Fuel up/down again

[xs2man]

Only people that suffer are the ones in the oil industry. No one else will. Its funny how people have got so used to $80+ per barrel that they are now saying its "bad" its gone back to the relatively normal sub $50.

Not true.

What about the builder / joiners / sparkies etc... that build the oil company offices, or the houses for the oil workers, or renovations / extensions for these oil workers. What about the gardeners that look after their gardens? What about the childcare workers who look after their kids? What about the local shops that sell them their daily vodka and fags? What about the car dealerships that sell them their cars? Clothes shops that sell them their clothes? All these people will lose money because the Oil worker hasn't got it to spend. Never mind the multitudes of transportation, engineering, electronics suppliers, IT companies etc. that support the oil industry.

What about their taxes? As I mentioned earlier, the average oil worker probably pays over £1k per month in taxes (I think it is quite a bit more in reality). Substantially more than the UK average. Will that be made up by the VAT on the extra spend by everyone else? Sure, everyone may have a little more to spend after fuel costs, but they are spending the same amount of money, so same amount of VAT surely? There are many many tens of thousands of offshore workers all over the UK, not just based around Aberdeen and wherever they fly out of England. And they don't all just work in UK sector either, there are many that will be hit from working abroad too. Okay, they wont likely be paying British taxes, but they will be coming back and taking British brew money.

You obviously have put little thought into how the economy actually works.

 

[MissChief]

The majority of those being 'laid off' are contractors. If you're a contractor and don't put anything away or make contingencies for not having your contract renewed then you're a fool.

 

[Jokester]

There's a lot of staffies being laid off as well.

 

[acemastr]

The majority of those being 'laid off' are contractors. If you're a contractor and don't put anything away or make contingencies for not having your contract renewed then you're a fool.

They still pay tax and buy things remember

 

[[TW]Fox]

You obviously have put little thought into how the economy actually works.

He hasn't but to be fair neither have you.

If we lived in a nation whose major export was crude oil you'd have a point.

We don't.

There are obviously negative effects of low oil prices but there are also negative effects of high ones, too.

 

[koolpc]

Just so nice to have a lower fuel price for a change!

 

[Overlag]

You obviously have put little thought into how the economy actually works.

to be fair, we import our oil so lower prices are GOOD for the UK overall. If we were the USA who had invested billions into fracking only to have to scale back production because it is too costly with these low oil prices then maybe you'd have a point, but we dont.

Im no expert in economics, but if it costs the government less to import oil, and it costs everyone in the country less to fill up whatever machines they are using then its all a big plus, something the UK needs. Yes the middle east has us by the balls, but it has done so since 1973.


Anyway, back to cheaper petrol now as this has gone a bit speakers corner/GA.

 

[xs2man]

He hasn't but to be fair neither have you.

If we lived in a nation whose major export was crude oil you'd have a point.

We don't.

There are obviously negative effects of low oil prices but there are also negative effects of high ones, too.

I have, in fact. I never said, at any point, that it was a HUGE issue, in terms of the overall country. But it does effect almost everyone in some way, some more so than others, obviously. It is almost irrelevant that we are an importer of crude oil, as the industry in this country is large enough to surpass the actual physical product. We are among the best in the world at designing, manufacturing and engineering of oil tools. Planning well paths, and whole fields. We have among the best engineers and designers on the planet. Worldwide, companies WANT to employ Brits because of their work attitudes, experience and knowledge. Often keeping them in the UK, but not always. There is a lot more to the industry here in the UK than actually just extracting the oil.

Nevertheless, it is not an all-round great thing to have oil at such low prices, neither was it good to have it so high before. Around $80 per barrel is roughly the sweet spot. Expensive enough for it to be worth extracting, cheap enough that you aren't absolutely crippled for driving a nice V8.

 

[[TW]Fox]

High oil prices are a proven drag on the world economy and can lead to demand destruction as well as reduction in growth.

What we are witnessing now is something we've not seen for a long time in the oil market - the free market setting the price. All producers are producing as much as they can and the market is setting price according to supply and demand.

It will undoubtedly begin to hit supply at which point price will begin to rise and the cycle will begin again.

To suggest that $40 crude, a place we've been before just 5 years ago, is going to destroy one of the worlds biggest industries, an industry that was built on crude at a far lower price, is nonsense.

 

[[TW]Fox]

We have among the best engineers and designers on the planet. Worldwide, companies WANT to employ Brits because of their work attitudes, experience and knowledge. Often keeping them in the UK, but not always. There is a lot more to the industry here in the UK than actually just extracting the oil.

All of this is still required - if not more so. Extracting oil at the most efficient possible cost is something that requires skilled engineers and high technology. The world is not suddenly going to stop producing oil because the price is 'low'. If that did happen it would take almost no time at all for the price to rocket anyway!

I do not dispute that cheap oil is not here to stay. However whilst it's here it's a positive influence on our economy not a negative one. Oil production simply doesn't contribute enough to the economy for the current pricepoint to cause the UK more harm than good.

No sympathy for the contractors - they've been making enormous amounts of money precisely because they offer instant and easily expendable skill. The fact they could at any point be curtailed is why they've been able to enjoy high earning power which any half decent contractor has put enough of away.

I do have sympathy for any permanent employees mind.

If we were Russian we might be having a different conversation!

 

[Overlag]

When north sea oil production was at its greatest, oil cost $30 a barrel... so why is $80 "normal"?

 

[[TW]Fox]

When north sea oil production was at its greatest, oil cost $30 a barrel... so why is $80 "normal"?

Much of the easier and cheaper to extract North Sea oil has been extracted. But $80 isn't 'normal'. It's not been sustained at that pricepoint for any real length of time.

 

[Jokester]

When north sea oil production was at its greatest, oil cost $30 a barrel... so why is $80 "normal"?

Inflation, increased demand and more costlier production globally.

The reason the price has dropped is because of US shale oil boom - typically needing $80 to make it viable. Once shale oil investment drops off and over supply tails off it will need to be at this level to for shale oil to pick up the slack again, $80-$100 will be the new long term average, the only that will change that is a drop in oil consumption to below that that conventional supplies can meet (which they largely don't at the moment). Cheap oil will also stimulate economic growth increasing demand which will also push the price up.

 

[Overlag]

Much of the easier and cheaper to extract North Sea oil has been extracted. But $80 isn't 'normal'. It's not been sustained at that pricepoint for any real length of time.

exactly, more normal price would be around $30-50?

 

[acemastr]

'Normal' has changed, times have moved on, things are more expensive.

As Jokester says, the US need it to be higher, the UK needs it to be higher.

 

[sanaxe1]

'Normal' has changed, times have moved on, things are more expensive.

As Jokester says, the US need it to be higher, the UK needs it to be higher.

The US and the UK don't need it to be higher. There will be greater economic benefit to both countries if oil is lower.

 

[muon]

to be fair, we import our oil so lower prices are GOOD for the UK overall. If we were the USA who had invested billions into fracking only to have to scale back production because it is too costly with these low oil prices then maybe you'd have a point, but we dont.

Im no expert in economics, but if it costs the government less to import oil, and it costs everyone in the country less to fill up whatever machines they are using then its all a big plus, something the UK needs. Yes the middle east has us by the balls, but it has done so since 1973.


Anyway, back to cheaper petrol now as this has gone a bit speakers corner/GA.

For the US the low price of oil is massively beneficial. The oil extraction and supply industry makes up a very small proportion of GDP. Russia the opposite is true. For importers of oil, like the UK it is even more beneficial as you stop paying foreign countries substantial amount of money you could be spending domestically.

To other posters, pension funds have a ridiculous amount of money at their disposal. They can't all be invested in oil companies. They hold wealth in the order of many magnitudes compared to the market capitalisation of oil companies.

Whilst they may get hit by whatever equity they do hold, other companies will benefit as their profitability goes up.

Secondly oil and gas may employ tens of thousands (lets say even a 100,000+ people) of people in the UK, but there are tens of millions of people working in the UK that stand to benefit.

If the oil industry becomes less profitable and employs less skilled workers, those workers will move to other industries which can now suddenly compete with oil companies in the lower salaries.

As for defining "normal", that is a world of trouble. What the buying/selling price is right now is the normal price.

You can make predictions of what may happen in the future, or have a commentary of what has happened in the past, but the normal price is the price it is now. If you believe it is much higher then, please be my guest and buy oil futures and double your money.

 

[Traffic_Warden]

I work for an Oil company in Aberdeen, and it has now got to a stage that OT has been cut and Redundancy's look like they will be on the cards in the next few months if fuel prices don't pick up. Its a case of you win in one hand with the fuel price being down, but the other hand the lively-hoods of family's around here will go to pot if company's start crashing.

Put it this way, its hurting Russia BIG TIME. And as was wanted by the majority of the world...

 

[muon]

I work for an Oil company in Aberdeen, and it has now got to a stage that OT has been cut and Redundancy's look like they will be on the cards in the next few months if fuel prices don't pick up. Its a case of you win in one hand with the fuel price being down, but the other hand the lively-hoods of family's around here will go to pot if company's start crashing.

Put it this way, its hurting Russia BIG TIME. And as was wanted by the majority of the world...

The decline in the oil industry will be more than offset by the growth of other industries in the UK.

Manufacturing may suddenly be more competitive, industries relying on transportation will benefit, energy intensive industries will benefit.

The income of most people will now go further.

The capital intensive projects in the oil industry which won't happen will now be free to be invested elsewhere which will spur growth in those areas.

 

[Jokester]

exactly, more normal price would be around $30-50?

No. If the normal price was even $50 the stimulated economic growth long term would cause demand to exceed production. The price was only pushed down from $100 because the US threw billions of $ in investment at shale oil thinking that Opec would quite happily cut back production to maintain that price. They didn't. Shale oil just isn't profitable at $50 so investment has stopped and within a couple of years shale oil production will greatly reduce removing the over supply in the market.

The only way $50 will ever become a normal long term price average is if oil consumption drops long term, presumably by moves towards renewables either because of them becoming cheaper than oil, or by direct global government intervention to effectively ban fossil fuel burning for environmental reasons.

As it is, because investment in new production is pretty much drying up, there is a very real chance that in the next few years there will be another big price spike as demand will be going up as production is falling. It takes a couple of years for large scale new production to come on stream, so there will always be big prices swings from low prices (~$30-40 I reckon it will bottom out at) to high prices, >$150 next time I suspect.