[Outcast_Searcher]

Meanwhile consumers are getting a much deserved break in gasoline prices.

What did we consumers do to deserve such a break in gasoline/diesel fuel prices in your opinion?

I'll second that Tanada. Until consumers are paying roughly the FULL cost of oil products like gasoline, including (at a minimum) pollution damage, AGW damage, and the military costs of protecting oil interests, they are getting a big BREAK which they don't deserve, in my considered opinion.

In other words you want to punish people because of how successful oil companies are at delivering a product. Do I smell a tax and spend progressive?

First as to politics, I lean libertarian. I, generally speaking, lean left wing on social issues, especially about personal freedoms. OTOH, I generally lean right on financial issues, including the overall size of government and the budget.

However, I deal with issues one at a time. To me, the problems of burning fossil fuels like there is no tomorrow are serious enough that we should tax it appropriately (Europe is partway there) instead of taxing some other things (like the most productive people's incomes at the highest rates, estates where a lifetime of taxes have been paid on the income already, etc).

Now, WHY does that have to be "punishing" anyone except the very high consumers of gasoline (by their lifestyle choices)? A few simple, sensible ideas which would allow this without such punishment. (These are individual ideas -- I'm not suggesting they would all make sense to implement at the same time).

0). If this would be too much of a shock to the economy, it wouldn't have to be implemented all at once. If voters knew this was coming two years ahead of time and it were implemented over ten years at 10% of the new tax a year, people could plan and adapt far more easily. (OTOH, I think a big SHOCK value of the hit to the pocketbook would do far more to produce maximum change/benefit).

1). Poor families could receive some sort of offsetting tax credit for some "reasonable" level of gasoline purchases.

2). Poor people (actually everyone) could be educated and encouraged to save lots of money by biking, walking, taking the bus, living close to work, car pooling, etc. Society could be paying many people (relatively speaking) because they are willing to avoid burning lots of gasoline.

3). Everyone could get a "reasonable" offsetting tax credit to relieve the burden. Then people could make a choice on how to use that credit. A few examples:

a). Take the bus, bike, telecommute etc. and greatly enrich their family with the big net tax credit. This would be good for the environment AND an anti-poverty program, for those willing to burn little gasoline.

b). Get a small, fuel efficient car like a Prius, minimize driving, and get a good chunk of the tax credit. For the middle and lower economic classes, it seems like they win and society wins.

c). Continue to burn gasoline stupidly, like have a couple each drive their big SUV 100 miles each way from their McMansion in the Virginia exurbs to DC for their commute. Those people would indeed be punished and deservedly so. Their unwillingness to change would be their choice, and the heavy gasoline taxes they'd pay would help society mitigate the damage they're doing. (And if this is "unfair", carpooling, driving a Prius, telecommuting, moving close to work, etc. are always options. Why should they burn 10x a "reasonable" amount of gasoline for a family with little consequence to them?)

Instead of pretending burning fossil fuels is no problem, wouldn't looking for viable alternatives make sense on a PEAK OIL site? I'm not saying these ideas are perfect. However, I think they're a good start to a different way of thinking about trying to use intelligent incentives to make intense conservation of gasoline a reality in our country (without destroying the economy).

[Outcast_Searcher]

I fail to see how this is anything that new or unique. The details this time around are unique, of course. OTOH, predictably:

1). Strong companies will acquire the (currently unprofitable) assets from the weak companies for whatever price the market will bear. The oil/gas isn't going away. When higher (or MUCH higher) prices return, the energy will be extracted, at a profit by the strong entity. (If higher prices never return, this implies we've solved our long term energy problems. That great news seems HIGHLY unlikely.)

2). Price will react over time to supply and demand, as the efficient (over time) mechanism that it is.

3). Global oil demand isn't going away. Chindia and the rest of the third world demand growth is still there. Fossil fuels will still be a BIG part of first world energy supplies in 2040 according to various credible institutions like the EIA.

....

So this is a blip. The market will work. Companies that take significant risk on producing commodities which are highly volatile take it on the chin financially if prices plummet, unless they are sufficiently hedged.

Again, aside from the details of this cycle, I'm baffled that this kind of thing is "news" to anyone who follows the energy industry.

[ROCKMAN]

Since 1940 the highest weekly US rig count was 4,530 recorded on December 28, 1981. But then it dropped to less then 2,000 in a year+. And then from 1993 dropped from 2,600 to less than 800 in a year+. And then in April, 1999 dropped to the lowest level since they began keeping count: 488. And then in 2008 dropped from 2,000 to less than 1,000 in a year. And now we've dropped from over 1,600 to less then 700. As they say what is old is new again...if you don't know the history. In the mid 80's the bumper stickers in Texas: Lord, give me one more boom and I promise not to screw it up again.

Promises, promises. LOL.

[sparky]

.
As the old tune goes " I'll never say never again , again "

[ralfy]

I fail to see how this is anything that new or unique. The details this time around are unique, of course. OTOH, predictably:

1). Strong companies will acquire the (currently unprofitable) assets from the weak companies for whatever price the market will bear. The oil/gas isn't going away. When higher (or MUCH higher) prices return, the energy will be extracted, at a profit by the strong entity. (If higher prices never return, this implies we've solved our long term energy problems. That great news seems HIGHLY unlikely.)

2). Price will react over time to supply and demand, as the efficient (over time) mechanism that it is.

3). Global oil demand isn't going away. Chindia and the rest of the third world demand growth is still there. Fossil fuels will still be a BIG part of first world energy supplies in 2040 according to various credible institutions like the EIA.

....

So this is a blip. The market will work. Companies that take significant risk on producing commodities which are highly volatile take it on the chin financially if prices plummet, unless they are sufficiently hedged.

Again, aside from the details of this cycle, I'm baffled that this kind of thing is "news" to anyone who follows the energy industry.

I think it's important because the world economy can barely tolerate high prices unless more credit is created, and that in turn causes more problems and is not sustainable. It might have to do with energy returns, which is what ultimately determines the health of the same economy.

With that, the market will work only if more easy oil is found, and increasingly larger quantities.

[ROCKMAN]

ralfy - Perhaps you meant morr affordable oil is found and not more "easy oil" is found. Been doing this for 40 yesrs and not have I seen the orocess "easy". Seriously. Just because large conventional oil fields were found decades doesn't mean it was easily done. We drilled a lot of dry holes. Remrber we had over 4,500 rigs drilling in 1981 and no meaningful oil rate increase.

[ralfy]

Sorry, I usually enclose the word in quotation marks.

[sparky]

.
Some of the "easy " oil was found in Saudi Arabia empty quarter , a place where camels die of heatstroke !
the North Sea was "easy" oil , I've had a picture of a 100 feet wave washing OVER the platform
and yes the guys kept on working their 12 hours shifts ,
coming back to sleep in the bunk just located by the guy on the other shift
I've worked in sandstorm and blizzards , a man has to make a buck

[ROCKMAN]

sparky - I've never confirmed it but long ago I saw a report on the N Sea: the first major oil field discovery was made with the 93rd well drilled out there.

[sparky]

.
Heard the same , it was supposed to be their last attempt , but that could be apocryphal

another story is Koweit drilling for water and weeping with frustration at hitting oil ,they went for desalination

[Graeme]

Opinion: Expect A Wave Of Consolidation In The Oil Industry

As stated previously, asset monetization by small E&P operators will start in earnest in the second half of this year out of cash flow necessity. Most, if not all, smaller market capitalization companies, public or private, are still free cash flow negative (operating cash flow less capital expenditure) and only a few of the larger ones are now, or will be, based on guidance. The point is, with volumes languishing (and probably poised to decline) tied to a flat oil futures price curve and with economics marginal at $60 per barrel, many E&P operators find themselves running through hedges in 2015 and still in need to finance their already reduced capital spending.

With Wall Street unwilling to lend anymore and prospects of fall credit line redeterminations looming, further reducing liquidity, it is likely small E&P operators will turn to either mature producing asset sales or, more likely, to undeveloped assets which require more capital spending. We are seeing this being factored into stock prices as we speak, as small cap E&P valuations have collapsed to 4-6 times the Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) from 6-8X EV/EBITDA. This not only reflects solvency risk but also the natural course of bringing assets to a price more in line with their underlying sale value.

Wall Street is famous for getting public prices at levels that magically make deals happen and, with better funded E&P companies trading at substantial premiums vs. the leveraged ones, this is what is occurring. Take the collapse of Goodrich Petroleum (GDP) as a prime example as to what is now taking place and what will continue through the latter half of this year. Here is a company with $100 million in liquidity but who continues to be free cash flow negative on current strip pricing in 2015 & 2016. However, it has a capital spending budget of $100 million for 2015 and 2016 and a free cash deficit of $60 million-$80 million in each of 2015 and 2016 depending on asset price assumptions. To plug the hole it hopes to sell its Eagle Ford assets this year.

greencarcongress