Oil Prices Slump to 11-Year Lows in Asia and Europe

[valta4065]

You cannot keep 100x profit margins for long, be lucky if you can produce a 1.5x profit margin these days. This was just a market correction that they had it coming for almost a century.

The profit margins are insanely high for some of the producers (such as Saudi Arabia, Russia, Iraq and Iran). For this group, the cost of production is around $10 to $15 per barrel. Anything above that is profit. But for the high-cost producers such as Venezuela, Brazil, Norway and the United Kingdom, the cost of production ranges from $25 to $60 per barrel. So right now many of them are producing crude at a net loss.

Market equilibrium

Thats one of the most important concepts of economics. The market will find the mean always if left untouched.

Even with the oil cartels you cannot keep the price too high, and the more you interfere in the market, the worse the crash will be.

Demand for oil probably dropped 20 years ago, but the price didnt reflected it due to cheap money.


Folks the normal profit margin is about +50% <> +100% profit margin at best , and I think the price will remain in that range, unless they start printing again.

Ah!

If that was not so vulgar I would spit on this post.
Market equilibrium... Yeah sure...
It's like "the invisible hand" or "the great chain".
It odesn't exist and it's a wrong concept.
Simply because some companies and some people share most of power, money and knowledge.

There is a hand, but it's linked to very existing people...

[7788bitcoin]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

[NorrisK]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

That is unfortunately how it works. When price drops it always takes longer for the prices to correct to reflect this. This is also because the companies buy in at the higher prices in bulk and is than an effect of undercutting each other, not because they are so nice to reflect their cheaper source in the consumer price.

[mikewillda]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

That is unfortunately how it works. When price drops it always takes longer for the prices to correct to reflect this. This is also because the companies buy in at the higher prices in bulk and is than an effect of undercutting each other, not because they are so nice to reflect their cheaper source in the consumer price.

The energy companies buy the electricity with future a few months/years in advance. So they cannot sell at the current price.

[Barnabe]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

That is unfortunately how it works. When price drops it always takes longer for the prices to correct to reflect this. This is also because the companies buy in at the higher prices in bulk and is than an effect of undercutting each other, not because they are so nice to reflect their cheaper source in the consumer price.

The energy companies buy the electricity with future a few months/years in advance. So they cannot sell at the current price.

Yes they can. Some companies build dams so they can sell energy when there is peaks in demand (such as midday) and buy when demand is low (mostly nuclear power at night).

[valta4065]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

Can't tell you, I'm French. French electricity is cheap because it comes from nuclear power

[mikewillda]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

Can't tell you, I'm French. French electricity is cheap because it comes from nuclear power

How much do you pay per kWh. Is that still over $0.15 per kWh. If it is so, there is not profit to be made for mining.

[Amph]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

Can't tell you, I'm French. French electricity is cheap because it comes from nuclear power

How much do you pay per kWh. Is that still over $0.15 per kWh. If it is so, there is not profit to be made for mining.

you don't need to have over 0.15 to have no profit, even at above 0.05 there is no real profit already, diff is skyrocketing pretty fast

[valta4065]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

Can't tell you, I'm French. French electricity is cheap because it comes from nuclear power

How much do you pay per kWh. Is that still over $0.15 per kWh. If it is so, there is not profit to be made for mining.

you don't need to have over 0.15 to have no profit, even at above 0.05 there is no real profit already, diff is skyrocketing pretty fast

Wow! Nobody mines in France I think. It's around 0.14 so not really usefull. But it's still rather cheap for Europe as far as I know

[elloco4ever]

Is it cheaper to mine bitcoin now? Oil prices dropped but the electricity cost has not changed!

When oil price drops, we were told that electricity is generated from natural gas/coal; when the oil price increase, we were told this directly affect the cost of electricity.

Can't tell you, I'm French. French electricity is cheap because it comes from nuclear power

How much do you pay per kWh. Is that still over $0.15 per kWh. If it is so, there is not profit to be made for mining.

bitcoin mining is a tough job and has to be done with complete planning because sometimes you will end up spending more on electricity than profit by this way we lose our time and profit and end up as a loser.

[HeroCat]

Yes, oil prices are very low from some time ago, for car drivers this is very good news .  I think low oil price can make some headache to large oil sale companies. 

[speaktome]

Overproduction is not good, If something renewable perhaps but oil is not. Low prices should lead to overproduction.

[botany]

Yes, oil prices are very low from some time ago, for car drivers this is very good news .  I think low oil price can make some headache to large oil sale companies. 

It is not just oil companies, there are entire countries dependent on oil.
Not to mention the millions of people who have invested in oil companies.
But on the whole, I would say more people benefit from lower oil prices than higher oil prices.

[gkv9]

Yes, oil prices are very low from some time ago, for car drivers this is very good news .  I think low oil price can make some headache to large oil sale companies. 

It is not just oil companies, there are entire countries dependent on oil.
Not to mention the millions of people who have invested in oil companies.
But on the whole, I would say more people benefit from lower oil prices than higher oil prices.

That's true, Commodities such as Oil control a very large % of Global Economy and such dumps in its price are going to let some Super-Powers suffer for sure...

[bryant.coleman]

Overproduction is not good, If something renewable perhaps but oil is not. Low prices should lead to overproduction.

Low prices will not lead to over-production.

If the prices are low, then the profit margins will be reduced. So for the companies, there is less incentive to ramp up their production. Therefore the exact opposite is going to happen. In case of prices staying low, the production will decline in the long-term. (Already the Bakken shale oil production in North Dakota is showing signs of decrease).

[mikewillda]

Overproduction is not good, If something renewable perhaps but oil is not. Low prices should lead to overproduction.

Low prices will not lead to over-production.

If the prices are low, then the profit margins will be reduced. So for the companies, there is less incentive to ramp up their production. Therefore the exact opposite is going to happen. In case of prices staying low, the production will decline in the long-term. (Already the Bakken shale oil production in North Dakota is showing signs of decrease).

For the Western companies, when the price is low, it will produce less or shutdown. For Iran or Saudi, if they want to balance their budget, they have to produce more.

[botany]

Overproduction is not good, If something renewable perhaps but oil is not. Low prices should lead to overproduction.

Low prices will not lead to over-production.

If the prices are low, then the profit margins will be reduced. So for the companies, there is less incentive to ramp up their production. Therefore the exact opposite is going to happen. In case of prices staying low, the production will decline in the long-term. (Already the Bakken shale oil production in North Dakota is showing signs of decrease).

As long as the price is more than the marginal cost of production, companies will keep producing.
However, investments in fresh capacity will stop.

[speaktome]

Overproduction is not good, If something renewable perhaps but oil is not. Low prices should lead to overproduction.

Low prices will not lead to over-production.

If the prices are low, then the profit margins will be reduced. So for the companies, there is less incentive to ramp up their production. Therefore the exact opposite is going to happen. In case of prices staying low, the production will decline in the long-term. (Already the Bakken shale oil production in North Dakota is showing signs of decrease).

OK,

But If I remember correctly the prices were down due to OPEC countries increased the production. Then if supply increases and the demand stays the same then prices fall as on this case however with the low prices I guess that some countries try to get oil as much as they can and this should lead to an increase in demand and therefore in the production of those who are selling cheap. I'll make a search on the production since the fall to see that meeting.

[speaktome]

Overproduction is not good, If something renewable perhaps but oil is not. Low prices should lead to overproduction.

Low prices will not lead to over-production.

If the prices are low, then the profit margins will be reduced. So for the companies, there is less incentive to ramp up their production. Therefore the exact opposite is going to happen. In case of prices staying low, the production will decline in the long-term. (Already the Bakken shale oil production in North Dakota is showing signs of decrease).

OK,

But If I remember correctly the prices were down due to OPEC countries increased the production. Then if supply increases and the demand stays the same then prices fall as on this case however with the low prices I guess that some countries try to get oil as much as they can and this should lead to an increase in demand and therefore in the production of those who are selling cheap. I'll make a search on the production since the fall to see that meeting.

After do a little search I found the next:

-OPEC controls about 43% of world oil production and 81% of stocks domain oil. Its oil exports stood at about 51%.
-While production has surged in recent years  supply has increased more than demand recently however the cause by which has fallen more than 70 percent since June 2014.
-The  increase come from Saudi Arabia,Iraq,Iran mainly.

So 3 are members of the OPEC, but even so,  maybe more than just new oil supplies from the Middle East influencing the market. Example:

World field production of crude oil in September was up 1.5 million barrels x day over the previous year. More than all of that came from a  increase in the U.S. Saudi Arabia, and  Iraq. If it had not been for the increased oil production from these three countries, world oil production would actually have been down over the last year.

Now come the thing interesting Im agree with you that: If the prices are low, then the profit margins will be reduced. So for the companies, there is less incentive to ramp up their production. Therefore the exact opposite is going to happen. In case of prices staying low, the production will decline in the long-term. (Already the Bakken shale oil production in North Dakota is showing signs of decrease).

Taking this in  consideration I could are agree with you that the production will decline in the long-term
especially in the countries that have lost due to the high cost of extraction, But no evidence that countries overproducers  decreases its production  as they do not decide bringing about the fall in prices as has been the case until now since June 2014.  Now as you say  North Dakota is showing signs of decrease we can say that US is showing a decrease but anyway,  Why increased  production September on? this was done together with Saudi Arabia, and  Iraq. If they had done world oil production would actually have been down almost over the last year which is contradictory.

Now my statement:  Low prices should lead to overproduction. Agree, is not true at all as you pointed clearly. However for instance one can not completely rule out that such, Suppose for example a company has a debt and has payments to make then necessarily has to sell it product at a low price but now it needed  to produce more to get the same amount of revenue which means an overproduction, despite the decrease in production is offset one another overproduction.

Finally please let me show a graphic where Supply has increased more than demand recently:

http://www.nytimes.com/interactive/2016/business/energy-environment/oil-price-supply-demand-imblance.html

[bryant.coleman]

But If I remember correctly the prices were down due to OPEC countries increased the production. Then if supply increases and the demand stays the same then prices fall as on this case however with the low prices I guess that some countries try to get oil as much as they can and this should lead to an increase in demand and therefore in the production of those who are selling cheap. I'll make a search on the production since the fall to see that meeting.

The situation is not that simple. All the OPEC members have well defined quotas, which they are expected to maintain. However, recently, Saudi Arabia started producing crude oil well over their quota limits. This was what triggered the oil price crash in 2015, from $110 per barrel to less than $30 per barrel. As far as I know, the other OPEC members are honoring their quota limits.