High oil prices last summer were fueled by 1. strong worldwide demand as more and more people in developing nations buy cars
2. A stock of US vehicles heavily overweighted with oversized, gas- guzzling truck-like SUVs and similar 3. A cheap and falling dollar 4. declining US production 5. The belief on the part of traders that oil prices could continue to rise as demand strengthens and supplies worldide and domestically weaken Low oil prices currently are a consequence of 1. weakeniing worldwide demand as economies throughout the world falter 2.Declining US demand for outsized, gas-guzzling vehicles 3. a rising dollar, since oil is priced in dollars not a basket of currencies 4. increased production from places like the Bakken providing new supplies, and even an improved situation with respect to the ability of Iraq to produce and market oil. 6. The belief on the part of traders that while demand is weak, production is gradually getting stronger and therefore prices could continue to fall. No one knows if the current trend toward lower oil prices will continue let alone last for any length of time.I paid $1.84 for gas in Kentucky yesterday. In support of continuing lower oil prices include the following arguments 1. Worldwide demand could continue to weaken 2. Consumers will over time replace gas guzzling vehicles with more fuel efficient ones (but interestingly, not so much if gas is only $1.84 a gallon for any length of time. Cheap gas does not favor energy conservation.) 3. The dollar could continue to rise against other key currencies such as the Euro, as Europe seems to be doing even worse than the US economically right now. 4. Increased domestic production from places such as the Bakken should ultimately add to supplies of oil and, with luck, total US production could rise not fall in the coming years. 5. Countries such as Iraq could be in a position to export more oil. 6. More and more of world production is coming from non-OPEC countries that are not as rigid about production..indeed many countries are attempting to offset revenue losses from declining prices by increasing not decreasing production. Factors that could cause oil prices to start back up again include 1. An improving world economy ands with it, increaseing worldwide demand 2. The dollar starts to fall again relative to the Euro, as Americans print more money to deal with the burgeoning debt and all the new government programs designed to be anti-recessionary. 3. A more liberal congress and executive branch will be more interested in environmental issues, restricting drilling in Alaska, offshore and in general promoting expensive and unproven alternative energy sources while attempting to limit US production as well as imports of crude oil particularly on places the federal government controls. However, nearly all of the Bakken is in private hands and I donot see any big push to restrict production on privately-held lands from an environmental perspective. 3. If the world economy improves, more and more people in developing nations will want to own cars 4. Historically the US has relied on Venezuela as a major source of imported oil..to say the least, relations right now are strained. This is most curious because US dollars from oil has largely built the Venezuelian economy and kept Chavez in power. What happens next will be most interesting as Chavez has a lot of oil he has to export, oil going from $140 to $60 in only a few months must be putting a real strain on his government and what he can say politically about the US historically his major buyer. This is one to watch. If the US no longer gets significant oil from Venezuelia where does this oil go instead? What other country has both the money AND the need for oil? 5. General turmoil in the oil producing regions of the world which limits countries' abilities to export is bullish for domestic oil prices and for Bakken mineral holders. With a price inelastic demand and supply it does't take very much shift in either to have a substantial impact on crude prices. THat's one reason why oil prices over periods as short as 3-6 months are nearly impossible to forecast. I find it more than a little weird that since Bakken mineral owners directly benefit from higher crude oil prices, their interests are most curiously aligned with those of OPEC and the US environmentalists who would like to see domestic production restricted on federally controlled lands, and not with the interests of those who call for more drilling offshore and in Alaska nor with those who think OPEC already has too much power to restrict world oil supplies. Strange world we live in,I would say. David On Nov 7, 11:11�pm, jajones422000 <[EMAIL PROTECTED]> wrote: > clr in their last quarterly report say they are going tomake a fairly > big cut back > > On Nov 7, 2:18�pm, cdnbkkn <[EMAIL PROTECTED]> wrote: > > > > > Companies are drilling with budget money that was allocated a year > > ago. Day to day oil price has little to do with it. If oil were to > > stay low for 6 months to a year ROR would decrease substantially and > > would most likely result in fewer rigs. I have already heard of a few > > companies that are releasing their rigs. > > > On Nov 7, 9:16�am, David <[EMAIL PROTECTED]> wrote: > > > > as reported on the ND dmr active well rig site Nov 7th 2008 > > > > 95 with 32 or almost exactly 1/3 of those in Mountrail > > > >https://www.dmr.nd.gov/oilgas/riglist.asp > > > > Does anyone know if that would be an all time high for ND? > > > > It looks to me that, if anything, with lower oil prices, drillers are > > > focusing on ND and Bakken, not staying away.- Hide quoted text - > > > - Show quoted text -- Hide quoted text - > > - Show quoted text - --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Bakken Shale Discussion" group. 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