My0gr81

Even as oil prices continue to go down, but no one can afford to stop pumping, as that would amount to NO revenue, instead of some revenue at a loss. Beside, not supplying today would also mean relinquishing market share, and again, no one wants to do that either. What happens when prices go back up, and you lost your customers to someone else?

Price of gas is "downstream" business. Saudi may have some impact, but really look at local factors, speculators, regulators and the NIMBY's that oppose the construction of new refining capacity whenever it is proposed. Also, look closely at the breakdown of how much of that $/gal. is going as city/state/federal taxes and road/infrastructure levies, etc. You will be surprised.

http://mediad.publicbroadcasting.net..._taxes_api.jpg

4TehNguyen

iTrader: (1)

saudi tried to do that a long time ago and failed. They made an agreement with others to reduce pumping but they ignored it so Saudi just ended up losing market share.

My0gr81

During the 2008/2009 downturn, demand went down, everyone agreed to reduce output to put a floor on prices. Some of the OPEC and most non-OPEC members moped up the floor by keeping their output high and stealing market share from Saudi as they were unable to supply since they did reduce output. Oh, and one of those countries was US as they implemented "fracking" technology to extract even more crude from wells that would be considered "dry" using conventional pumping methods.

Infra

iTrader: (1)

OPEC has always been the swing producer. OPEC has only ever sold oil after every non-OPEC entity has sold every barrel of oil they could. What we're seeing is a power struggle to be the swing producer, as the US has become such through hydraulic fracturing. OPEC wants to drive high cost operators out of business so they can resume being the swing producer, controlling the price of oil through restriction of supply.

But by this very fight they've started, they've caused significant reductions in the break even price of hydraulically fractured wells. The cost to drill and complete a well was benchmarked at $80 oil. Today, we see prices benchmarked at $65 oil. In the next six months, we'll see prices continue to come down and benchmark to $50 oil (which is pretty much the current strip price on the futures market).

By attempting to drive hydraulic fracturing out of town, all they've done is make it more cost effective, thereby eliminating the entire point of the exercise, and setting a lower ceiling price.

bitkahuna

iTrader: (20)

saudi flooding the market is probably affecting russia (and world security) more than anything, and it's a concern. putin simply cannot stand oil prices going much lower, or he will have a major economic collapse. although vast u.s. military spending under reagan was a big factor in crushing the old soviet union, a collapse in oil prices around that time was probably the biggest factor.

pman6

oil prices hit their multi year lows.

I bet I am still not going to see a discount at the pump. Lowest price for 87 is 3.45 in my area.

-J-P-L-

That's a buck more a gallon than most of the country. Vote out those California politians!

bitkahuna

iTrader: (20)

somehow the 800K/yr salaries for cali city officials (recent story) or the $500 MILLION LA high school have to be paid for.

californian politicians are looting the people's pocketbooks.

mmarshall

To some extent, though, the public brings it on themselves by electing (and re-electing) those politicians. The state is quite heavily Democrat, especially along the coast and in the SFO/LAX regions. Even long-conservative Orange County is no longer a Republican bastion.

And, it's not just elected politicians. The bureaucrats at CARB (the California Air Resources Board) sets strict refining/distilling regulations for gas and diesel fuel sold in the state.......and sometimes local parts of the state. That makes fuel relatively cost-inefficicient to refine and sell, compared to gas sold in other states on a much larger scale, necessitating higher fuel prices in the state for oil comanaies to recover their costs.

Fizzboy7

CA gas prices are now heading in the direction of another 17 cent increase, thanks to another TAX on us. This is for "road improvements," which we already allocated funding for from several past measures and bonds. The current crop just wants to tax us to death and see who wants to stay in Cali. At this rate, it makes me wonder if even the illegals will not find CA an attractive place to break into. Godspeed middle class, you are on the endangered species list.

My0gr81

They're being pro-active. Ensure Iran ends up with a smaller windfall from their reserves that everyone knew would hit the market as soon as agreement was in place and cripple Russia's ability to help Iran to develop the remaining nuclear technology. Both goals benefit US interest too. While the US is feeling the economic impact of low oil prices, it is offset by the gains downstream.

The US and Canadian government have to manage the messaging of gas prices better, specially when downward oil prices won't translate into lower gas prices.

CaptainAir

May god bless your wallet. 91 (highest in my area) is like a penny or two over/under $3.00 a gallon where I live. I can get 87 for about $2.20 or $2.15.

pman6

that's terrible.

Here, 91 is only 20 cents more than 87.

Why the huge 80c difference in your area?

CaptainAir

Okay I was slightly outdated on that. lol The gas station I normally use has the following prices, 87-$2.16, 89-$2.30, and finally 91-$2.52

The highest 91 right now is $3.29, and the lowest 87 is $2.14, different stations yes but still in the same general area.

tgold

its going get even cheaper until it hits the bottom and up again