Look like cheap gas is only temporary
02-04-2015 | 10:27 AM
#1
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From: Upstate NY
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Look like cheap gas is only temporary
Oil could shoot back to $200
Knew that was going to happen. My guess is this time next year, we'll see $3-4+ per gallon gas again.
According to recent comments by the Secretary-General when he was in London, the oil market doesn't need to look for oil prices to bottom as the market has already bottomed. Instead, he offered quite bullish comments by saying, "Now the prices are around $45-$55, and I think maybe they [have] reached the bottom and we [will] see some rebound very soon."
Normally that type of remark would be just another layer of noise, but this is coming from OPEC's Secretary-General so it comes with a lot of weight behind it.
That said, he's not saying that OPEC will come in and rescue the oil market by reversing its previous decision to hold steady on production. Instead, he sees the signs that the oil market is self-correcting as oil companies have made deep cuts to spending, which will eventually lead to lower production growth.
Further, the rig count in the U.S. is plunging, which is usually a key to a bottom in oil prices. However, in the midst of cutting back as the industry works through the current oversupply the Secretary-General is now warning that the industry is putting future oil supplies at risk by under investing today.
Underinvestment leads to a shortage: The Secretary-General said that, "if you don't invest in oil and gas, you will see more than $200" when it comes to future oil prices. While he didn't give a time frame, he did note the correlation between investment and future production.
CNN wants to know: What was your best investment ever?
This is because oil production naturally declines and oil companies need to invest in new production to not only replace this decline in production from legacy oil fields but to add new production to meet growing demand. However, oil companies are reluctant to invest in new production as their cash flows decline.
Over time this could become a problem as oil fields around the world naturally decline by an average of about 5% per year. As we see in this chart from a Chevron Corporation (CVX) investor presentation, in order to overcome this decline oil companies need to develop about 200 billion barrels of oil supplies over the next decade and a half just to meet demand.
Normally that type of remark would be just another layer of noise, but this is coming from OPEC's Secretary-General so it comes with a lot of weight behind it.
That said, he's not saying that OPEC will come in and rescue the oil market by reversing its previous decision to hold steady on production. Instead, he sees the signs that the oil market is self-correcting as oil companies have made deep cuts to spending, which will eventually lead to lower production growth.
Further, the rig count in the U.S. is plunging, which is usually a key to a bottom in oil prices. However, in the midst of cutting back as the industry works through the current oversupply the Secretary-General is now warning that the industry is putting future oil supplies at risk by under investing today.
Underinvestment leads to a shortage: The Secretary-General said that, "if you don't invest in oil and gas, you will see more than $200" when it comes to future oil prices. While he didn't give a time frame, he did note the correlation between investment and future production.
CNN wants to know: What was your best investment ever?
This is because oil production naturally declines and oil companies need to invest in new production to not only replace this decline in production from legacy oil fields but to add new production to meet growing demand. However, oil companies are reluctant to invest in new production as their cash flows decline.
Over time this could become a problem as oil fields around the world naturally decline by an average of about 5% per year. As we see in this chart from a Chevron Corporation (CVX) investor presentation, in order to overcome this decline oil companies need to develop about 200 billion barrels of oil supplies over the next decade and a half just to meet demand.
Knew that was going to happen. My guess is this time next year, we'll see $3-4+ per gallon gas again.
02-04-2015 | 01:39 PM
#2
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From: Denver Co
Vehicle: 1999 Hyundai Tiburon
Yep, it's already coming back up to 2 bucks a gallon here in Denver. With a rewards card you can still get it under 2. I'm sure that will be short lived as well.
Yes. It was nice while it lasted!
Yes. It was nice while it lasted!
02-05-2015 | 12:08 AM
#4
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From: Vegas, Baby, Vegas!!!
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Actually, it's because 4,000 refinery workers just went on strike. Despite the fact that there's a massive stockpile of refined products and most of the refineries can run just fine on skeleton crews due to increased automation. Any excuse to raise prices... it's just a bonus that they can point the finger at the "evil free-market crushing unions".