"The Saudis Won't Let Oil Free-Fall"

This article discusses the recent OPEC decision to not cut oil production, despite the sustained decline in crude prices (Brent is below $67 today; this article was written when it was at $71).


TLDR version - author believes:

  1. Some OPEC countries are already below quota. For instance, Iran faces trade sanctions, and Iraq is undergoing instability, which limits their production capacity.

  2. Other countries simply do not want to further reduce oil revenues, as they are already under fiscal distress.

  3. Saudi Arabia, the biggest oil producing country in OPEC, has a strong economic position. So, they can afford to cut spending elsewhere and retain their market share in oil.

  4. Due to the appearance of new oil sources, particularly in the US, Saudi Arabia has limited pricing power anyway; a reduction in output would have a limited effect in increasing oil prices.

  5. However, the author concludes that Saudi Arabia is likely to take action at some point to support oil prices, as they want to protect their image as a dominant producer domestically and internationally.

Anyway, I thought this article was worth reading, even if it is short and probably simplifies many things.

I bought regular for $2.35/gallon (credit price) on Saturday.

Ahh the non-Cali price. I was pretty excited that we got down to $3.00 though, that’s possibly the lowest it’s been since I live here and certainly better than the ~$5.00 it was at for a while.

I saw 2.29 (Cash) on Saturday - gave me a boner

good article, how do we best capitalise in your opinion?

I am currently reviewing a US share company that has been hit extremely hard as a possible buy too, more to come with that

I’m no expert, but I’ve been looking at a few opportunities as a result of this collapse. It seems like there are some very nice long term plays to be had. One that seems attractive, although I haven’t done a ton of digging yet, is FMSA. They supply materials(sand and other industrial products) to fracking operations, but they also serve other oil and gas exploration interests, as well as some mining and maanufacturing. They’re a mining company at the end of the day, and they have a ton of land under contract, a lot more coming on board, and they’ve built out a transport infrastructure that seems to give them an advantage in getting product directly to consumers. They went public in the last few months and are off 50% from the IPO price, yet their Q3 financials looked really promising. It seems like they’ve taken a beating because of the assumption that their customers have taken a beating.

I’m fully prepared for someone smart to tell me that this company is a complete fraud, and then I’ll point to my holdings that are almost exclusively index funds and remind myself that this is why i stay out of the deep end.

You guys pay a different price if you pay with a credit card? This is new to me…

^Lots of companies around here offer a discount if you pay with cash.

And I read an article in the local paper that said there is a gas station in San Antonio that is offering gas for $1.999 per gallon right now. (The Midland paper is very sensitive to gas prices, for obvious reasons.)

I went to a Chinese restaurant a couple of weeks ago, and they offered a 15% discount if you pay in cash. I thought that was really sketchy.

Im digging into SM Energy as one potential and XOP as another. usually i would try and hit a home run and buy some OTM calls but in this case i may just speculate lt and outright buy.

The important thing here is the USA has an export ban (for the most part, exceptions apply). So to me, it seems that our influence on global prices only goes as far as we eliminate our demand and increasing the supply elsewhere. But once we hit that ceiling, seems it wouldn’t be as important because it just means our stockpiles grow but they aren’t actually for sale. But I slept through economics, so am I mistaken?

^It’s only an export on crude oil. You can export refined stuff.

But most of the US refineries are set up to refine heavy crude, not the light sweet crude that is produced in most of the US. So we have to import crude to refine it, and the West Texas Intermediate is experiencing a glut of supply.

but but but saudis enjoy their aooodis


Some places charge $0.08 - $0.11 more per gallon if you pay with CC. I avoid such places if at all possible.

It was news until recently when many gas stations around here started changing their pricing. They have to pay 3-4% to CC which at $3/gal comes out to anywhere between 9-12c/gal. They incentivize the buyers by discounting cash prices by 10c/gal. Plus I am sure there is also the off the book nature of cash transaction that the gas station owners can take advantage off for tax purposes.

Yeah, I saw Costco had for $2.29 this weekend. Great timing since I typically drive home over Christmas, this will probably save me $40-50 compared with last year on the return trip.

^Wouldn’t it be cheaper/faster/easier to fly?

According to my friends of Asian Pursuasion, Chinese restaurants in Northern California have menus printed in English and Chinese with different prices. Beat that :slight_smile:

Cheaper? No way. Buying return airfare to Florida at Christmas aint’ cheap. Faster? Yes. Easier? Not really. When I go home, my mom only has 1 car. So if I fly, I’m basically trapped at the house, makes it tough to see my friends, etc. Plus, with driving I can decide when I go there, when I come back, and am not beholden to ridiculous change fees.

^I thought your folks were in Canada. But Houston to Florida is a different story.

Whilst in the Marines (in San Antonio), I had a friend who hailed from Jacksonville. It took him 16 hours to drive it. He would leave at 6:00 a.m. and get to his parent’s house at 11:00 p.m. That drive would still suck, but still might be better than flying, for all the reasons you mentioned.