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.

[Dayze]

I remember in 2008 when I got laid off; we we lived about 35-40 miles from work; our fuel bill each month was around $450-500/mo.....and that was when gas was around $2.50 i think.

I'd hate to think what our fuel bill would be now, or in the future had we stayed there.

[bevischief]

Originally Posted by Stewie

Oil production increases mean nothing when refinery capacity isn't allowed grow.

Bingo. A lot of the new oil is sold to other countries as well.

[RaiderH8r]

Crude oil remains a global commodity. If you want to see what happens to an energy price when America truly commits itself to producing I give you the natural gas prices here.

http://www.eia.gov/dnav/ng/hist/n9190us3a.htm

You see the trend from when unconventional production takes off to now and the price drops roughly 50% to today's price. Natural gas is a regional market, meaning we don't currently have export facilities to scale. Hell, before 2008 companies were investing in LNG import terminals to bring crude to the US market. Lo and behold we find ourselves in an energy revolution and the prices come down. As America continues (or damn well ****ing should) produce unconventional crude oil to put on the global market prices will come down and/or America will reap the benefit of high prices and the infusion of the corresponding foreign capital. That is if we don't **** it up. Face it, idiot ****ing liberals will **** this up. Dumbasses.

[Amnorix]

The price per gallon of gas at the pump is subject to a massive number of variables, and US production of crude isn't directly corollary to pump prices.

[Iowanian]

Insert ObamaSong here.

[HemiEd]

Originally Posted by Stewie

Oil production increases mean nothing when refinery capacity isn't allowed grow.

This and the fact that it is a world market, where we are no longer the pandered to or preferred consumer.

[Amnorix]

Originally Posted by petegz28

It's almost like clockwork

You understand that the President doesn't have much/any control over short term oil prices? That worldwide, integrated, highly sophisticated commodities markets determine the prices for crude and that car gasoline, which is only one of MANY byproducts of crude oil, is subject to many additional factors affecting price, including refining capacity?

Or, of course, it's a conspiracy...

[petegz28]

Originally Posted by Amnorix

You understand that the President doesn't have much/any control over short term oil prices? That worldwide, integrated, highly sophisticated commodities markets determine the prices for crude and that car gasoline, which is only one of MANY byproducts of crude oil, is subject to many additional factors affecting price, including refining capacity?

Or, of course, it's a conspiracy...

I never said Obama had anything to do with the weak $, did I?

[RNR]

Originally Posted by Amnorix

You understand that the President doesn't have much/any control over short term oil prices? That worldwide, integrated, highly sophisticated commodities markets determine the prices for crude and that car gasoline, which is only one of MANY byproducts of crude oil, is subject to many additional factors affecting price, including refining capacity?

Or, of course, it's a conspiracy...

Gee the left seemed to think he did until their boy got elected~

[theelusiveeightrop]

Ride a bicycle.

[KC native]

Originally Posted by RaiderH8r

Crude oil remains a global commodity. If you want to see what happens to an energy price when America truly commits itself to producing I give you the natural gas prices here.

http://www.eia.gov/dnav/ng/hist/n9190us3a.htm

You see the trend from when unconventional production takes off to now and the price drops roughly 50% to today's price. Natural gas is a regional market, meaning we don't currently have export facilities to scale. Hell, before 2008 companies were investing in LNG import terminals to bring crude to the US market. Lo and behold we find ourselves in an energy revolution and the prices come down. As America continues (or damn well ****ing should) produce unconventional crude oil to put on the global market prices will come down and/or America will reap the benefit of high prices and the infusion of the corresponding foreign capital. That is if we don't **** it up. Face it, idiot ****ing liberals will **** this up. Dumbasses.

And you're a dipshit for insinuating that we have oil reserves comparable to our NG reserves.

[KC native]

But there are several reasons why oil won't drop.

1. Quantitative Easing: All that money has to go somewhere. Correlations between asset classes are pushing towards 1.

2. The growth of the futures market: There has been a tremendous growth in prop trading, managed futures accounts, ETFs that track commodities, mutual funds that focus on commodities and real estate in a "real return" strategy. Oil futures need to have their trading curbed immediately (not eliminated, position limits, limitations on the type of players that can buy the contracts, etc). It's ridiculous that such a vital commodity can be pushed around by people with no interest in the underlying commodity.

3. Global commodity. We are not the only country that uses a lot of oil.

4. Refining capacity: The oil companies (at least domestically) have been strategic about their capacity for refining. They have abused regulations in an attempt to blame the lack of capacity on EPA regs so they can eliminate current regs. When they were buying up all the small refiners they could, there should have been FTC inquiries. The only refiners that I'm aware of currently are all captive of the big oil companies.

[RaiderH8r]

Originally Posted by KC native

And you're a dipshit for insinuating that we have oil reserves comparable to our NG reserves.

No, I am illustrating that the market does work because the OP implies it doesn't and that there is something more nefarious going on.

And our crude reserve base is ever expanding. The Bakken has been producing for almost 15 years and we still haven't clearly established the width or breadth of the formation, let alone the benches.

Check out the Monterrey shale in CA which is on par with the Bakken as well as Eagle Ford, Utica, Mississippi Lime and we quickly ramp up a tremendous reserve base in these unconventional plays. The basis for calculating reserve estimates is outdated and very conservative. And this is just onshore. America's energy potential to develop these plays is simply stunning. We commit to developing these plays and we will lead the world in crude production within a decade.

Oh, and get bent.

[RaiderH8r]

Originally Posted by KC native

But there are several reasons why oil won't drop.

1. Quantitative Easing: All that money has to go somewhere. Correlations between asset classes are pushing towards 1.

2. The growth of the futures market: There has been a tremendous growth in prop trading, managed futures accounts, ETFs that track commodities, mutual funds that focus on commodities and real estate in a "real return" strategy. Oil futures need to have their trading curbed immediately (not eliminated, position limits, limitations on the type of players that can buy the contracts, etc). It's ridiculous that such a vital commodity can be pushed around by people with no interest in the underlying commodity.

3. Global commodity. We are not the only country that uses a lot of oil.

4. Refining capacity: The oil companies (at least domestically) have been strategic about their capacity for refining. They have abused regulations in an attempt to blame the lack of capacity on EPA regs so they can eliminate current regs. When they were buying up all the small refiners they could, there should have been FTC inquiries. The only refiners that I'm aware of currently are all captive of the big oil companies.

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

[KC native]

Originally Posted by RaiderH8r

No, I am illustrating that the market does work because the OP implies it doesn't and that there is something more nefarious going on.

And our crude reserve base is ever expanding. The Bakken has been producing for almost 15 years and we still haven't clearly established the width or breadth of the formation, let alone the benches.

Check out the Monterrey shale in CA which is on par with the Bakken as well as Eagle Ford, Utica, Mississippi Lime and we quickly ramp up a tremendous reserve base in these unconventional plays. The basis for calculating reserve estimates is outdated and very conservative. And this is just onshore. America's energy potential to develop these plays is simply stunning. We commit to developing these plays and we will lead the world in crude production within a decade.

Oh, and get bent.

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.