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Posts Tagged ‘oil price’

High Costs of Cheap Oil

Posted by hkarner - 11. Mai 2015

Date: 10-05-2015
Source: YaleGlobal

Consumers are delighted by low oil prices and economists anticipate increased global growth. But the low prices are locking many industries into infrastructure that relies on fossil fuels. “High-carbon infrastructure – power plants, pipelines, factories, inefficient buildings, roads and transport vehicles – built now will last and pollute for decades to come,” writes Deepak Gopinath, a writer and analyst based in New Delhi. The low prices suppress demand for new technologies based on alternative fuels. Developing nations account for most global population growth in the energy sector. Delays in developing alternative energies lock countries like China and India into competitive patterns that encourage dependence on fossil fuels. In addition to ending subsidies for fossil fuels, Gopinath encourages taxes on consumption to reduce use and develop funding for alternative energies. – YaleGlobal

Low energy prices lock the world into fossil-fuel consumption and infrastructure – new taxes could encourage alternative

NEW DELHI: The consensus around the collapse in oil prices is that the trend a net positive for the world economy and global growth. Sure, exporters like Venezuela and Russia suffer, but that’s outweighed by the increased spending by governments and consumers with more cash to burn – no small thing when the global economy is suffering from a crisis in demand. Den Rest des Beitrags lesen »

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The economy: Oil be damned

Posted by hkarner - 2. Mai 2015

Date: 01-05-2015
Source: The Economist

The economic boost from lower oil prices is smaller than you might expect

WTI Oil priceIN 2014 oil prices crashed. Americans jumped for joy. Small wonder: each year the average American consumes more energy than a Briton and a Japanese person put together. The oil-price drop pleased economists, too. Many were sure that it would give the economy a nice boost. However, the oil bust was followed not by a boom but a slowdown (see chart). Figures released on April 29th showed that growth in the first quarter of this year was just 0.2%. All this leads wonks to wonder: are lower oil prices such a good thing?

Gross domestic product (GDP), the total annual output of an economy, is made up of four things: government spending, net exports, consumer spending and investment. The oil price does not much affect government spending, but has a big impact on the other three.

Net exports (ie, exports minus imports) have certainly been boosted by the lower oil price. America exports very little oil, but imports a lot: about 9m barrels a day. With the oil price roughly $60 below its peak, Americans now send $500m less abroad every day—or about $200 billion a year.

Add to this the lower price of domestically produced oil, and Americans have received a windfall, akin to a juicy tax cut. That cash could be spent or invested at home. But consumers are reluctant to splash out, perhaps because wage growth has been so miserable. The monthly growth rate of retail sales—not including those at petrol stations—has stumbled in the past few months. Den Rest des Beitrags lesen »

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The rouble: The worst is yet to come

Posted by hkarner - 1. Mai 2015

Date: 30-04-2015
Source: The Economist

Don’t mistake a stronger rouble for a Russian economic recovery

Rouble dollrRUSSIA’S currency, the rouble, had a terrible 2014. As oil prices collapsed and Western sanctions bit, export revenues slumped. Nervous investors pulled $150 billion from the country. As a result, the rouble lost about half its value against the dollar (see chart). But over the past few months, it has climbed out of its trough. Russian bonds and stocks have done well, too. The Central Bank of Russia (CBR) has been cutting interest rates—an unthinkable prospect just a few months ago. On April 30th it lowered its main rate from 14% to 12.5%. All this, some say, is proof that investors are too pessimistic about the Russian economy. They are wrong.

Oil prices have risen slightly since the start of the year. That is helpful for an economy where the stuff provides half of all exports. The cheaper rouble has buoyed exports, too. A new deal to end the Russian-backed insurgency in Ukraine, signed in February, has also made investors less jittery.

Nonetheless, the rouble’s strength is a puzzle, since in many ways the Russian economy looks worse than it did in December. Inflation, at 16.9%, is 5.6 percentage points higher, a jump that would normally spur depreciation. Real wages are tumbling fast. The foreign-exchange reserves of the CBR have fallen by about $30 billion so far this year, and by $130 billion since this time last year. The IMF thinks that the economy will shrink by 4% in 2015—and it is a relative optimist. Den Rest des Beitrags lesen »

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Crude-oil prices: the new normal

Posted by hkarner - 18. April 2015

Date: 17-04-2015
Source: The Economist

oil pricesAn oil-price collapse is now as unlikely as a spike. The new normal lies between $50 and $70, with America replacing Saudi Arabia as the swing producer. For the sheikhs, political reasons determined output; for America’s shalemen, however, only market signals matter. Though the rig count has fallen by half, the International Energy Agency reckons that American oil production will decline only slightly by the fourth quarter of this year, from 12.6m barrels a day to 12.5m. That has created a “fracklog”—up to 800,000 b/d which will come into production if prices rally. Meanwhile OPEC—despite frantic entreaties from Russia—keeps putting market share first: prices are down by 45% but Saudi Arabia is pumping at a near-record rate of 10.1m b/d. As always, a big upset in the Middle East could change the outlook. But the lesson from America is that technology and finance are trumping geology and geopolitics.

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Oil Prices Tumble as Supplies Hit New Record

Posted by hkarner - 9. April 2015

Date: 09-04-2015

Source: The Wall Street Journal

U.S. inventory data show largest one-week build in crude supplies since 2001

The most volatile oil market in three years was hit with another sharp swing on Wednesday, as a huge buildup in crude supplies sent U.S. prices to their biggest loss in two months.

Crude oil for May delivery slid 6.6%, a day after rising 3.5% to set a high for the year.

Prices have moved more than 2% up or down on 42 trading days this year, more than the total number of such moves in any of the past three years. Den Rest des Beitrags lesen »

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The Deflation Bogeyman

Posted by hkarner - 2. März 2015

Date: 01-03-2015
Source: Project Syndicate

MARTIN FELDSTEINFeldstein

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

CAMBRIDGE – The world’s major central banks are currently obsessed with the goal of raising their national inflation rates to their common target of about 2% per year. This is true for the United States, where the annual inflation rate was -0.1% over the past 12 months; for the United Kingdom, where the most recent data show 0.3% price growth; and for the eurozone, where consumer prices fell 0.6%. But is this a real problem? Den Rest des Beitrags lesen »

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Big Oil Faces Time of Reckoning

Posted by hkarner - 28. Januar 2015

Date: 28-01-2015
Source: The Wall Street Journal

Shell, BP and Others to Report Earnings, Reveal What Role Lower Crude Prices Played On Results

LONDON—In the coming days, the world’s biggest publicly traded oil companies will report fourth-quarter earnings, offering the best look yet at the bite lower crude prices have taken out of Big Oil.

For BP PLC, lower oil prices are just one headwind. A federal trial now under way in New Orleans could levy penalties of as much as $13.7 billion for the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. Meanwhile, BP owns nearly 20% of Russian producer OAO Rosneft . Kremlin-controlled Rosneft faces Western sanctions on exporting certain oil-development technology to Russia. Rosneft is also struggling with the falling ruble and weaker oil prices.

BP, which has sold more than $40 billion in assets to pay cleanup and legal costs from the Gulf spill, is also trying to rein in costs that are higher than those of some competitors. Den Rest des Beitrags lesen »

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2014 in review: why the oil price fell

Posted by hkarner - 31. Dezember 2014

Date: 30-12-2014
Source: The Economist

Supply, demand and expectations are the factors that influence the oil price.

In 2014 demand sagged—the result of weak economic activity and greater efficiency—while supply surged, chiefly thanks to the shale boom in America.

The US now produces more than 8m barrels a day (b/d). That put OPEC, the old oil-producers’ cartel, in a pickle. Saudi Arabia and its Gulf allies are its richest members and have the lowest extraction costs.

They refused to cut production from OPEC’s 30m b/d limit to bolster the price, fearing (rightly) that the result would be lost market share and a windfall for enemies such as Iran and Russia. Den Rest des Beitrags lesen »

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How Cheap Oil Complicates Investing

Posted by hkarner - 15. Dezember 2014

Date: 14-12-2014
Source: The Wall Street Journal

While Retail Stocks Benefit, Others Take It on the Chin

For most Americans, this year’s sudden collapse of oil prices appears to be unqualified good news. Oil prices have dropped 45% since June, amid surging output from U.S. shale fields, strong Saudi Arabian production and weak demand from Asia and elsewhere. They dropped 12.2% just last week, closing Friday at $57.81 a barrel. Analysts at Credit Suisse and other banks say it will take years before oil prices return to $100-a-barrel levels.

For drivers and those who rely on oil to heat their homes, falling crude prices act as an unexpected bonus or tax refund.

But for investors? It gets a bit more complicated. Sure, energy stocks are taking it on the chin, as are companies that seem far removed from the oil patch—among them debt-laden North Dakota oil drillers, energy-service companies and junk bonds. Den Rest des Beitrags lesen »

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How Crude Oil’s Global Collapse Unfolded

Posted by hkarner - 13. Dezember 2014

Date: 12-12-2014
Source: The Wall Street Journal

Tracing the Plunge In Oil Prices Back to Texas

The sudden plunge in global crude oil prices from over $100 a barrel to under $65 has been portrayed as a showdown between Saudi Arabia and the U.S., but the reality is more complex.

Since the 1970s, Nigeria has sent a steady stream of high-quality crude oil to North American refineries. As recently as 2010, tankers delivered a million barrels a day.

Then came the U.S. energy boom. By July of this year, oil imports from Nigeria had fallen to zero.

Displaced by surging U.S. oil production, millions of barrels of Nigerian crude now head to India, Indonesia and China. But Middle Eastern nations are trying to entice the same buyers. This has set up a battle for market share that could reshape the Organization of the Petroleum Exporting Countries and fundamentally change the global market for oil. Den Rest des Beitrags lesen »

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