LyrArc Article Gist
Lower oil prices in June 2012 with slowing growth worldwide and a planned buildup of inventories by Saudi Arabia and western nations. U.S. crude oil prices dropped to $83.23 a barrel on June 1, 2012.

LyrArc Article Gist
Oil prices drop below $38 by mid-December 2015, as the Saudis continue to push prices down further by continuing production increases. No change is planned for 2016 and analysts expect low oil prices into 2016. At $38 a barrel it becomes uneconomical for most shale oil producers to operate in the U.S. About 50,000 jobs are lost in Texas and 250,000 jobs worldwide. This is a boost for large oil importers such as India, Japan, and Europe. China also stands to benefit from low oil prices. Nigeria, Venezuela, Iran and Russia have the most to lose from an extended period of low oil prices. Politics in the Middle East also may play a part in decisions as the Saudis oppose intervention in Syria and Iraq by Russia and Iran. Rising shale oil production in the U.S. could also be one of the additional targets of Saudi policy. One consequence is that OPEC is divided with the Saudis going their own way.

LyrArc Article Gist
Southwest hedged against oil price increases and has hedges through 2009 at $51 a crude oil barrel. This has proved to be a smart move as it has provided Southwest with a hedge worth over $2 billion with most of the hedges value being realized over the next 2 years. Airline fuel costs are substantial and evey dollar increase in the price of crude translates intoa $80 million increase in the fuel bill for American Airlines. The hedges for the first 9 months of 2007 cost Southwest about $42 million, so its surprising that other airlines, United, Delta, American, Jet Blue and Northwest did not hedge against rising prices. Maybe they thought that at prices of $52 at the beginning of this year why hedge if prices go down to $40. Or they were too distracted by looking for merger options, or pricing options or other things. What will happen now if oil prices keep climbing? Can airlines raise fares. Yes but revenue per mile is'nt going up significantly as the mix of seats changes with price increases, more of the lower priced seats are sold than the higher priced ones and revenue per seat has not improved. For example even in an environment where 6 industry fare increases ocurred in the 3rd quarter Southwest average ticket price for that period was $105.37 only 62 cents higher than the previous year. Southwest now hopes to gain in this cycle as the other airlines may scrap some routes or ground some planes and Southwest can expand in those areas. ...

LyrArc Article Gist
Ukraine's effort to neutralize the effect of oil price hikes by hitting export refineries in Russia- every $10 rise in prices brings in $1.6 billion more in tax revenues for Russia. One of these naval drones hit a target 900 kilometres away on the Russian oil refinery at Ust-Loga in the Baltic Sea, which exports 700,000 barrels a day of oil. At price of $120 compared to $70 this adds about $54 billion in tax revenues for Russia without drone attacks on Russian export refineries. Another approach taken by Ukraine is to propose cessation of attacks on Russian oil export infrastructure if Russia agrees not to target Ukraine energy infrastructure. Much of Ukraine experienced a cold winter with Russian attacks on its energy infrastructure and its apartment buildings.

LyrArc Article Gist
Russian seaborne crude shipments are up 18% as of June 11 over the prior year, Iran's shipments up even more by 45%. The result is increased supplies even though the Saudis tried to increase oil prices by limiting production. China's economy is slowing and faces headwinds that will not go away anytime soon of debt close to 290% of GDP higher than US or Europe. And lower imports by the US and EU as they correct the mistakes of overconcentration in China. The European Union faces high inflation and a mild recession. This is cutting demand as supplies increase. It will help the Biden administration as it seeks to give all Americans a fair chance to improve their standard of living, by reducing the cost of living and investing in the economic potential of the country in a way no other adminstration has done in the last 40 years.

LyrArc Article Gist
Energy Aspects, London based consultancy, estimates non-OPEC production declines of 700,000 barrels a day, up from previous forecasts of 200,000-300,000 barrels a day. Demand is expected to be higher than supply by June 2016, and drawing down inventory from that time. Agreement to freeze production is uncertain at a Doha meeting of OPEC countries, with Iran planning to increase production from 3.1 million barrels a day currently to 4 million barrels a day. Saudis increased production to 10 million barrels a day in 2015, and Iran is determined to increase its production to the higher level. The price of U.S. oil rebounded to $42.17 by April 2016.

LyrArc Article Gist
Oil importing countries in East Africa will benefit from lower oil import bills. Measured as a percentage of GDP the oil imports will go down from 6.3% to 3.7% of GDP for Tanzania, from 6.2% to 3.7% for Mozambique, from 6.0% to 3.6% for Kenya and from 4.8% to 2.8% for South Africa. For the oil exporting countries for revenue decline as a percentage of GDP, Ghana goes from 2.7% to 1.6%, Nigeria from 15.7% to 9.3%, and Angola from 56% to 33%. About 80% of Nigeria's budget comes from oil revenues which will result in spending cuts. About 14% of GDP in Nigeria is dependent on the oil sector, because of the growth in retail and telecommunications. Nigeria's finance minister estimates the decline in GDP growth by 1% to 5.3% for 2015. Benefits from lower oil prices are offset by decline in the price of iron ore and other commodity exports for South Africa, and from the decline in the South African currency, the Rand. Drop in the value of iron ore exports affects other parts of West Africa such as Liberia, Sierra Leone and Guinea. Projects for large investments by large oil companies in Uganda and Angola may be delayed as oil prices decline. ...

LyrArc Article Gist
Saudi price cut in November 2014 to reverse market share decline in the U.S. The Saudi share of total U.S. oil consumption declined to 4.6% in August 2014 from 7% in August 2013, according to EIA. This brought NYMEX price to below $80 in early Nov. 2014.

LyrArc Article Gist
China lifts pump prices for gasoline by 10%. Supply shortages have been reported The rising value of Asian currencies such as the rupee help to cushion the increase in crude oil prices in India and other countries. In China and India the Government keeps the price of gasoline and other fuel at affordable prices and oil companies cannot pass on the increase in oil prices. China's oil consumption is increasing rapidly at about 9% a year and lower oil prices does not encourage conservation, at the same time oil prices to consumers especially in the rural and farming areas can be painful if food prices are also going up. How to balance these two considerations and also the international aspect where increases in China's demand for oil are itself a cause of demand side pressures leading to ever higher oil prices, is a challenge for China's policymakers.

LyrArc Article Gist
Policies and actions taken today to reduce future consumption and to conserve oil will create expectations for lower prices in the future in relation to today's price. It will lower price pressures as these expectations get embedded, and as this makes it more profitable to produce more oil rather than leave it in the ground. In addition see the supply of Iraqi oil, and efforts to reverse the oil supply situation in Iran which may happen with a different administration in the US. The reduction in fuel subsidies in Iran would lower oil consumpion in Iran. Efforts to reverse years of decline in Mexican oil fields, and increase supplies in the US by drilling in new areas, would create new supplies. While supply would see changes, demand would see a new fuel efficient car fleet on the streets in several years, and better use of mass transit and rail transit, and oil conservation across the board, this would then create anew and favorable dynamic. But look for oil prices to stabilize at lower levels in relation to current levels of about 140 and higher as it rises in 2008 and 2009 till new expectations get embedded, and not a sharp decline in prices, as pressures from the developing world's demand will continue for years to come. Think a billion people being absorbed over time into urban type economies....

LyrArc Article Gist
How China is struggling with high oil prices, the situation of Sinopec which buys most of its oil and sells gasoline at government mandated prices. This follows a 10% increase in gasoline prices and hopes of easing shortages.

LyrArc Article Gist
The US sees no contradiction to India looking for bargain priced oil from Russia to meet the growing needs of its economy and is actually furthering the goals of the G-7 by lowering the price Russia gets for its oil. It helps the economy of 1.2 billion people that like the rest of the world has struggled to fight the pandemic and has incurred the kind of heath costs that even China is now struggling to pay for. President Biden clearly understands and supports this. Democracies an only succeed if they fulfill the aspirations of their people. On this point Biden made clear in his State of the Union that he will generate what it takes from large corporations that paid no tax, to invest in America. Rather than fuel the profits of large oil companies India has increasingly chosen to use Russian discounted oil to invest in India. The Biden and Modi policies are identical generate savings and invest big time in trillions of dollars over the next few years to put democracies ahead in meeting rising aspirations that have been unfulfilled for far too long, which is where the real battles are being fought and will be won, and rightly so. US Assistant Secretary of State for Energy Resources, Geoffrey Pyatt,  said during a visit to New Delhi on Feb. 16-17- "Our experts now assess that India right now is enjoying a discount of about USD 15 a barrel in the price that it is paying for its imports of Russian crude. So by acting in its own interest, by driving a hard bargain to get the lowest price possible, India is furthering the policy of our G7 coalition, our G7 plus partners in seeking to reduce Russian revenues."  Looking at the bigger picture the problem was created by Germany under Merkel who built Germany's over dependency on Russian oil to power a cheap fuel economy it thought was in Germany's interest. This is now being reversed by the hard work of Mr. Habeck of the Green party in the coalition government of Scholz in securing alternative supplies in record time for the EU to avoid a recession. In this sense the perception created early of India which has suffered itself from invasions in 1962 and incursions in the Himalayas more recently, it is not a problem India can solve by becoming energy short at a time when it has invested so much in fighting the pandemic. A similar problem was created by Republican and Democratic administrations of the past that concentrated the supply chain in one country. India lost much investment in the last 8 years as a result of the policies of Merkel's Germany and past Republican Democratic administrations in concentrating the supply chain in one country. ...

LyrArc Article Gist
Oil prices are forecast to remain above $100 a barrel in 2012 because of higher social spending in Saudi Arabia, Iran and other countries after the democracy protests, and the threat of retaliation by Iran in the Straits of Hormuz. Iranian threats of retaliation for increased sanctions has embedded a $10-$20 premium in oil prices say some experts.

LyrArc Article Gist
Higher oil prices benefit some states in America in heart of oil country- New Mexico, Texas, Oklahoma, North Dakota, Colorado, Utah, Wyoming, California, Alaska. Of these states Texas, New Mexico, Wyoming, North Dakota, Alaska are likely to see the most benefit because of large oil production.

LyrArc Article Gist
The thinking is that a slight drop in the year to year increase in GDP from 11.4% to 10%, according to both IMF and Goldman Sachs group forecasts, isn't going to do much in reducing China's demand growth for oil. For one thing China's industry is very energy intensive and consumes a lot of energy to produce a give amount of output. Its estimated that it takes about 1% of increase in energy demand to produce 1% rise in GDP. It ranks as the largest consumer of coal and the second largest user of oil. It takes in about 8 million barrels a day of the 84 million barrels a day, that is 9.52%. Even as China's export sector slows down because of lower demand from the industrialized countries, the Chinese government can use its large cash reserves to build roads and bridges and ports and upgrade infrastructure to maintain employment levels. Major refiners margins have swung wildly from $30 in May 2007 from $10 in the last few years. Before the recent boom in refinery margins the margins average $5, and it looks like the boom in refinery building in Saudi Arabia, India and China and the US that resulted from shortage of refinery capacity, will bring margins back to their longterm average. A surge in oil prices that has outpaced the rise in prices of gasoline and refined products is shrinking margins and lowering profits and stock price of refiners like Tesoro and Valero. and upgrade its infrastructure ...

LyrArc Article Gist
Said, Kent and Faucon describe the meetings and maneouvring between oil producers that led to the decision to not cut production at the November 2014 OPEC meetings in Vienna. This led to a drop in Brent crude down to below $70 by Dec. 2014, with Russia, Iran and Venezuela losing, countries such as India, and motorists benefitting from lower oil prices.

LyrArc Article Gist
Sharp drop in oil prices in Dec. 2015.

LyrArc Article Gist
Ian Talley provides this excellent account of how this drop in oil prices is likely to add to economic growth in major world economies, removing any ambiguity about the positive effect on the global economy. West Texas Intermediate crude dropped to about $65 from $105 between June and December 2014. The IMF estimates growth in 2015 will increase from 3.1% to 3.5% largely because of the lowering in energy costs. JP Morgan Chase economists see an addition of 0.7% points in global growth in the first half of 2015. ECB president Draghi sees the lower oil prices as an unambiguous positive. Estimates from Rhodium Group show major oil importing countries seeing import bills cut by $500 billion if prices remain low for 6-8 months, with $90 billion going into the U.S. economy. IMF estimate is that only 20% of the drop in oil prices is from lower demand, about 80% from higher fuel efficiency, increased supply using new technologies, decisions by OPEC to lower oil price, increases in supply. Based on estimates by the Rhodium Group, IEA and the IMF, the extra money flowing into the economies of the U.S., Asia and Western Europe from reduced oil import bills, as measured in percentage of GDP is: the U.S. 0.5%, Germany 0.8%, Japan 1.2%, China 0.8%, India 1.8%, South Korea 2.4%. Italy and France and other oil importing countries benefit. The impact comes at a time when Japan, China, India and eurozone economies badly needed a boost after significant slowdown in growth in 2014. It could not have come at a better time and because it is technologically driven as in the case of highly fuel efficient automobiles and new oil exploration technologies, a self sustaining process. The corresponding impact for oil exporters is: Russia -4.7%, Nigeria -5.4%, Venezuela -10.2%....

LyrArc Article Gist
Analysts say the large growth in orders for Boeing and Airbus is likely to slow with lower oil prices. Access to cheap financing and high oil prices at $100-$120 a barrel led to a surge in orders. With oil below $50 in Jan. 2015 this is likely to change. A study by Ascend, an aviation consultancy, shows about 50% of the orders in the last 5 years were for replacement aircraft compared to the longer term trend of 43%. Airlines are likely to hold on to older aircraft for longer with lower oil prices. Boeing's head of market analysis, says the airlines will still benefit from fuel efficient aircraft such as the Boeing 737 max and the Airbus neo with 20% less fuel cost, even at current fuel prices. Airlines will still need to plan for growth. And Airbus executives say the fuel price levels could go up in the future as inventories fall. In the Asian market overcapacity is a problem with falling airline prices and reduced profitability of Asian carriers.

LyrArc Article Gist
How much of the rise in price of oil is from speculators? About 20%. How much money is chasing oil? About $85 billion or thereabouts. What is causing the volatility, price shock atmosphere? Losses in production in Venezuela after a strike, Nigerian production in a backward region (issues of redistribution of wealth and periodic violence), and Iraq (Sunni insurgency). And now the Iran standoff with the USA over nuclear proliferation. According to Cambridge Energy Research Associates, an energy consulting firm owned by IHS, Iraq is 900,000 barrels a day below its prewar output; Nigeria has shut 530,000 barrels a day; Venezuela is still 400,000 barrels below its prestrike production; and the Gulf of Mexico remains down by 330,000 barrels a day. In all, this amounts to more than two million barrels of disrupted oil, Cambridge Energy estimates. The impasse with Iran on nuclear proliferation is the latest factor in oil prices. One analyst says the hedge funds have come into this commodities market in a big way and are willing to take risks. Energy funds make up 5 percent of the global hedge fund business, with about $60 billion in assets, according to Peter C. Fusaro, principal at the Energy Hedge Fund Center, an online research community. The gains on the oil market have attracted a fresh class of investors: pension funds and mutual funds seeking to diversify their holdings. Their investments have been mostly channeled through a handful of commodity indexes, which have ballooned to $85 billion in a few years, according to Goldman Sachs. Goldman's index holds more than $55 billion, three times the amount in 2002....

LyrArc Article Gist
One of the favorable factors for Iraq in recent years was the surge in oil production, adding 1 million barrels a day to reach 3.3 million barrels a day. It surged to an average of 3.7 million barrels a day in December 2014 after a deal with the Kurdish region in northern Iraq for an additional 550,000 barrels a day in exchange for Kurds getting a 17% share of federal revenues. This helped Iraq overcome other problems. The drop in oil prices has led to a 40% drop in revenues and the invasion by Islamic State in a loss of some production.The federal budget of $101 billion planned revenues is based on an oil price of $56 and exports of 3.3 million barrels a day, resulting in a $20 billion deficit. It assumes $10 billion in new tax revenues which may be hard to achieve with a lack of strong central government. Experts on Iraq's oil industry say large investments are needed to offset declining oil production from older oil fields in southern Iraq. Oil exports were 2.5 million barrels a day in 2014, and experts say even this will be hard to achieve for 2015. Investments could come from western oil companies, but Iraq and the Kurdistan region are behind in payments to oil companies. Iraq is considering issuing bonds for $10-$15 billion....

LyrArc Article Gist
A milder than usual winter can reduce consumption by a large enough amount to affect oil prices significantly. The IEA estimates that last years mild winter cut oil consumption by as much as 900,000 barrels a day globally. Something like this could erase expected deficits andpush oil prices lower as they currently reflect lower inventories as winter approaches. UBS expects lower prices whereas Goldman Sachs believes there is lower risk of slowdown in the global economy, that is India, China and Europe will continue to grow even as US growth moderates, and Goldman's estimates shows even higher prices approaching $90 a barrel.

LyrArc Article Gist
Saudis unilaterally cut prices of crude oil without consultation with other members of OPEC at the beginning of Oct. 2014. Saudi oil minister Ali al-Naimi says there is not much point in talking to other members of OPEC as everyone does as they please. The old cooperation between Gulf states Qatar, U.A.E., Kuwait and Saudi Arabia is breaking down with each country backing different rebel factions against the Assad regime in Syria-Iraq. Ali al-Naimi who normally comes in ahead of the OPEC meetings in Vienna, which meet twice a year, arrived this time at the last minute. He said meetings should be conducted only once a year and consulting can be done remotely. The old style when he guided discussion at OPEC meetings is gone. OPEC now produces about a third of the world's oil, has large spare capacity of 3.8 million barrels a day in 2014 or 4% of global oil supply in a crisis, according to IEA. Yet it faces pressures from the increasing shale production in North America and the decline in demand from Asia. Brent crude is at about $92 in October 2014. OPEC production in August 2014 was split as follows- Saudis 9.6, Iraq 3.0, Iran 3.0, U.A.E. 2.9. Kuwait 2.9, Venezuela 2.3, Qatar 0.7, Libya 0.5, Algeria 1.2, Nigeria 1.8, Angola 1.7 (millions of barrels a day, source: OPEC)...