Russian Woes

[biosurfer1]

Seems that Russia could handle US/UN sanctions, or cheap oil prices...but not both.

[red-beard]

The collapse of the price of oil is due to a combination of reduced demand and over supply. The reduced demand part means the world economy is slowing down. France may fall into deep recession. Add in Russia. Europe is in trouble. And trouble like this has lead to war, many many times...

[targa911S]

I think that is why gas is so cheap here..drive the price of oil down and bust their economy. Payback for a bunch of wrong doing by them..

[red-beard]

If anything, it is the Middle East producers trying to kill the oil shale and oils sands development. We "started it" by producing a lot of shale oil. We have more shale oil than they have oil. And I bet there is more oil around the world than people think. It depends on how expensive the oil is to produce. I've been hearing about the shale oil since the 1970s.

[targa911S]

That's true. I'm sitting on the Marseilles shale sweet spot. Waiting for them to start drilling. lots of changes being made in this counties infrastructure to support the coming commerce.

[GH85Carrera]

Originally Posted by targa911S

That's true. I'm sitting on the Marseilles shale sweet spot. Waiting for them to start drilling. lots of changes being made in this counties infrastructure to support the coming commerce.

That is likely going to be put on hold. When the price comes back up they will go after shale oil again. We will keep buying the cheap Saudi oil until it is gone.

[Evans, Marv]

I agree the Saudi action right now is to keep oil shale production down. I don't think it's going to work out as a long term strategy, and you'd think they would know that. For a long time I've had a wish/suspicion/hope/etc. that we are buying up oil from around the world and saving our reserves so we would have maybe a plentiful supply when reserves start nose diving in the future. However I know our politicians and government are incapable of such long term strategic planning. I think in the far future, oil will be more valuable as a source of chemicals and products yet to be developed than for burning as fuel (though it's far from an expert opinion). When it's mostly gone, so will the economies of Russia and other oil producers around the world and yes there will be major disruptions.

[jyl]

Originally Posted by Evans, Marv

I agree the Saudi action right now is to keep oil shale production down. I don't think it's going to work out as a long term strategy, and you'd think they would know that. For a long time I've had a wish/suspicion/hope/etc. that we are buying up oil from around the world and saving our reserves so we would have maybe a plentiful supply when reserves start nose diving in the future. However I know our politicians and government are incapable of such long term strategic planning. I think in the far future, oil will be more valuable as a source of chemicals and products yet to be developed than for burning as fuel (though it's far from an expert opinion). When it's mostly gone, so will the economies of Russia and other oil producers around the world and yes there will be major disruptions.

There is so much shale oil there in the US (and elsewhere), that future is a long time away, many decades. There is also very little oil storage capacity compared to consumption, so the US govt couldn't store enough reserves to make a real difference. Anyway, if oil were only used for chemicals, plastics, etc, the consumption would then be so low, the supply would last many centuries.

I think there is a huge amount of "unconventional" oil yet to be extracted, it is just a question of cost, technology, and environmental damage. Tar sands - expensive and lays waste to big swathes of Canada. Shale oil - expensive and (debatable) contamination from fracking. Ultra deep ocean - expensive and needs lots of technology. At $50-60/bbl, much unconventional oil is not profitable to produce. At $100+/bbl, lots of it is. So in the medium term, seems to me oil should tend to stay in the $60-100/bbl range. Problem is, that is a very wide range . . .

[targa911S]

Originally Posted by GH85Carrera

That is likely going to be put on hold. When the price comes back up they will go after shale oil again. We will keep buying the cheap Saudi oil until it is gone.

Agreed. The price Shell and others are paying for leases went from $3250.00 per acre to $500.00 per in a heartbeat. All the leasing has pretty much come to a stand still. HOWEVER they are working on getting pipelines in place, building access roads and a cracking plant over on the Ohio. In washington county, south of me, you can't get a hotel room because of all the oil workers in that area. Homes are leasing for crazy money. We get field workers coming into the shop a lot and money is no object to them. The oil companies know it's just a matter of time and are using the lull to prepare for the big flow. I have mixed emotions about it really, but I took their money just the same..

[William930t]

Russians are now snapping up Porsches as good long term investments!

Russians Snap Up Porsches as Falling Ruble Erodes Savings - Bloomberg

[targa911S]

these guys?

[red-beard]

Russia going down will damage Europe



http://www.theblaze.com/stories/2014/12/16/chart-shows-what-could-happen-if-russias-economy-goes-down-and-its-not-good/

[jyl]

Definitely. China is slowing too, and Europe exports a lot to China - tools and industrial equipment, luxury goods, cars, etc.

Plus there is the concern that if Russian companies default on debt, which European and US banks are exposed.

A Russian collapse will be uncomfortable for lots of countries, companies, etc outside of Russia. Even aside from what Russia (Putin) might do with her back to the wall.

[Iciclehead]

Originally Posted by jyl

There is so much shale oil there in the US (and elsewhere), that future is a long time away, many decades. There is also very little oil storage capacity compared to consumption, so the US govt couldn't store enough reserves to make a real difference. Anyway, if oil were only used for chemicals, plastics, etc, the consumption would then be so low, the supply would last many centuries.

I think there is a huge amount of "unconventional" oil yet to be extracted, it is just a question of cost, technology, and environmental damage. Tar sands - expensive and lays waste to big swathes of Canada. Shale oil - expensive and (debatable) contamination from fracking. Ultra deep ocean - expensive and needs lots of technology. At $50-60/bbl, much unconventional oil is not profitable to produce. At $100+/bbl, lots of it is. So in the medium term, seems to me oil should tend to stay in the $60-100/bbl range. Problem is, that is a very wide range . . .

Generally agree with your statement except....fact is...the oil sands mined area is about 150 square miles.... .004% out of the about 3.9 million square miles of Canada's land mass. There are other areas that are mined in situ where there is no visible activity on the surface.

Total area of the oil sands including all types, most of which is not active at this point, is about 54,000 square miles or about 1.3% of Canada's land mass, and the vast majority of the 54,000 is too deep to be mined, it needs in-situ.

The oil sands mines are similar in nature to those used for coal, iron ore, copper and so forth....I think your open pit mined area (for all minerals) is considerably larger than the oil sands.

...and them's the facts...

Dennis

[red-beard]

Sinking economy a global threat...

Beware: Putin the wounded animal

There is nothing more dangerous than a wounded animal. Vladimir Putin is wounded — and he's not known for holding back.

His entire adventure in Ukraine this year is example of just how destructive and unpredictable Putin can be, and that all happened when oil was still trading at $100 a barrel.

For all we know, Putin has already done a lot of the following things, but here's just a partial list:

1. Launch another attack on Ukraine or another neighboring nation

2. Cut off energy supplies to the rest of Europe

3. Launch an all-out cyber war on Western and U.S. companies and government agencies

4. Nationalize foreign-owned or -controlled businesses inside Russia

The question is: do the White House and NATO realize the situation? Does Wall Street?

The Obama team's lack of vigilance has almost been matched by Wall Street's. Most of the discussions about Russia's ability to drag our markets down centered around the Ukraine crisis earlier this year, with little talk about the overall stability of the nation and Kremlin itself. Only people like Hermitage Capital CEO Bill Browder took the appropriate tone when he started sounding the alarm bells in 2006 about Putin's corrupt government and accomplices in the domestic Russian business world.

[Jim Richards]

The economics stuff and speculation about Putin is great, but please, keep the domestic politics in PARF.

[GH85Carrera]

Originally Posted by red-beard

Sinking economy a global threat...

Beware: Putin the wounded animal

I know Putin is a bit crazy but cutting off his customers and that revenue stream really would be wacko crazy. That does not mean he won't do that.

[jyl]

1. Launch another attack on Ukraine or another neighboring nation

2. Cut off energy supplies to the rest of Europe

3. Launch an all-out cyber war on Western and U.S. companies and government agencies

4. Nationalize foreign-owned or -controlled businesses inside Russia

#1 Putin could increase incursions in Ukraine or another former Soviet bloc country - Moldova, Georgia, etc.

#2 would be a great hardship to some European countries, temporarily, until pipelines and LNG export facilities are built. Of course, it also cuts off that revenue for Russia.

#3 would be somewhat welcome, IMHO, in the sense that it would light a fire under companies and governments to improve their cyber security. Note that a possible response to an "all out cyber war" would be for Western governments and telco companies to disconnect Russia from the Internet. Which would be fairly devastating for Russia's economy.

#4 has been happening for years, as Putin has been seizing private Russian companies and handing them over to his cronies, and in a few cases has done that to Western joint ventures as well. With the exception of oil companies, Western companies have rather limited operations in Russia. If Exxon has to take a writeoff when Putin tears up their agreements in Russia, of all the McDonalds' restaurants in Russia get shut them down, or the VW factory in Russia is nationalized, the impact (beyond those companies and their shareholders) will be minor.

[red-beard]

Originally Posted by jyl

#4 has been happening for years, as Putin has been seizing private Russian companies and handing them over to his cronies, and in a few cases has done that to Western joint ventures as well. With the exception of oil companies, Western companies have rather limited operations in Russia. If Exxon has to take a writeoff when Putin tears up their agreements in Russia, of all the McDonalds' restaurants in Russia get shut them down, or the VW factory in Russia is nationalized, the impact (beyond those companies and their shareholders) will be minor.

It will freeze most foreign investment into the country. Long term, that will really hurt Russia.

Of course, you would have to have been stupid investing in Russia in the last 10 years...

[DanielDudley]

Originally Posted by Tobra

As long as he says so, that is how long.

I must say, I view the Russian Bear with a great deal of trepidation lately, their economic troubles are only due in small part to the sanctions. Vlad is not someone I expect to behave well when crowded into a corner.

Oh YEAH.