Thread: Bust out your Rover V8s, petrol is down to double digits!!

Was 98.9 on way to work today in good old Logan Central. Diesel was 125.9.

My boss is very happy his budget for diesel for the buses and trucks might be underspent.

World oil prices have plummeted because the Americans are flooding the market with shale oil and the Saudis etc refuse to cut their production. Looks like predictions of a world oil shortage were premature.

Hmmmmmm.....north east Vic - $1.24 this arvo and that is for basic unleaded. I didn't go in to look at the 95 and 98.

Originally Posted by Grumbles

Hmmmmmm.....north east Vic - $1.24 this arvo and that is for basic unleaded. I didn't go in to look at the 95 and 98.

I got diesel in Euroa for 113.9 this arvo. How much further North East?

Originally Posted by DiscoMick

World oil prices have plummeted because the Americans are flooding the market with shale oil and the Saudis etc refuse to cut their production.

me thinks it might be the other way round.. the saudis and their mates are flooding the market with fuel at a price below breakeven price for all the other methods of extraction in the hope it sends a few broke...

same as bhp and the other big players are doing with iron ore etc..

quite a few small players are now @ junk status

You might well be right Dave....

BHP Billiton cuts oil rigs in the US - ABC News (Australian Broadcasting Corporation)

Originally Posted by B92 8NW

I got diesel in Euroa for 113.9 this arvo. How much further North East?

About 200 kms east of Euroa.

Actually, according to commentary on the news last night, the big drop in oil price is not because of oversupply - supply and consumption are pretty closely in balance - but because speculators expect prices to drop sharply because oversupply is expected.

This is probably a little harsh, as a lot of these "speculators" are probably big users who have for years locked in prices under forward contracts, but because they expect prices to drop are not signing more forward contracts, pushing a lot more oil onto the open market, depressing the price of oil traded on the open market (which of course is where the quoted prices come from).

The reality is that oil consumption is, in the short term, very inelastic to changes in price, so drops in price do not see a big increase in consumption, but in general, neither is production very dependent on price in the short term.

Long term (>5 years), oil price changes will change the amount of production available, but in the short term won'[t have much effect. With the exception of some tertiary recovery projects, the major cost of production is capital (exploration and production infrastructure) - and for existing fields, this has mostly already been spent. Lower oil prices mean the venture is no longer economically viable - but as long as the incremental production pays above running costs, the production will probably continue, even if the bank that lent the money forecloses and sells the property for a fraction of what it owed. Similar projects won't get off the ground, but this won't affect production for several years.

Production capacity and reserves are probably the highest they have ever been, but high prices for the last decade and economic stress have led to large scale increases in energy efficiency worldwide, so that demand is likely to drop significantly below capacity despite increasing industrialisation and rising living standards, particularly in India and China. The resulting drop in price will lead to another shortage situation, but this is expected to not be for another ten years or more - simply because of the lag between price signals and new production becoming available.

John

You could be right about the real causes of the low prices for all resources, not just oil.

Gavin Wendt, senior resources analyst with MineLife, said he was not surprised by BHP's plans to reduce oil drilling.

"This just reflects what's happening in the broader US shale industry at the present time," he told the ABC in an interview for The World Today.

"We always knew that US shale oil production was a high cost endeavour, and was sustained and made commercially viable by the higher oil price environment that we've seen over the last four to five years."

Oil producing cartel, the Organisation of Petroleum Exporting Countries, has refused to cut production so it can maintain market share at the same time that other countries like the US have increased output.

Incidentally, discounted E10 unleaded was 95.9 at one servo near me this morning, so that's good for our Yaris. Diesel was 126.9, so that's good as I'm going to fill the Defender's 110 litre tank tonight.