing new fields to come on strength... the largest of this being shale oil recovery resulting from fracking. This "new" oil has dramatically affected oil production in the United States.

 

The second issue affecting price is more political in nature.... OPEC has taken a political decision to not reduce capacity of their production as a means of influencing the price as they have often done in the past. Generally OPEC Oil is cheap oil so if they manage oil supply they impact world prices.

 

Additionally from a geopolitical perspective I kinda think that the US likes the fact that the lower oil prices specifically hurt Russia and severely diminish their financial ability to play in world political issues.

 

After saying all of that the reality is that this correction is just that... it will have a short (few years) impact but the longer term outlook for energy supply and demand does not really change. The oil in the ground and oceans of Canada still have tremendous value it just might be a little later in flowing through our economy.

 

Just my Opinion

 

Sent from my Passport using Tapatalk

[PistolPete 61421]

Fuel or a strong Canadian dollar....

 

Meanwhile consumers might be saving at the pumps, but our dollar is taking a shit kicking. I have invested quite a bit over the past 6 years in the USA dollar, (because I like to travel in the winter months) analyst say the loonie can drop another nickel in next while, bringing it under .80 cents.

[Guest N***he**Ont**y]

It is to bad that Alberta will be feeling the pain of falling oil prices but they will survive. Ontario has been going through job losses for the past few years. This is what happens when a country puts all of its eggs in one basket. We have other resources that should be developed and processed in this country and not exported to other countries to process and refine, Lay offs have occurred in my home town this past week due to low Nickel Prices and high costs of mining low grade ore. Now Target has announced the closure of all its stores nation wide and Sony has announced the closure of all its retail outlets. It is the bottom of the cycle but it will turn around in a period of time.

[LadiesFirst 848]

Just think of it as your run of the mill deflation (basically when asset prices in general are too high, not just oil, and they correct themselves). Know that most all market trends move excessively in both directions (more than people think)a period of deflation happens to work off periods of exuberance (2009-present)

 

Just think of it as a workout after indulging excessively. The thought and process of the workout is tedious and painful much like watching your asset prices adjust lower. But, when it is over you feel better look better and can eat bad again much like the our economy after deflation prices are lower our currency is lower, so cheap Canadian assets in a cheap currency makes Canada attractive to foreign investors and growth ensues . once again we consumers can start to do what we do best.... Excessively consume until next time.

[CristyCurves 169032]

It is a complicated and intricate situation for sure. As all it's effects are not necessarily seen or known by the general public. I feel awful for those losing jobs, imagine having a family and no reliable long term income, that must be an unbearable stress. But then for many it's a good thing and a financial break, a long time coming. Good and bad in every situation so it appears. Thanks for all the input to this thread.

[oldblueeyez 15475]

It pisses me off that we can declare economic war on Russia and crash oil prices. So what does it mean, just an order from the top to bring oil prices down? Everybody knows that oil prices came crashing down in order to crush Russia.

 

So why were oil prices so high during the recession? Because somebody up top ordered them to be?

 

We are slaves to oil, and to those who dictate its price.

[Guest A**aTo**h]

It pisses me off that we can declare economic war on Russia and crash oil prices. So what does it mean, just an order from the top to bring oil prices down? Everybody knows that oil prices came crashing down in order to crush Russia.

 

So why were oil prices so high during the recession? Because somebody up top ordered them to be?

 

We are slaves to oil, and to those who dictate its price.

 

Yes, Putin deserves our pity.

[oldblueeyez 15475]

Well apparently somebody tells somebody to crash oil prices, because it isn't a fucking coincidence that they come as Russia is declared the new enemy.

So you're in the oil business, woo hoo, are you in the White House?

[LeeRichards 177238]

So you're in the oil business, woo hoo, are you in the White House?

 

Nope My house is kinda steel grey kinda color.... White house is down the street tho .

 

Obama has a White House with wings down south but he didnt do it either.

[Phaedrus 209521]

Actually, it was me.

 

Sorry about that, guys - I hit the wrong button on the Economic God app on my phone. I'll make it up to you just as soon as I figure out how it works, okay? Seriously, Vlad... nothing personal. Honest.

[Winnipegcub 21293]

I've stayed out of this discussion for a variety of reasons.

I live in the economics, industrial, and public policy of this issue. The simple reality is that this is a commodity which is priced in a world context with very complex externalities. Phd papers can describe this but are beyond our simple posts here.

The resulting economic and political impacts are very real for Albertans and Canadians. The sun will still come up in the morning and in a few weeks time we'll be back to a more sustainable level. In the meantime consumers will enjoy the relief and the industry can benefit from a streamlining.

Alberta Bear

[Metalsmith 2983]

I was thinking this was another massage oil or personal lubricant discussion....geez....was I ever disappointed!

[CristyCurves 169032]

I was thinking this was another massage oil or personal lubricant discussion....geez....was I ever disappointed!

 

Lol!!! always fun to talk about lube;)

 

Additional Comments:

I've stayed out of this discussion for a variety of reasons.

I live in the economics, industrial, and public policy of this issue. The simple reality is that this is a commodity which is priced in a world context with very complex externalities. Phd papers can describe this but are beyond our simple posts here.

The resulting economic and political impacts are very real for Albertans and Canadians. The sun will still come up in the morning and in a few weeks time we'll be back to a more sustainable level. In the meantime consumers will enjoy the relief and the industry can benefit from a streamlining.

Alberta Bear

When I started reading articles, news, etc about the issue it became to complex for me. So I thought some here might have experience and opinions that might explain it better. Perhaps there are no phd's here wanting to break it down and explain it. The posts, however simple, are still interesting discussion:)

[oldblueeyez 15475]

The White House told the Saudis to pump into oblivion,

damaging primarily Russia, but Iran and Venezuela too.

 

Russia has retaliated by cutting gas supplies to Europe

and is prepared to sell tens of billions of US treasuries.

 

I'm rooting for Russia because Russian men are real men

and Russian women are real women!

 

It's a cold war until somebody makes it hot. It's quite

fascinating.

[Nicolette Vaughn 294340]

Filled my new Honda for $40 but it doesn't feel as good as what I thought it would be. As many have reiterated here, low gas prices indicate trouble. The party's over...

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[piano8950 32577]

I'm kind of nervous actually. In 2008, we saw a big correction in the markets, and while unemployment went up, house prices just kept growing as well. That was not the case in US.

 

Since then, house prices in the Toronto area, Vancouver, and some other big Canadian cities have reached beyond unaffordable, there is a report that Canadian house prices are overpriced by 60% (although we've been talking about a price correction for a while, so I don't know if it'll happen this year). If I didn't already own, I don't know what I would have done to buy one now. My place has doubled in price since owning it, and had I bought it brand new, it would be nearly 3-4 times the initial asking price. All this in a matter of 12-15 years.

 

With the market growing the rate it has since 2009, being 6 years, I'm starting to get nervous. Canada's exchange is 25% finance, 20% oil and gas. That's a huge reliance on just two industries. With oil prices in a free fall, and the cost of production in Canada at ~$70-80 a barrel (from what I heard), I don't know how any of this is good for us in the near future. There will be layoffs, I think we've already started to see some of that. Many of these jobs are very high paying, and while it probably hurts Alberta more then any other provinces, I'm wondering what will happen elsewhere.

 

I also don't completely know how yesterday's rate cut will affect finances in the long term. Even though yesterday I made more in one day then I ever have before. Perhaps I'm being massively pessimistic.

[LadiesFirst 848]

I'm kind of nervous actually. In 2008, we saw a big correction in the markets, and while unemployment went up, house prices just kept growing as well. That was not the case in US.

 

Since then, house prices in the Toronto area, Vancouver, and some other big Canadian cities have reached beyond unaffordable, there is a report that Canadian house prices are overpriced by 60% (although we've been talking about a price correction for a while, so I don't know if it'll happen this year). If I didn't already own, I don't know what I would have done to buy one now. My place has doubled in price since owning it, and had I bought it brand new, it would be nearly 3-4 times the initial asking price. All this in a matter of 12-15 years.

 

With the market growing the rate it has since 2009, being 6 years, I'm starting to get nervous. Canada's exchange is 25% finance, 20% oil and gas. That's a huge reliance on just two industries. With oil prices in a free fall, and the cost of production in Canada at ~$70-80 a barrel (from what I heard), I don't know how any of this is good for us in the near future. There will be layoffs, I think we've already started to see some of that. Many of these jobs are very high paying, and while it probably hurts Alberta more then any other provinces, I'm wondering what will happen elsewhere.

 

I also don't completely know how yesterday's rate cut will affect finances in the long term. Even though yesterday I made more in one day then I ever have before. Perhaps I'm being massively pessimistic.

 

 

You did great on you house congratulations! Wouldn't worry too much of house prices in toronto, this weak oil and dollar should help Ontario and it's manufacturing, as well tourism should pick up. The same people telling you your house is 60 % overvalued are probably the same people telling you rates had nowhere to go but up. I think the gain on your house is mainly due to rates dropping. And they continue to, both here and globally. People tend to go to the bank inquiring how much of a mortgage they can afford, the lower the rate the more they are approved for and house prices reflect this. I do think Alberta will have some trouble obviously, although rates are low the job market there has been hit hard. However, for the rest of the country especially here in the east, maybe our people can return home and build some ships and demand some houses give us some appreciating prices, hopefully.

 

Yes, MKT did well yesterday but we did lose some purchasing power. Our dollar approaching .80 US now. Like oil it is good and bad. Bad, we can't buy as much, good we are more competitive. More Yankees will visit with their money, more Canadians will stay home with their money, global companies will be more inclined to hire and build in Canada.

 

Remember there is usually good offsetting the bad. Generally though, it has a harder time making the news.

 

 

Now, if only we could strike down certain bills and legalize certain industries. Let's let the rest of the world see our most precious and valuable resource.... The exquisite beauty of our companions , or country would flourish.

[EmilyRushton 253372]

A clear sign things are getting worse, on my flight to Gander the other day - the flight was full of recently laid off people from fort mac. Sad - its going to affect everywhere....

[Frankmc 210]

It's interesting how in these discussions about oil prices and the economy no one ever brings up federal transfer payments. These equalization payments come from federal taxes on corporations and individuals. With oil revenues plummeting there will be much less corporate taxes collected which eventually will affect provinces that depend upon equalization payments.

 

As things get tighter in the western provinces it follows that it will get tighter in the rest of the country.

[henryporter 1836]

Old Blue Eyes is fast becoming a favourite.

 

Its definitely a conspiracy.

I'm pretty sure that this guy was not involved but he does shed some light on the situation.

 

https://www.youtube.com/watch?v=UrOZllbNarw

 

Myself I am going to enjoy the saving from every tankful.

i'm going to enjoy the .75 prime rate that was just announced.

 

Its just another economic cycle and the sky isn't falling.

 

Well.... maybe in Europe where the Euro just has gone into the shitter.

Or maybe Greece or Spain. Or somewhere like that.

 

The guys at the top have been busy.

[LadiesFirst 848]

It's interesting how in these discussions about oil prices and the economy no one ever brings up federal transfer payments. These equalization payments come from federal taxes on corporations and individuals. With oil revenues plummeting there will be much less corporate taxes collected which eventually will affect provinces that depend upon equalization payments.

 

As things get tighter in the western provinces it follows that it will get tighter in the rest of the country.

 

 

Excellent point. Perhaps one way to counter that problem would be for the govt to invest in Canada both our people and infrastructure. One of the benefits of the recent economic slowing is the drop in interest rates. Our govt can borrow money for 10 years @1.5% or 30 years @ 2.05% I say there turn to pick up the slack.