Why haven't oil prices dropped like a rock?

[Direckshun]

So I admit I know very little when it comes to this subject. But weren't we told "drill baby drill" going back as far as the 2008 GOP convention, and that an oil surge from something like the Keystone Pipeline would drop gas prices down to something ridiculous like $2/gallon?

I never believed that rosy scenerio, but we've gotten the most promising news in energy independence this past year when it has now been projected for America to overtake Saudi Arabia in oil production.

So here we are, projected to be the global leader in oil production. Something that not even the Keystone Pipeline could have achieved, and goes beyond even its rosy projections in terms of oil generated for American usage.

Oil prices have largely held, have they not? My understanding (limited as it is) is that oil is priced based on the projection of how much we'll be able to acquire in the future:

There are many factors that commodities traders look at when developing the bids that create oil prices:

• Current supply in terms of output, especially the production quota set by OPEC. If traders believe supply will decline, they bid the price up. If they believe supply will increase, they willing to pay as much for oil, and the price falls.
• Oil reserves, including what is available in U.S. refineries and what is stored at the Strategic Petroleum Reserves. These reserves can be accessed very easily, and can add to the oil supply if prices get too high. Saudi Arabia also has a large reserve capacity. If it promises to tap those reserves, traders allow oil prices to fall.
• Oil demand, particularly from the U.S. These estimates are provided monthly by the Energy Information Agency . Demand usually rises during the summer vacation driving season. To predict summer-time demand, forecasts for travel from AAA are used to determine potential gasoline use. During the winter, weather forecasts are used to determine potential home heating oil use.

Our current supply is increasing, our reserves are or will be increasing.

So what's the story on this?

Thanks in advance.

[KC native]

Originally Posted by RaiderH8r

Marathon and Conoco just spun off their downstream assets and Valero is still a thriving independent refiner.

Valero?

Valero Energy Corporation is a Fortune 500 international manufacturer and a marketer of transportation fuels, other petrochemical products, and power that is based in San Antonio, Texas, United States.[1] The company owns and operates 16 refineries throughout the United States, Canada, United Kingdom, and the Caribbean with a combined throughput capacity of approximately 3 million barrels (480,000 m3) per day, 10 ethanol plants with a combined production capacity of 1.2 billion US gallons (4,500,000 m3) per year, and a 50 megawatt wind farm. Valero is also one of the United States' largest retail operators with approximately 6,800 retail and branded wholesale outlets in the United States, Canada, United Kingdom, and the Caribbean under the Valero, Diamond Shamrock, Shamrock, Ultramar, Beacon, and Texaco brands.[2]

[RaiderH8r]

Originally Posted by KC native

Just because it can be recovered, doesn't make it cheap. But carry on, acting like extracting oil at a loss will lower oil prices is brilliant.

I think you have fully missed my point. Crude oil is a global market with a multitude of variables acting on it. I used the natural gas market to demonstrate that a regional commodity, removing a number of variables that come into play in a global commodity market, demonstrates that increased product has, in fact, yielded a lower price and that the domestic energy commodity market does work.

Most companies are doing project valuations based on roughly $70 crude so they still have a ways to go before hitting bottom. Sure, there may be those going at $75 but not many going in for the projects based on $90 oil. They got flexed out.

Generally the cure for low prices is low prices and the cure for high prices is high prices. The system, when left to operate, usually works.

[RaiderH8r]

Originally Posted by KC native

Valero?

Yes. They are an independent. The term applies to the IRS classification meaning, simply, they are not a fully, vertically integrated company like the Exxons of the world. They are buying crude from third parties to refine and distribute.

You can stop being a dickhead any time now Taco.

[Taco John]

>Why haven't oil prices dropped like a rock?

For one reason, people will pay the prices.

[Deberg_1990]

Wheres Donger been?

[Hammock Parties]

Your Fuhrer has no prize, Direckshun.

[loochy]

Originally Posted by Taco John

>Why haven't oil prices dropped like a rock?

For one reason, people will pay the prices.

THis is pretty much it. Demand hasn't slowed, so why should the price?

[CoMoChief]

Originally Posted by Direckshun

Not really.



The dollar is also projected to strengthen against the Euro over the next four years.

dude stf

[CoMoChief]

Originally Posted by petegz28

I have said this time and time again ...

weak $ = high oil and commodity prices

biiiiingo

[Saul Good]

Originally Posted by Taco John

>Why haven't oil prices dropped like a rock?

For one reason, people will pay the prices.

That's not really accurate. People would always have paid the prices, but there are other market forces that kept the price down.

[BigMeatballDave]

Obamacare

[BigMeatballDave]

I suppose it is still Bush's fault.

[bsp4444]

Originally Posted by loochy

THis is pretty much it. Demand hasn't slowed, so why should the price?

Then why the drop in price last quarter last year?

[Radar Chief]

Originally Posted by Deberg_1990

Wheres Donger been?

I know, right? This is obvious trolling for him.

[petegz28]

Originally Posted by bsp4444

Then why the drop in price last quarter last year?

Seasonal factors. Coming off of the "summer blends" which cost a lot more to make is one reason gas prices tend to drop over the fall and winter months and start to rise again in late winter, early spring.