Price of Oil

Started by trueblue1234, January 19, 2016, 05:02:40 PM

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trueblue1234

Just talking about this today. Now with fuel back under the £1 mark and Heating oil so cheap, is this likely to be a long term drop or are thinks going to go back up again as quickly as they went down. Or are we looking at lower prices for the next couple of years? We're building a house at the minute and had been looking at Geotherm, but given the price of oil now, we're wondering if it's the best move. Obviously the Geotherm is better environmentally, but given the capital costs OFCH is starting to look very attractive again.   
Grammar: the difference between knowing your shit

seafoid

Oil went from 30 to 160 and back down to 30 in 2 years. The price won't be stable for a long time.
"f**k it, just score"- Donaghy   https://www.youtube.com/watch?v=IbxG2WwVRjU

omaghjoe

No body truely knows if it will go up or down but if the present conditions persist then it will stay subdued

The present conditions where created by an advance in technology in how to extract oil (mainly shale fracturing), it has meant there is more oil out there than can be consumed, a glut. The traditional and cheap producers (OPEC) are trying to maintain their market share and reduce the amount of oil supplied by forcing out the new producers, ironcially this has meant that the glut has mushroomed in the short term and the price plummeted  as a result.

The biggest factors that would cause an increase in price are:

There is a massive glut in the market that has to be consumed to increase the price

Economic conditions have to be right to consume more.

And the new producers need to have a significant drop in production which incidentally they are starting to show signs off.

However even if the above conditions are met  the technology still exists to produce more oil, so if the price increased then so will the production using shale, sands etc.

As I said no one truely knows however the oil industry has prepared for a prolonged period of cheaper oil.

My own prediction would be that oil could well break $20 this year with Iran now able to sell on the open market and China's slowing economy. However as the new producers cut production and the glut gets consumed I see oil slowly heading back towards $60/70 over the next 4/5 years. The $60/70 mark is the the likely sweet spot for the shale producers to start producing again, so spikes are likely to be $80/90 are breaking $100 unlikely. However the oil industry is extremely resourceful and full of ingenuity so dont be surprised if they find a way to produce oil cheaper than that sweet spot.

Franko

Quote from: omaghjoe on January 19, 2016, 05:59:26 PM
No body truely knows if it will go up or down but if the present conditions persist then it will stay subdued

The present conditions where created by an advance in technology in how to extract oil (mainly shale fracturing), it has meant there is more oil out there than can be consumed, a glut. The traditional and cheap producers (OPEC) are trying to maintain their market share and reduce the amount of oil supplied by forcing out the new producers, ironcially this has meant that the glut has mushroomed in the short term and the price plummeted  as a result.

The biggest factors that would cause an increase in price are:

There is a massive glut in the market that has to be consumed to increase the price

Economic conditions have to be right to consume more.

And the new producers need to have a significant drop in production which incidentally they are starting to show signs off.

However even if the above conditions are met  the technology still exists to produce more oil, so if the price increased then so will the production using shale, sands etc.

As I said no one truely knows however the oil industry has prepared for a prolonged period of cheaper oil.

My own prediction would be that oil could well break $20 this year with Iran now able to sell on the open market and China's slowing economy. However as the new producers cut production and the glut gets consumed I see oil slowly heading back towards $60/70 over the next 4/5 years. The $60/70 mark is the the likely sweet spot for the shale producers to start producing again, so spikes are likely to be $80/90 are breaking $100 unlikely. However the oil industry is extremely resourceful and full of ingenuity so dont be surprised if they find a way to produce oil cheaper than that sweet spot.

There's a finite amount of it.
A huge percentage of the world's population and industries are totally dependent on it for energy.
Other forms of energy are only scratching the surface of the overall requirement.

Long term, it will most definitely go up.

brokencrossbar1

The reason oil is so low is because Aramco in Saudi have glutted the market deliberately in an attempt to put the US fracking companies and the Russian oil and gas companies out of business. Aramco can produce as much or as little as they want and owns the worlds largest on and off shore sites. If they decided to stop producing or worse still increase the level of production then the ramifications on other oil producers would be devastating. They dictate the price of oil effectively

haranguerer

Iran is back in the fold too

seafoid

Quote from: brokencrossbar1 on January 19, 2016, 06:16:59 PM
The reason oil is so low is because Aramco in Saudi have glutted the market deliberately in an attempt to put the US fracking companies and the Russian oil and gas companies out of business. Aramco can produce as much or as little as they want and owns the worlds largest on and off shore sites. If they decided to stop producing or worse still increase the level of production then the ramifications on other oil producers would be devastating. They dictate the price of oil effectively
that and deflation
"f**k it, just score"- Donaghy   https://www.youtube.com/watch?v=IbxG2WwVRjU

Over the Bar

#7
...and not forgetting the popularity of cycling!

omaghjoe

It ammuses me to hear the Saudis get the blame for the current price increase when they have in actual fact done nothing. The reason that the price of oil is on the rise is due to a glut the glut is caused by more oil on the market that whats being consumed. The extra oil that has come around is by and large a result of American shale production. So are they to blame? Not really those guys are just responding to a shortage in supply.

So who is to blame then??? Well no one actually its just market forces playing themselves out

Which brings me along nicely to the next point about a finitie amount of oil . There may well be a finitie amount of oil (although even that might be in question) but no one knows what it is, and the amount that is extractable (which is what we are really talking about) is constantly changing. In fact the increase in what is extractable is what has caused the drop in oil in the first place, remember the media where talking that we are hitting "peak oil" a few years back, that theory was truely blownout of the water by the new technology in the oil field which could extract more oil from the same reserves.

LeoMc

Quote from: trueblue1234 on January 19, 2016, 05:02:40 PM
Just talking about this today. Now with fuel back under the £1 mark and Heating oil so cheap, is this likely to be a long term drop or are thinks going to go back up again as quickly as they went down. Or are we looking at lower prices for the next couple of years? We're building a house at the minute and had been looking at Geotherm, but given the price of oil now, we're wondering if it's the best move. Obviously the Geotherm is better environmentally, but given the capital costs OFCH is starting to look very attractive again.

You need to factor in the pay back here too. With a new build I will assume you have went over the top with insulation, reducing the amount of heating actually required and stretching out the payback time.

orangeman

Only a matter of time till it bounces back and same with the shares.

trueblue1234

Quote from: LeoMc on January 21, 2016, 10:27:49 AM
Quote from: trueblue1234 on January 19, 2016, 05:02:40 PM
Just talking about this today. Now with fuel back under the £1 mark and Heating oil so cheap, is this likely to be a long term drop or are thinks going to go back up again as quickly as they went down. Or are we looking at lower prices for the next couple of years? We're building a house at the minute and had been looking at Geotherm, but given the price of oil now, we're wondering if it's the best move. Obviously the Geotherm is better environmentally, but given the capital costs OFCH is starting to look very attractive again.

You need to factor in the pay back here too. With a new build I will assume you have went over the top with insulation, reducing the amount of heating actually required and stretching out the payback time.

Yes, Insulated the life out of it. I'm aware the pay back is slower. But there's a good grant at the minute that reduces some of the capital costs. It's a fairly large house so OFCH could be expensive if the price did increase. To be honest, we're kind of on the fence at the minute but need to make a decision ASAP. 
Grammar: the difference between knowing your shit

LeoMc

Quote from: trueblue1234 on January 21, 2016, 12:41:28 PM
Quote from: LeoMc on January 21, 2016, 10:27:49 AM
Quote from: trueblue1234 on January 19, 2016, 05:02:40 PM
Just talking about this today. Now with fuel back under the £1 mark and Heating oil so cheap, is this likely to be a long term drop or are thinks going to go back up again as quickly as they went down. Or are we looking at lower prices for the next couple of years? We're building a house at the minute and had been looking at Geotherm, but given the price of oil now, we're wondering if it's the best move. Obviously the Geotherm is better environmentally, but given the capital costs OFCH is starting to look very attractive again.

You need to factor in the pay back here too. With a new build I will assume you have went over the top with insulation, reducing the amount of heating actually required and stretching out the payback time.

Yes, Insulated the life out of it. I'm aware the pay back is slower. But there's a good grant at the minute that reduces some of the capital costs. It's a fairly large house so OFCH could be expensive if the price did increase. To be honest, we're kind of on the fence at the minute but need to make a decision ASAP.

So long as you have underfloor heating you should be able to retro-fit.
I am holding out for Geo-T Efficiencies to improve and costs to come down and went with the oil.

trueblue1234

Quote from: LeoMc on January 21, 2016, 03:40:00 PM
Quote from: trueblue1234 on January 21, 2016, 12:41:28 PM
Quote from: LeoMc on January 21, 2016, 10:27:49 AM
Quote from: trueblue1234 on January 19, 2016, 05:02:40 PM
Just talking about this today. Now with fuel back under the £1 mark and Heating oil so cheap, is this likely to be a long term drop or are thinks going to go back up again as quickly as they went down. Or are we looking at lower prices for the next couple of years? We're building a house at the minute and had been looking at Geotherm, but given the price of oil now, we're wondering if it's the best move. Obviously the Geotherm is better environmentally, but given the capital costs OFCH is starting to look very attractive again.

You need to factor in the pay back here too. With a new build I will assume you have went over the top with insulation, reducing the amount of heating actually required and stretching out the payback time.

Yes, Insulated the life out of it. I'm aware the pay back is slower. But there's a good grant at the minute that reduces some of the capital costs. It's a fairly large house so OFCH could be expensive if the price did increase. To be honest, we're kind of on the fence at the minute but need to make a decision ASAP.

So long as you have underfloor heating you should be able to retro-fit.
I am holding out for Geo-T Efficiencies to improve and costs to come down and went with the oil.

Yeah it's UFH. And I know they will always improve efficiencies. But that'll always be the case. The grant's £3500 at the minute. Which is a fairly decent % of the capital costs. (Our total costs for the geo therm is roughly £9000. So we'll only be paying £5500) So even if we have to replace and improve in say 15 years it SHOULD" be cost effective.
Grammar: the difference between knowing your shit