Price of oil has collapsed; how will this impact the economy?

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DonIce
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Re: Price of oil has collapsed; how will this impact the economy?

Post by DonIce » Mon Apr 20, 2020 1:51 pm

Oil will be at ~$20 again in a day or two. That's what the next month's contract is going for.

DonIce
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Re: Price of oil has collapsed; how will this impact the economy?

Post by DonIce » Mon Apr 20, 2020 1:52 pm

dukeblue219 wrote:
Mon Apr 20, 2020 1:48 pm
Corsair wrote:
Mon Apr 20, 2020 1:44 pm
S&P is down only -1%, economy is fine.
Weird as hell though.

I always wonder if there's an unanticipated side effect though. Some derivative that is based on oil and turns into an infinite return with negative numbers or whatever. Or essentially a Y2K bug that breaks someone's computers. Hard to predict with a financial market this complex.
The etrade oil price chart crashed for an hour when the price passed through 0.00. Probably a divide by zero error.

Random Poster
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Random Poster » Mon Apr 20, 2020 1:53 pm

fredflinstone wrote:
Mon Apr 20, 2020 7:15 am
I know this is good news for drivers, but there undoubtedly will be some disruptions in the economy. I suspect a lot of upstream oil producers -- companies involved in exploration and production -- will go bankrupt. Diamond Offshore Drilling is one example. This is a Houston-based company that employs 2,500 full-time employees. There are many other firms in this industry. I worry that a lot of regular people -- like commercial divers -- will be laid off. If oil prices remain low for a long time, I'm pretty sure the broader economy in cities like Houston will suffer. People who are laid off from their oil-related jobs aren't going to be building new swimming pools and undertaking fancy landscaping projects.

There may also be unforeseen effects in international affairs (for example, in Saudi Arabia).

What other effects do you anticipate?
Midland and Odessa are going to become ghost towns.

The state budgets of Texas, New Mexico, and North Dakota are going to take a huge beating. New Mexico and North Dakota will take it harder than Texas, but Texas will get hit and some school districts are going to get hit really hard.

Unemployment in the oil sector is going to be tremendous, which, as you note, will have knock-on effects for every other industry in oil towns.

Projects in general will get shelved, which will reduce demand for other workers (designers, fabricators, etc) and other items (steel, for one).

Banks will likely have to write off many loans and some of the smaller banks may become insolvent.

The local real estate in the oil towns will, at best, freeze. The real estate in second-home-towns where those in the oil business go to vacation (Santa Fe, Colorado ski towns, etc) will likely soften quite a bit.

If lower oil prices keep up for several years, you will end up with an entire generational gap in the oilfield workforce, much like what happened in the 1980s. Even today (or, at least, as of last year), you can find many oil and gas engineers, accountants, attorneys, and the like aged 50+ and many below 30, but there aren't many between 30 and 50.

Low oil prices are not a good thing for the economy.

BogleMelon
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Re: Price of oil has collapsed; how will this impact the economy?

Post by BogleMelon » Mon Apr 20, 2020 2:00 pm

What does it mean for crude oil to turn negative? Those who buy crude oil will buy it for free and get additional cash per barrel for it? :shock:
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nps
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Re: Price of oil has collapsed; how will this impact the economy?

Post by nps » Mon Apr 20, 2020 2:05 pm

BogleMelon wrote:
Mon Apr 20, 2020 2:00 pm
What does it mean for crude oil to turn negative? Those who buy crude oil will buy it for free and get additional cash per barrel for it? :shock:
Assuming they have a place to store it

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Re: Price of oil has collapsed; how will this impact the economy?

Post by AlphaLess » Mon Apr 20, 2020 2:09 pm

Random Poster wrote:
Mon Apr 20, 2020 1:53 pm
fredflinstone wrote:
Mon Apr 20, 2020 7:15 am
I know this is good news for drivers, but there undoubtedly will be some disruptions in the economy. I suspect a lot of upstream oil producers -- companies involved in exploration and production -- will go bankrupt. Diamond Offshore Drilling is one example. This is a Houston-based company that employs 2,500 full-time employees. There are many other firms in this industry. I worry that a lot of regular people -- like commercial divers -- will be laid off. If oil prices remain low for a long time, I'm pretty sure the broader economy in cities like Houston will suffer. People who are laid off from their oil-related jobs aren't going to be building new swimming pools and undertaking fancy landscaping projects.

There may also be unforeseen effects in international affairs (for example, in Saudi Arabia).

What other effects do you anticipate?
Midland and Odessa are going to become ghost towns.

The state budgets of Texas, New Mexico, and North Dakota are going to take a huge beating. New Mexico and North Dakota will take it harder than Texas, but Texas will get hit and some school districts are going to get hit really hard.

Unemployment in the oil sector is going to be tremendous, which, as you note, will have knock-on effects for every other industry in oil towns.

Projects in general will get shelved, which will reduce demand for other workers (designers, fabricators, etc) and other items (steel, for one).

Banks will likely have to write off many loans and some of the smaller banks may become insolvent.

The local real estate in the oil towns will, at best, freeze. The real estate in second-home-towns where those in the oil business go to vacation (Santa Fe, Colorado ski towns, etc) will likely soften quite a bit.

If lower oil prices keep up for several years, you will end up with an entire generational gap in the oilfield workforce, much like what happened in the 1980s. Even today (or, at least, as of last year), you can find many oil and gas engineers, accountants, attorneys, and the like aged 50+ and many below 30, but there aren't many between 30 and 50.

Low oil prices are not a good thing for the economy.
Add to that:
- Saudi Arabia,
- Abu Dhabi
- Qatar
- Kuwait
- Russia

And the rest of the producer / exporters.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by GoldenFinch » Mon Apr 20, 2020 2:32 pm

jebmke wrote:
Mon Apr 20, 2020 1:30 pm
Money and oil are free now.
Just when I thought we had reached peak Twilight Zone....

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dmcmahon
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Re: Price of oil has collapsed; how will this impact the economy?

Post by dmcmahon » Mon Apr 20, 2020 2:38 pm

In general, lower oil prices are good for the US economy. There are certainly winners and losers, but it's a net positive because we use so much of it.
Regarding green energy companies, it's a mixed bag because there isn't any good way to store electricity. Even massive batteries can only carry the grid for a few minutes, and then there are issues about the materials needed to construct them. Long topic, but suffice to say that they are utterly reliant on being paired with nat gas generation today. And we rely on cheap fracked gas to keep that on track.
In the long run we are still going to need petroleum. We can't make "stuff" (chemicals, plastics) out of wind and solar farms, plus long haul freight, heavy equipment, and aviation aren't going to yield to batteries any time soon because the energy/weight ratios are still about 50x off. So in the long run the industry will survive, at least the big players.
In the near term I worry that if we allow the domestic industry to go bankrupt, we'll be back to depending on Russia and the middle east for imported oil. Historically that's been a bad geopolitical position for the US to find itself in.

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firebirdparts
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Re: Price of oil has collapsed; how will this impact the economy?

Post by firebirdparts » Mon Apr 20, 2020 2:50 pm

I noticed that Yahoo finance can't display the negative price. they didn't code for it. They did chart it correctly, though.

prices of all petrochemicals will be affected, and they'll be legitimately low for a while. The cheaper the product, the more it's affected by raw material prices. The negative prices are a way for people to try to avoid the effort to shut down. As people shut down, there are supply and demand effects based on who makes what, so there could be some shifting around of products, winners and losers. Just like there always is. Your profits may get squeezed or expanded depending on what your feedstock and products are.
Last edited by firebirdparts on Mon Apr 20, 2020 3:47 pm, edited 1 time in total.
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KSActuary
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Re: Price of oil has collapsed; how will this impact the economy?

Post by KSActuary » Mon Apr 20, 2020 3:27 pm

Energy prices should be materially higher in 2 - 3 years due to lack of exploration and shut in of poor performing wells.

oilrig
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Re: Price of oil has collapsed; how will this impact the economy?

Post by oilrig » Mon Apr 20, 2020 3:47 pm

KSActuary wrote:
Mon Apr 20, 2020 3:27 pm
Energy prices should be materially higher in 2 - 3 years due to lack of exploration and shut in of poor performing wells.
They said this around 2015-2017 as well. Never happened.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by AnalogKid22 » Mon Apr 20, 2020 3:49 pm


Carmen1409
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Carmen1409 » Mon Apr 20, 2020 3:53 pm

H-Town wrote:
Mon Apr 20, 2020 10:36 am
skepticalobserver wrote:
Mon Apr 20, 2020 10:26 am
Houston, we have a problem
Image
As an H-Towner, I normally cringe when someone says this. But, today we really do have a problem!

KSActuary
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Re: Price of oil has collapsed; how will this impact the economy?

Post by KSActuary » Mon Apr 20, 2020 3:56 pm

oilrig wrote:
Mon Apr 20, 2020 3:47 pm
KSActuary wrote:
Mon Apr 20, 2020 3:27 pm
Energy prices should be materially higher in 2 - 3 years due to lack of exploration and shut in of poor performing wells.
They said this around 2015-2017 as well. Never happened.
It may be determined by actual demand at the time versus projected but this is the first time in memory that a lot of oil may get shut in. If today didn't spook you, even though it was just around the expiry of a futures contract, demand is dead and storage is getting fuller. This could happen every month if things don't change and demand will not come back immediately. I have clients with lots of verticals and they are all shut in where possible. They will be cycled every couple weeks to keep the pipe clean. These are strange times and DC hates oil.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by alfaspider » Mon Apr 20, 2020 3:59 pm

oilrig wrote:
Mon Apr 20, 2020 3:47 pm
KSActuary wrote:
Mon Apr 20, 2020 3:27 pm
Energy prices should be materially higher in 2 - 3 years due to lack of exploration and shut in of poor performing wells.
They said this around 2015-2017 as well. Never happened.
It did- sort of. WTI hit around $70bbl in 2018, with brent at $80. The issue is that shale came roaring back once prices got to that level. But I still think there are limits to how much shale can grow to make up for a lack of international investment, and this current crisis is going to wipe out some much bigger names than that last go-around.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by JBTX » Mon Apr 20, 2020 4:03 pm

10 year at 0.6%. 30 year at 1.2%. I'm seriously thinking about eebonds and holding for 20 years.

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TechGuy365
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Re: Price of oil has collapsed; how will this impact the economy?

Post by TechGuy365 » Mon Apr 20, 2020 4:39 pm

For the record, per Yahoo finance oil (Crude Oil May 20) went down to -$38.96 at 3:34 PM today (negative $39). Nobody wants it? Because storing oil costs money? Clearly there is value to a barrel of oil, yet it traded at -$39. What does that mean?

KSActuary
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Re: Price of oil has collapsed; how will this impact the economy?

Post by KSActuary » Mon Apr 20, 2020 4:45 pm

It means that investors who were long oil couldn't accept delivery in two weeks for various reasons (no demand, no storage) so they actually have to pay someone to take it off their hands. Speculators are involved in these markets so it doesn't have to be an oil company.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by RomeoMustDie » Mon Apr 20, 2020 4:46 pm

WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.

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canadianbacon
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Re: Price of oil has collapsed; how will this impact the economy?

Post by canadianbacon » Mon Apr 20, 2020 4:47 pm

I am mystified that Canadian stocks were up today.
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Re: Price of oil has collapsed; how will this impact the economy?

Post by AnalogKid22 » Mon Apr 20, 2020 4:50 pm

RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?

RomeoMustDie
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Re: Price of oil has collapsed; how will this impact the economy?

Post by RomeoMustDie » Mon Apr 20, 2020 4:53 pm

AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
TSLA overbought, buy Ford in case the electric mustang gets popular. :wink:

KSActuary
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Re: Price of oil has collapsed; how will this impact the economy?

Post by KSActuary » Mon Apr 20, 2020 4:55 pm

RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
A material move to EV's will require a significant shift in energy policy as oil may be less in demand but electricity will be in much higher demand which will tax the grid and require significant capex. Not saying its wrong, just that we are not prepared technologically for the shift. I remember a company named American Superconductor once.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by H-Town » Mon Apr 20, 2020 4:56 pm

AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
No. Time to buy C8 Z06, if you can wait a year or so.

RomeoMustDie
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Re: Price of oil has collapsed; how will this impact the economy?

Post by RomeoMustDie » Mon Apr 20, 2020 4:57 pm

KSActuary wrote:
Mon Apr 20, 2020 4:55 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
A material move to EV's will require a significant shift in energy policy as oil may be less in demand but electricity will be in much higher demand which will tax the grid and require significant capex. Not saying its wrong, just that we are not prepared technologically for the shift. I remember a company named American Superconductor once.
You can say that about any consumer trend. This will not be a run on toilet paper. It's a gradual shift over time.

KSActuary
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Re: Price of oil has collapsed; how will this impact the economy?

Post by KSActuary » Mon Apr 20, 2020 5:00 pm

Maybe but the new EVs are more exciting than a Tesla so actual consumer demand may pick up more than you think. National grid and energy policy need a re-work. Too bad we just spent it on a virus.

KSActuary
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Re: Price of oil has collapsed; how will this impact the economy?

Post by KSActuary » Mon Apr 20, 2020 5:00 pm

Maybe but the new EVs are more exciting than a Tesla so actual consumer demand may pick up more than you think. National grid and energy policy need a re-work. Too bad we just spent it on a virus.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by ValuationsMatter » Mon Apr 20, 2020 5:02 pm

dmcmahon wrote:
Mon Apr 20, 2020 2:38 pm
In the near term I worry that if we allow the domestic industry to go bankrupt, we'll be back to depending on Russia and the middle east for imported oil. Historically that's been a bad geopolitical position for the US to find itself in.
We can prop up our oil industry indefinitely, as long as we choose to. Russia's & OPEC economies are largely driven by theirs.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by Leesbro63 » Mon Apr 20, 2020 5:08 pm

AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
I see this opposite. That super cheap oil will slow the transition to electric cars.

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AnalogKid22
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Re: Price of oil has collapsed; how will this impact the economy?

Post by AnalogKid22 » Mon Apr 20, 2020 5:26 pm

Leesbro63 wrote:
Mon Apr 20, 2020 5:08 pm
AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
I see this opposite. That super cheap oil will slow the transition to electric cars.
+1

KSActuary
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Re: Price of oil has collapsed; how will this impact the economy?

Post by KSActuary » Mon Apr 20, 2020 5:29 pm

Overabundance of oil has resulted in collapsing prices for now. Rack rate (wholesale) for convenience stores, etc.in upper midwest is 10 cents per gallon. This will quickly go up once demand is revived. This will not help the economy that much.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by whodidntante » Mon Apr 20, 2020 5:34 pm

The loonie has taken a beating in this oil madness. You can buy the currency now to lock in a reasonably priced voyage to the north. Assuming that Canada doesn't degenerate into a Mad Max wasteland, of course. But I think that oil has to be negative for at least two months before that happens. :twisted:

jpmorganfunds
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Re: Price of oil has collapsed; how will this impact the economy?

Post by jpmorganfunds » Mon Apr 20, 2020 5:35 pm

It's because the economy has tanked that oil has collapsed, not the other way around.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by emoore » Mon Apr 20, 2020 6:12 pm

We have hit peak oil consumption in 2019/early 2020. EVs will start to become more and more of the new cars. It's time to start transitioning to the new future.

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Re: Price of oil has collapsed; how will this impact the economy?

Post by Ged » Mon Apr 20, 2020 6:19 pm

Rainier wrote:
Mon Apr 20, 2020 12:25 pm
DonIce wrote:
Mon Apr 20, 2020 12:24 pm
Dang, touched a low of $2.99.

I kind of want to take physical delivery of 1000 barrels for $3k haha.
Got a swimming pool?

BTW, CME just confirmed that oil futures can go negative.
Got a refinery? Crude oil is not going to be of much use to you.

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Ged
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Ged » Mon Apr 20, 2020 6:31 pm

nps wrote:
Mon Apr 20, 2020 2:05 pm
BogleMelon wrote:
Mon Apr 20, 2020 2:00 pm
What does it mean for crude oil to turn negative? Those who buy crude oil will buy it for free and get additional cash per barrel for it? :shock:
Assuming they have a place to store it
Assuming you don't sell the future first. Or pay someone to take it off your hands.

If you hold the future to expiration you will need to take delivery.

DonIce
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Re: Price of oil has collapsed; how will this impact the economy?

Post by DonIce » Mon Apr 20, 2020 6:35 pm

Leesbro63 wrote:
Mon Apr 20, 2020 5:08 pm
AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
I see this opposite. That super cheap oil will slow the transition to electric cars.
I keep seeing people say this. It has no connection to reality.

Most electric cars are sold in coastal cities. In these areas, the price of gas has almost nothing to do with the price of oil. The price of gas in west coast cities is ~90% land/lease costs for the gas station, labor, fees, taxes, etc, and ~10% the price of the actual oil.

Here in Seattle, gas prices have fallen ~30% from their all time highs, while oil has fallen from over $100/barrel to zero/negative.

The price comparison of gas vs electric in the areas where people buy electric cars is almost unaffected by the price of oil.

Corsair
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Corsair » Mon Apr 20, 2020 6:41 pm

When will Tesla updating their pricing sheets? They still show a ~$4500 potential gas savings. :mrgreen:

I agree with others, Hummers will be back
Last edited by Corsair on Mon Apr 20, 2020 6:42 pm, edited 1 time in total.
All posts are my own opinions and are not financial advice.

Leesbro63
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Leesbro63 » Mon Apr 20, 2020 6:42 pm

DonIce wrote:
Mon Apr 20, 2020 6:35 pm
Leesbro63 wrote:
Mon Apr 20, 2020 5:08 pm
AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
I see this opposite. That super cheap oil will slow the transition to electric cars.
I keep seeing people say this. It has no connection to reality.

Most electric cars are sold in coastal cities. In these areas, the price of gas has almost nothing to do with the price of oil. The price of gas in west coast cities is ~90% land/lease costs for the gas station, labor, fees, taxes, etc, and ~10% the price of the actual oil.

Here in Seattle, gas prices have fallen ~30% from their all time highs, while oil has fallen from over $100/barrel to zero/negative.

The price comparison of gas vs electric in the areas where people buy electric cars is almost unaffected by the price of oil.
I’m not buying it. A new Corolla/Civic is half the price of an equivalent EV. And while the coasts might have niche appeal for EV’s, driving thru Ohio and Indiana and seeing gas drop into the $1 to $1.50 area suggests Chevy Suburban, not expensive mini plug-in car. Americans will return to their old car habits as has been the case in cycle after cycle since 1973.

Dave55
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Dave55 » Mon Apr 20, 2020 6:50 pm

BogleMelon wrote:
Mon Apr 20, 2020 2:00 pm
What does it mean for crude oil to turn negative? Those who buy crude oil will buy it for free and get additional cash per barrel for it? :shock:
Roger Diwan explains How you end up with negative oil prices: https://twitter.com/RogerDiwan/status/1 ... 5291374592

Good explanation.

Dave

DonIce
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Re: Price of oil has collapsed; how will this impact the economy?

Post by DonIce » Mon Apr 20, 2020 7:00 pm

Leesbro63 wrote:
Mon Apr 20, 2020 6:42 pm
I’m not buying it. A new Corolla/Civic is half the price of an equivalent EV. And while the coasts might have niche appeal for EV’s, driving thru Ohio and Indiana and seeing gas drop into the $1 to $1.50 area suggests Chevy Suburban, not mini plug in car.
Not talking about the price of the car. Of course Teslas are way more expensive. And people buying Teslas aren't doing it to save a few bucks; anyone who has done the math knows a cheap fuel efficient gas car will come out way ahead, whether they're paying $2 or $4 per gallon. The total cost of gas in the lifetime of a car at $4/gallon and 35 MPG is $10k-$20k, less than the price difference between a Model 3 and basic fuel efficient gas car like a Corolla, Civic, etc.

Gas here in Seattle is $2.80 and was $3.50 until last week. Gas is also the equivalent of $6-8/gallon in European countries where Teslas are also popular. Norway has a 100% tax on the costs of gas cars and 0% tax on electric cars.

And yeah, my post specifically talked about the places where people actually buy Teslas... the coasts. How many Teslas are bought in Ohio and Indiana?

People buy Teslas because they have plenty of disposable income and think they are cool, like the features, because they think they are environmentally friendly, because they want to show off how environmentally friendly they are to their friends/neighbors, for the partial self-driving tech, because they like the convenience of charging at home and/or work rather than going to gas stations, etc. Not to save money.

EV demand won't notice the change in oil price. It literally doesn't matter.

Hoongajji
Posts: 24
Joined: Sun Feb 23, 2020 7:15 pm

Re: Price of oil has collapsed; how will this impact the economy?

Post by Hoongajji » Mon Apr 20, 2020 7:02 pm

jpmorganfunds wrote:
Mon Apr 20, 2020 5:35 pm
It's because the economy has tanked that oil has collapsed, not the other way around.
You nailed it.

Economics 101: Supply overwhelms demand. Prices plummet.

Milk producers can dump excess milk inventory down the drain...not so with oil.

At the hilariously mentioned current “Twilight Zone” rate - we can all cheaply purchase and operate Boeing 737s to fly to our mailboxes? A railroad track might be safer...either way the neighbors are gonna complain.

Social distancing should “keep it real”.

Oil, airlines, resorts, etc are great opportunities for a long term rebound investment. The two or three fund portfolio will appreciate over time.

Be nimble while staying the course,

Hoongajji

fatcoffeedrinker
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Re: Price of oil has collapsed; how will this impact the economy?

Post by fatcoffeedrinker » Mon Apr 20, 2020 7:04 pm

KSActuary wrote:
Mon Apr 20, 2020 5:00 pm
Maybe but the new EVs are more exciting than a Tesla so actual consumer demand may pick up more than you think. National grid and energy policy need a re-work. Too bad we just spent it on a virus.
Nothing is more exciting then a Tesla. :mrgreen:

1130Super
Posts: 504
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Location: Minnesota

Re: Price of oil has collapsed; how will this impact the economy?

Post by 1130Super » Mon Apr 20, 2020 7:13 pm

RomeoMustDie wrote:
Mon Apr 20, 2020 4:53 pm
AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
TSLA overbought, buy Ford in case the electric mustang gets popular. :wink:
Ford finance is going to be in trouble when people can’t pay their auto loans

Xrayman69
Posts: 476
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Xrayman69 » Mon Apr 20, 2020 7:17 pm

Ged wrote:
Mon Apr 20, 2020 6:31 pm
nps wrote:
Mon Apr 20, 2020 2:05 pm
BogleMelon wrote:
Mon Apr 20, 2020 2:00 pm
What does it mean for crude oil to turn negative? Those who buy crude oil will buy it for free and get additional cash per barrel for it? :shock:
Assuming they have a place to store it
Assuming you don't sell the future first. Or pay someone to take it off your hands.

If you hold the future to expiration you will need to take delivery.
Today was the last day for the future expiration. As result those holding the paper today are obligated to take physical receipt of the product (typically large volume not 1000 barrels) at some specified date. Today seems to be an artificially financially derived musical chairs game of chicken in which those buying futures at $1 a barrel (million barrels) hoped that it wouldn’t go lower (speculation) and unfortunately for the last buyers at negative $37/barrel before the turn around.

Today was a futures contract issue mostly related to storage and transport as opposed to physical drilling.

Demand and utilizAtion today is low compared to “normal”. Thus the continued increase accumulation due to continued daily output based upon previous normal utilization. More made than used leads to increased need for storage and at some point the storage of oil becomes the valuable commodity, and thus those with capacity to store today were paid to store barrels of oil. The law of supply and demand worked to some extent in the fact that the demand for storage was more valuable than the physical product today.

Now what to do with the barrels of oil that will be in storage going forward in an environment for the next 6 months to possibly 2 years in which demand is likely to be diminished.

fatcoffeedrinker
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Re: Price of oil has collapsed; how will this impact the economy?

Post by fatcoffeedrinker » Mon Apr 20, 2020 7:22 pm

DonIce wrote:
Mon Apr 20, 2020 7:00 pm

Not talking about the price of the car. Of course Teslas are way more expensive. And people buying Teslas aren't doing it to save a few bucks; anyone who has done the math knows a cheap fuel efficient gas car will come out way ahead, whether they're paying $2 or $4 per gallon. The total cost of gas in the lifetime of a car at $4/gallon and 35 MPG is $10k-$20k, less than the price difference between a Model 3 and basic fuel efficient gas car like a Corolla, Civic, etc.

I see this argument a lot, that buying say a Civic is overall cheaper than buying a Tesla. But that's like arguing that renting is better than buying because you can rent a studio for a lot less than it costs to buy a 4 bedroom house. You cannot compare the quality, features and performance of a Civic with a Tesla. I went from a Genesis v8 to a Model 3. Similar in quality, features and performance. I ran a 5-year analysis and due to savings of gas and maintenance costs, I actually had a positive IRR by buying the new Model 3 as compared to keeping the Genesis for 5 more years. Now I drive a lot (20k+ per year) and live on the west coast where fuel prices are high, so that goes into that calculus and won't be true for everyone. But I will actually save money over 5 years by buying the Tesla.

Leesbro63
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Joined: Mon Nov 08, 2010 4:36 pm

Re: Price of oil has collapsed; how will this impact the economy?

Post by Leesbro63 » Mon Apr 20, 2020 7:23 pm

1130Super wrote:
Mon Apr 20, 2020 7:13 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:53 pm
AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm
WWJBDo wrote:
Mon Apr 20, 2020 10:49 am
I think you have it backwards. The current extreme low price of oil is a manifestation of the current and near-term expected demand for oil. So the low price is being influenced by expectations of the economy, not the other way around.
I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
TSLA overbought, buy Ford in case the electric mustang gets popular. :wink:
Ford finance is going to be in trouble when people can’t pay their auto loans
This seems to happen every 10 years or so. The automaker lending arms extend very generous loans and leases to move the metal. The economy slows or stops and the lenders have to write down huge portions of their portfolios. GMAC went bust. So did whatever Chrysler’s financing arm was called.

Turbo29
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Turbo29 » Mon Apr 20, 2020 7:27 pm

Leesbro63 wrote:
Mon Apr 20, 2020 7:23 pm
GMAC went bust.
Yes it did but then it rose from the dead as the much loved (around here) Ally Bank.
It is by the goodness of God that in our country we have those three unspeakably precious things: freedom of speech, freedom of conscience, and the prudence never to practice either of them. --M. Twain

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dmcmahon
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Re: Price of oil has collapsed; how will this impact the economy?

Post by dmcmahon » Mon Apr 20, 2020 8:43 pm

Leesbro63 wrote:
Mon Apr 20, 2020 6:42 pm
DonIce wrote:
Mon Apr 20, 2020 6:35 pm
Leesbro63 wrote:
Mon Apr 20, 2020 5:08 pm
AnalogKid22 wrote:
Mon Apr 20, 2020 4:50 pm
RomeoMustDie wrote:
Mon Apr 20, 2020 4:46 pm


I agree with this post. Demand for oil will decrease over time. Electric vehicles have crested and are now far superiour to gas vehicles.
Time to buy TSLA?
I see this opposite. That super cheap oil will slow the transition to electric cars.
I keep seeing people say this. It has no connection to reality.

Most electric cars are sold in coastal cities. In these areas, the price of gas has almost nothing to do with the price of oil. The price of gas in west coast cities is ~90% land/lease costs for the gas station, labor, fees, taxes, etc, and ~10% the price of the actual oil.

Here in Seattle, gas prices have fallen ~30% from their all time highs, while oil has fallen from over $100/barrel to zero/negative.

The price comparison of gas vs electric in the areas where people buy electric cars is almost unaffected by the price of oil.
I’m not buying it. A new Corolla/Civic is half the price of an equivalent EV. And while the coasts might have niche appeal for EV’s, driving thru Ohio and Indiana and seeing gas drop into the $1 to $1.50 area suggests Chevy Suburban, not expensive mini plug-in car. Americans will return to their old car habits as has been the case in cycle after cycle since 1973.
The other problem is the amount of lithium (and other metals) needed to make that many pure EVs. I’m not sure there’s enough reserves in the entire world to do that.

Monsterflockster
Posts: 298
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Re: Price of oil has collapsed; how will this impact the economy?

Post by Monsterflockster » Mon Apr 20, 2020 8:45 pm

Well gas is just under $3 gallon here where I’m at in CA. I’m guessing they make some huge profits.

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