Comments on: International Implications of the Drop in Oil Prices (Updated)

By: Dave Schuler

Dave Schuler — Thu, 04 Dec 2008 22:38:17 +0000

Yeah, my web host is moving physically. I thought they'd be back up hours ago. I've got a support call in (probably along with thousands of others).

By: fester

fester — Thu, 04 Dec 2008 22:20:57 +0000

Dave --- thanks for the nod --- the lack of a big liquidity pool for the Mexican government in the form of much lower oil prices and minimal international cheap credit could be extraordinarily dangerous.

Also --- are you having issues with the Glittering Eye host as I have been getting an error message from LunarPages the few times I have tried to go there today.

By: John Burgess

John Burgess — Thu, 04 Dec 2008 17:38:13 +0000

Actually, Abdullah and the Saudis argued that oil prices were too high. The fears were several: That too high a price would lead to global economic problems; That too high a price would lead to replacements of oil; That too high a price, fueled by speculation, would be a bubble that would eventually burst, damaging oil producers who built budgets around the inflated price. BTW, Saudi Oil Minister Naimi clarified Abdullah's '$75/bbl' remark: Saudis Suggest $75/bbl Price for Oil. His point was that $75 was a reasonable price to support marginal production.

By: odograph

odograph — Thu, 04 Dec 2008 17:12:45 +0000

I'm a big enviro and fast cars do look a little more appealing, even to me. My two previous cars were a Honda S-2000 roadster and a WRX turbo wagon ... before I started leading the good life ... and getting my speed outlet on the Santa Cruz Superlight.

Pluses to the mountain bike are 1) no highway patrol, and 2) less likely to cause collateral damage with bad judgment.

I walked away from owning half a dozen fast cars never crashing one and never hurting anyone ... figure it was record I wanted to end with.

By: Dave Schuler

Dave Schuler — Thu, 04 Dec 2008 16:33:51 +0000

Absolutely, odograph. That's a serious point that I'd thought of mentioning in the body of the post. $35/barrel oil pushed down by lack of demand presents less motivation for urgent action on carbon production while making the economic argument for it that much harder to make.

By: Drew

Drew — Thu, 04 Dec 2008 16:32:58 +0000

The Middle Eastern sovereign wealth funds have been huge capital providers to the US, assisting to finance the twin deficits and avoiding large US interest rate increases. Will the drop in oil prices be large enough to restrict the ME SWF's US investment? That requires a quantitative anlysis of capital flows beyond my access to the required data. But I would be watchful.

Also, what do these lower prices mean for technologies such as oil shale and oil sands extraction? If I recall correctly $65/bbl +/- is considered the go, no-go for these technologies. Will Canada's current oil shale boom go bust?

Lastly, this should take pressure off of the dollar related to fears the ME would stop pricing oil in dollars. Perhaps this is one reason for its recent increase.

By: odograph

odograph — Thu, 04 Dec 2008 16:28:26 +0000

My Prius is not as cool as it was a year ago ... but it's nice not being able to fit a $20 in the tank.

(If I really have to get defensive I'll say my carpool stickers still work. Overall the best car-as-investment I've ever had. Last year I could have sold it with 30K miles for the purchse price. This year ... maybe a bit less.)

By: tom p

tom p — Thu, 04 Dec 2008 16:19:27 +0000

*A fracturing of OPEC? (fracturing, not a break up) Not sure how this will play out as they all cut each others throats trying to keep their revenues up.
*No oil revenue sharing plan in Iraq? The Kurds will make an even stronger play for the northern oil fields as Maliki's hand becomes weaker.
*A drop in popularity for Hugo Chavez? He certainly won't be able to fund all of his ambitious socailistic plans, and I suppose it could even mean the end of his drive to become "President for Life".

By: Bithead

Bithead — Thu, 04 Dec 2008 15:56:00 +0000

Just last week King Abdullah of Saudi Arabia was complaining that “the fair price for oil is $75 a barrel”. Oddly, I don’t remember him seeing things that way when the world price was $146 a barrel.

I wonder if something isn't being lost in the translation, here. I gather that his concern is that current prices are getting uncomfortably close to his production cost.

Iran, contrariwise, will be less able to pursue expensive development projects than it otherwise might have been.

Mmpphhff. Buying centrefuges, for example.

My guess is that the price drops will postpone CAFE like mandates. That will play into the future of he big trhee, I think, and certainly into any talk of a bailout.

Global wamring scare mongers, too, will find themselves on the outs to a larger degree than they are already. (I know, bad pun)

Since so much of the western economy is built on energy and it's uses, it seems to me also that lower energy costs will serve to soften the blow of any economic crisis.