Oil prices could plunge to $60 if OPEC does not cut output

[amoy]

Meanwhile, This Is Who Is Quietly Buying All The Cheap Oil | Zero Hedge

The number of supertankers sailing toward China's ports surged to a nine-month high as over 80 very large crude carriers (VLCCs) - the industry's biggest ships - sail toward the Asian country's ports. At an average of 2 million barrels each, the 160 million barrels will help refill China's 727 million barrel SPR which it started in 2012.

There are 89 tankers sailing for Chinese ports, 80 of which are VLCCs - the highest since January 3rd.

 

[Singh]

@Singh completely agree with you.I have been writing about this for quite some time now. Biggest hoax on the people.

Petroleum import is also one of the biggest revenue source for our Govt(s). If oil prices plummet, then the revenue collection will go down. They will have to increase the taxes not only to stabilize prices but also to make up for the revenue shortfall.

However, the Govt will cloak in a manner that we will be grateful for reduction in prices via subsidies.

 

[Singh]

Meanwhile, This Is Who Is Quietly Buying All The Cheap Oil | Zero Hedge

Mind boggling numbers.

 

[asianobserve]

Here Comes $60 Oil as OPEC Tests U.S. Shale: Chart of the Day - Bloomberg

 

[LETHALFORCE]

Saudi Arabia is playing a dangerous game which can backfire on its own economy. If
Oil gets cheap the demand will increase these prices are not sustainable. The plan to
Hurt Iran and Russia May work in the short term but it is not realistic long term. Oil
Will be above 80 with any bad news or drillers and alternate energy will be in trouble.

 

[sgarg]

The State budget of Russia can go down if revenues are down. The fall of ruble has already pruned the State budget.

What about other countries in the list? Does low price of oil promote stability in middle east?

Is it that focus on Russia is creating unsolvable problems in other areas??

 

[jamesvaikom]

Cost of extracting oil is less than $5 per barrel in most Middle East countries. As they earn more money they are able to maintain high budget expenditure without imposing tax on citizens. If oil price goes down then they will reduce expenditure. So there is no point in claiming that they need $80 or $100 as long as oil price is many times higher than cost of extracting oil.

 

[jamesvaikom]

Sir,

There was never ever any real susbidy for Petrol and Diesel.

As an example if I tax you 100% and then give you a 10% subsidy.

=====

You are right that "There was never ever any real susbidy for Petrol and Diesel". But loss due to trade deficit is very high compared to tax earned by Govt. from oil. Govt. is getting tax in rupees while our refineries pay money in foreign currencies. Its difficult to earn those foreign currencies. So only trade surplus countries can afford low tax on imported goods. If Govt. reduce tax on oil then oil import will increase. This will result in rupee depreciation. This will result in high oil price again. To solve this problem we should reduce oil imports by spending more money for power generation and railways. If trade surplus countries face financial problems then they can print money. But if trade deficit countries do that then they will face huge inflation.

 

[Singh]

You are right that "There was never ever any real susbidy for Petrol and Diesel". But loss due to trade deficit is very high compared to tax earned by Govt. from oil. Govt. is getting tax in rupees while our refineries pay money in foreign currencies. Its difficult to earn those foreign currencies. So only trade surplus countries can afford low tax on imported goods. If Govt. reduce tax on oil then oil import will increase. This will result in rupee depreciation. This will result in high oil price again. To solve this problem we should reduce oil imports by spending more money for power generation and railways. If trade surplus countries face financial problems then they can print money. But if trade deficit countries do that then they will face huge inflation.

1. Yes a rising oil import bill for us will cause a rise in fiscal deficit.

2. Nobody is arguing for not taxing but GoI raises taxes and then gives "subsidies". This is a bloody hoax and misleading claim.

3. However, your solution although simple has not been implemented because Indian politics love doling out free money. And then raising taxes, and give "subsidies"

 

[sob]

Petroleum import is also one of the biggest revenue source for our Govt(s). If oil prices plummet, then the revenue collection will go down. They will have to increase the taxes not only to stabilize prices but also to make up for the revenue shortfall.

However, the Govt will cloak in a manner that we will be grateful for reduction in prices via subsidies.

Central Govt. duties on Crude and finished products are ad-valorem. they are fixed values and not percentages. So any increase or decrease in prices does not impact them. For State Govts it is exactly the opposite.

But on the other side i agree with you.

There are so many by products from crude oil like bitumen, polyester etc that the oil companies make a lot of money. Otherwise if there was so much under recovery how come the Oil comapanies churn out profits and dole out large dividends to the GOI.

 

[sob]

just to share a very interesting phenomenon with members here.

India exported US $ 57 Billion of petroleum products in 2011-12 and this figure has continued to grow and this accounted for nearly 19% of our exports. The Big players in this are Reliance and Essar. They have one of the most modern refineries in the world and their products are exported to North America and Europe.

this is the only field where India is ahead of China, with Indian exports almost double of Chinese.

This is very good news for the country because we are talking about value addition

 

[sob]

Did Putin say so? Any links??

That is my trade secret.

 

[jamesvaikom]

1. Yes a rising oil import bill for us will cause a rise in fiscal deficit.

2. Nobody is arguing for not taxing but GoI raises taxes and then gives "subsidies". This is a bloody hoax and misleading claim.

3. However, your solution although simple has not been implemented because Indian politics love doling out free money. And then raising taxes, and give "subsidies"

High tax and subsidies helped PSU oil marketing companies get monopoly. But the problem is oil exploration companies like ONGC also faced subsidy burden.

I think the new Govt. will encourage investment in power plants and railways. If they do that then most money we spend will circulate in our own economy.

 

[jamesvaikom]

Central Govt. duties on Crude and finished products are ad-valorem. they are fixed values and not percentages. So any increase or decrease in prices does not impact them. For State Govts it is exactly the opposite.

But on the other side i agree with you.

There are so many by products from crude oil like bitumen, polyester etc that the oil companies make a lot of money. Otherwise if there was so much under recovery how come the Oil comapanies churn out profits and dole out large dividends to the GOI.

In past oil marketing companies used almost all cash they earned to buy oil. Now as they are making profit they are investing huge money in oil exploration. This is a good decision to reduce oil shocks in future. Brazil has huge oil reserves. But they are not able to increase oil production because their Govt. is forcing petrobras to sell oil at subsidized rates. If Govt. get more dividend then they can spend more money for renewable energy and railways. Most money we spend for oil is going out of our economy. But if we reduce oil consumption by spending more money for power generation and railways then most money we spend will circulate in our own economy.

 

[jamesvaikom]

just to share a very interesting phenomenon with members here.

India exported US $ 57 Billion of petroleum products in 2011-12 and this figure has continued to grow and this accounted for nearly 19% of our exports. The Big players in this are Reliance and Essar. They have one of the most modern refineries in the world and their products are exported to North America and Europe.

this is the only field where India is ahead of China, with Indian exports almost double of Chinese.

This is very good news for the country because we are talking about value addition

That's because our companies are getting more tax soaps for exporting petroleum products. But that's good as we need more forex reserves for oil imports.

 

[amoy]

just to share a very interesting phenomenon with members here.

India exported US $ 57 Billion of petroleum products in 2011-12 and this figure has continued to grow and this accounted for nearly 19% of our exports. The Big players in this are Reliance and Essar. They have one of the most modern refineries in the world and their products are exported to North America and Europe.

this is the only field where India is ahead of China, with Indian exports almost double of Chinese.

This is very good news for the country because we are talking about value addition

Can't take 2 factors out 1. domestic demand that keeps by-product exports down, imports high 2. environmental constraints - Shenzhen becomes third city to join protests over Maoming chemical plant | South China Morning Post

 

[LETHALFORCE]

Cost of extracting I have heard is about $30? Transport costs,storage and labor costs are
Separate

 

[sob]

Can't take 2 factors out 1. domestic demand that keeps by-product exports down, imports high 2. environmental constraints - Shenzhen becomes third city to join protests over Maoming chemical plant | South China Morning Post

Was not trying to put down China. the point is that even China is building more refining capacity. These are value added exports.
In India ironically it was the Govt. plants that were causing environmental problems. Mathura plant was causing damage to Taj Mahal and needed a court order to clean their mess.

 

[nmb]

The oil-war on Russia

"Russia's national currency, the ruble, has hit a historic low following a decision by the Organization of the Petroleum Exporting Countries (OPEC) to maintain its current oil output level of 30 million barrels per day."

"OPEC 'decided to maintain the production level of 30 million barrels per day,' which it has kept for three years, during its latest meeting, the oil exporter group said in a communiqué after the 166th ministerial meeting of the 12-nation organization. The announcement sent global oil prices dropping to fresh four-year lows. Crude prices have fallen by 35 percent since June."

"OPEC was under pressure from some of its members, notably Venezuela and Ecuador, to cut output to reduce supplies and push prices back up. However, the call was rejected by some Persian Gulf members."

PressTV

"After the official visit of the US President Barack Obama to Riyadh, there were rumors that the two countries were planning to 'drown' global market in oil, in order to reduce prices up to 12 dollars per barrel and hit Russia economically. The plan was mentioned even by George Soros, during a speech in Berlin, while Philip Verleger, former consultant under Ford and Carter administrations, estimated that in case that the United States alone would add in the market 500,000 barrels from their strategic deposits, the economic cost for Moscow would reach 40 billion dollars, or, 2% of the Russian economy. The economy of Iran would had receive a proportional hit. The target of such an operation, at least according to the related scenario, would be to strike the two key pylons supporting the Syrian regime, that is Moscow and Tehran, and open the road for Assad's overthrow. Despite the fact that Iran, under the leadership of Rouhani who is friendly to the West, didn't support Syria as someone should expect, and Russia didn't rise tension for the same matter, the two countries remained the basic barriers for Saudi Arabia."

fe

 

[LETHALFORCE]

Re: The oil-war on Russia

Russia is going to go thru a multi year economic decline. The west will
Definitely punish Russia without mercy.