Oil drops to $43 a barrel

Somebody finally noticed the correlation between recessions and oil prices... Too bad they didn't also notice that oil prices are about 70% higher than they were in the last recession this decade. Wanna guess what will happen when we come out of recession again?

 

Whew! Thank goodness *that's* over! Now, where did I put my Jeep Cherokee?

 

Do you think they are finished dropping?

 

Seen an analyst on the other night and he was saying $27 / $30 for a while.

Even if it does, still won't be driving the gas guzzler much.

 

Yeah I think it will bottom out between $20 and $25/barrel. $25-$60/barrel for a couple years.

 

I don't know. This recession is a lot more severe than the last and still has the potential to be an actual global depression. Depression would likely drive oil prices even lower for a few years. But the whipsaw on the other side will be tremendous if that happens because as we saw this last time, the ability to fulfill increasing demand is just not there.

The other factor is that the dollar is presently strong because of the global severity of the recession. When we get through recession the mammoth U.S. debt and deficits are probably going to severely weaken the dollar and drive inflation harder than the last bout of it.

 

If it goes that low for any length of time, you can kiss-off our major supplier of oil, Canada. It costs at least $25-30/barrel to extract oil from the Alberta tar sands. Compare that to the $2-5/barrel it costs the Saudis to pump oil from the Ghawar field.

You enjoy the thought of shipping all those dollars to the sheiks of Araby, so they can turn around and buy chunks our major corporations? Not to mention financing Islamic militants around the planet.

The sooner we're off oil based energy, the better. Unfortunately, our entire economy is based on its availability, at low prices. It will be tough going when we pass the peak extraction rate, if we haven't already.

 

dropping oil prices are the best thing that could happen, now i can get a little used 2007 or 08 Pri for $10,000 under real market value...they are popping up all over the place!!

WOOHOO!!

 

Yea. Where, precisely?

 

My sentiments exactly. Except I think the tar sands are more expensive than that (something over $40). I've heard they are already laying off people there. The heavy crude from Venezuela and the all the deep-sea oil is also too expensive to produce, let alone explore, at sub $30 prices. So I really don't see it dropping below $30 for any length of time, unless we're in a really severe depression. (Remember, oil has already been in the low $30's, so 'dropping to $43' means the price is staying sideways, more than anything).

But with a new administration in power, hopefully this gives us time to develop alternative transportation and energy (if congress permits it) before we really need to use it. That's our only hope for economic progress when the recession lifts. If our economy was still rolling along, we'd still be paying $4/gallon, at least. Maybe that had something to do with killing our economy (not the price of gas so much as the corresponding trade imbalance with petroleum exporting countries).

This recession is the only thing standing between us and peak oil.

 

Alberta tar sands oil is break even somewhere north of $60 usd depending on how you calculate it. Ft. McMurry work has slowed way down. The reality is that when the economy turns around,,,(when!) the price spike will make the one last summer look like a picnic. No money is being spent on new supplies for that eventuality. The time to get serious about RE is now.

As for discounted Prius' Washington State has a sales tax holiday on new ones, Toyota is offering $750 rebate (for the first time ever!) as well as ~$3500 in other incentives. This is serving to drive down the price of all Prius', especially used ones. Thems that bought last August got screwed on this one!

Icarus.

 

I estimate the depreciation of NHW11 Prius now at 10 or 11 cents per mile. This is a relatively big deal as it used to sit at 6 or 7, during the NHW20s early years. Prices of used NHW11s will probably come up a bit as crude oil prices increase over time, but there is an upside limit because the fleet is aging and its odometers are turning.

As an NHW11 owner this means a few cents/mile get added to the TCO. As a potential buyer (to the extent that fearless buyers exist in a world of HV battery and tranaxle concerns), there may be bargains in the used fleet. In my opinion there probably are.

They are probably still about 25 cents per mile TCO, as fuel cost decrease and depreciation increase are nearly balanced. I am not prepared to estimate TCO for the NHW20 but I guess they are smilar now, with the prospect of looking slightly better a few years out. Yes I actually said that a used NHW20 could be a better deal than an NHW11. Imagine that...

As far as crude oil price variations through time, I was interested in some of the blogs here:

http://www.oil-price.net/

perhaps they have been discussed at PriusChat before?

The US strategic petroleum reserve stands steady now at about 700 million barrels, and China's is 100 million and slowly increasing. For what that's worth.

 

Hey, I resemble that remark...okay we took delivery a few days earlier than that. Same of course could be said for those who bought stocks or many other things. Would you rather have bought $23K+ worth of Prius...or $23K worth of Lehman brothers in August?

Doesn't really matter though, we needed the car then and there was no compelling reason to buy anything else.

 

The geopolitics of cheap oil are going to be interesting. Irans seems to be in real trouble now that the bottom has dropped out. It will be interesting to see the Russian reaction as this drags out. One of the best reasons to get off of the oil economy is to stop funding those dickheads. This is something that I would think would get a lot of traction with republicans, but that doesn't really seem to be the case.

 

Agree 100%. The GOP has become a scorched earth party unfortunately. They only seem to be happy when they antagonize the other 70% of the U.S. population (and most of the world.) Rumsfeld might call them "dead enders" if he had a bit wider view...

There are some though who get it, and some of them drive a Prius for the very reasons you mention.

 

yeah, it's sad to see what's become of the GOP. Hopefully, a new party will emerge and push the GOP off into the margins where, in its current form, it belongs. I would love to see an "Eisenhower" style party return to counter balance the democrats.

 

my comment was made purely in jest. what is going on now is simply nothing short of a tragic. i personally know people going out and buying mid sized cars for a very good price that barely get 20 mpg thinking they are ok and TODAY, they probably are.

i really feel sorry for them now that they are in a 7 year commitment for monthly payments, when they will most likely see a monthly gas bill just as large as their car payment way before the beast is paid off. they will not be able to get out from under that burden without a major financial concession or ruining their credit because, despite the fact that they got a $8,000 discount, the car is already not worth anywhere near what they still owe on it and as gas prices go back up the devaluation will only accelerate

 

Dave, the one nice thing about cars is that you can reduce your driving... you still have to make the car payment, but the variable cost can be reduced, though it sometimes means a major lifestyle change. What gets me is why people think they need a new car every 5 years! That's bloody insane. You've just got it paid off and now you wanna go and take on another car payment. It's madness. Drive the bloody thing into the ground... then go get a reasonably priced car that you can afford to own/operate. It blows me away. I'd rather have the extra $300-400/mo myself. I really don't care how nice the new car is, but that's just me.

It remains to seen how fast we get ourselves out of this mess. I hope you're right about the timing of a rebounding economy, can't say I'm holding my breath.

 

true, but i did the car payment thing and got to where i resented the car as an anchor... so i avoid car payments if i can manage it.