# OKCpedia > Businesses & Employers >  Oil prices

## bchris02

Oil is currently at $74/bbl.  Some reporters are now predicting $50 oil next year which could be a cause of concern for OKC.

Why oil is more likely to test $50 than $100 again next year

For those who know the industry more than I do, is this something to really be concerned about?

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## gopokes88

> Oil is currently at $74/bbl.  Some reporters are now predicting $50 oil next year which could be a cause of concern for OKC.
> 
> Why oil is more likely to test $50 than $100 again next year
> 
> For those who know the industry more than I do, is this something to really be concerned about?


No.

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## windowphobe

Some of the more marginal wells that are barely profitable at $70 won't be at $50; there will probably be some job losses if it gets that low, and firms that switched from gas to oil in hopes of better returns will likely return to gas production.

That said, other segments of the economy will absolutely love it.

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## catch22

Russia said they would enter a recession if oil hits $60 for any significant duration of time.

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## Pete

Gas just dipped below $3 (at Costco) for the first time in over four years.

For a while, our average price for regular was almost $5 and this summer averaged around $4.40.

So, almost a 1/3 reduction in just a few months.

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## catch22

> No.


I disagree. Harold Hamm (CLR) removed all 2015 hedges. The oil they produce next year will be sold at market rate. He's betting on the oil price to skyrocket -- if he is wrong and 50-70 bbl oil is sustained through much of 2015, CLR will have some serious issues as I don't think their drilling cost is < $50. (I may be wrong, but even then it's still tight margins)

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## OkiePoke

This is our hand, USA, telling the Saudis to release their reserves to hurt the Russian economy. Similar to what happened in the late 80s, then the USSR crashed in the early 90s.

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## Easy180

Hamm will survive...Let's let us average joes enjoy this for a while

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## PhiAlpha

> I disagree. Harold Hamm (CLR) removed all 2015 hedges. The oil they produce next year will be sold at market rate. He's betting on the oil price to skyrocket -- if he is wrong and 50-70 bbl oil is sustained through much of 2015, CLR will have some serious issues as I don't think their drilling cost is < $50. (I may be wrong, but even then it's still tight margins)


Probably would be ok in the Bakken but would have to scale back somewhat in the scoop.

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## PhiAlpha

> Hamm will survive...Let's let us average joes enjoy this for a while


Of course Hamm will survive, it's the state of the his and other companies here that we should be concerned about if oil hits $50. Plenty of average joes are employed at continental.

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## OKCisOK4me

I thought the bbl value had more to do with less dependence on foreign oil and the fact that the US is becoming more self reliant for production.

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## bchris02

> I thought the bbl value had more to do with less dependence on foreign oil and the fact that the US is becoming more self reliant for production.


Oil is a global commodity and all oil produced in every producing country gets sold on a global market.

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## Urbanized

> Of course Hamm will survive, it's the state of the his and other companies here that we should be concerned about if oil hits $50. Plenty of average joes are employed at continental.


Hang on...I thought everyone associated with the oil industry was a filthy profiteering billionaire..? Are you suggesting AVERAGE JOES work for and invest in oil companies and associated industries?

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## gopokes88

> I disagree. Harold Hamm (CLR) removed all 2015 hedges. The oil they produce next year will be sold at market rate. He's betting on the oil price to skyrocket -- if he is wrong and 50-70 bbl oil is sustained through much of 2015, CLR will have some serious issues as I don't think their drilling cost is < $50. (I may be wrong, but even then it's still tight margins)


Na. Their costs in the Bakken are lower then that. You'll see a slowdown in the scoop. However, a brutal brutal winter appears to be coming. Production usually falls off a little bit while demand jumps up. 

The Saudis might not be hurting but others in OPEC are and even the slightest production cut will give it a boost. Crude is oversold on the fear opec and the U.S. is trying to teach Russia a lesson. If we are trying to teach Russia a lesson it won't take long before Russia taps and begs them to stop. 

I think humans just like to be negative, talk about how the sky is falling and that we're all gonna die.

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## Jersey Boss

According to Bloomberg, it depends on what part of the Bakken you are talking about as far as impact.

Bakken Drillers Poised to Curb Exploratory Spending - Bloomberg

_Companies drilling parts of the Bakken where very high underground pressure forces more oil to the surface in each well -- such as the Nesson Anticline or the western Williston -- are best-positioned to withstand the slump in prices, Sorbara said. Conversely, the northernmost areas of the region where geological conditions are less favorable will be hardest hit, he said. 

During the past six months, Bakken has lost 21 percent of its value, making it the second-worst performing domestic crude. Only Kern River crude, a thick, sulfury oil produced in southern California, fell more with a 24 percent decline during the period._

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## Laramie

> Russia said they would enter a recession if oil hits $60 for any significant duration of time.


Has Russia ever recovered from a recession?

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## OKCisOK4me

> Oil is a global commodity and all oil produced in every producing country gets sold on a global market.


Money makes the world go round... We should horde our locally produced oil like the US government hordes gold.

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## jn1780

> Na. Their costs in the Bakken are lower then that. You'll see a slowdown in the scoop. However, a brutal brutal winter appears to be coming. Production usually falls off a little bit while demand jumps up. 
> 
> The Saudis might not be hurting but others in OPEC are and even the slightest production cut will give it a boost. Crude is oversold on the fear opec and the U.S. is trying to teach Russia a lesson. If we are trying to teach Russia a lesson it won't take long before Russia taps and begs them to stop. 
> 
> *I think humans just like to be negative*, talk about how the sky is falling and that we're all gonna die.


What's negative to some is positive to others.  States that are not heavily invested in oil would love to see 50 dollars a barrel. Of course, I don't think we will see 50 dollars a barrel.

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## PhiAlpha

> Hang on...I thought everyone associated with the oil industry was a filthy profiteering billionaire..? Are you suggesting AVERAGE JOES work for and invest in oil companies and associated industries?


I know, right? Who would've thought?!?!?!

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## venture

Well the Saudis said no to production cuts so crude is now under $70 bbl. Keep on falling in my opinion. It will help a lot of other sectors in this country.

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## Bellaboo

Anyone notice has gasoline has dropped 30 % but diesel hasn't really budged ?

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## sooner88

> Well the Saudis said no to production cuts so crude is now under $70 bbl. Keep on falling in my opinion. It will help a lot of other sectors in this country.


While it will help many sectors, the market is is killing the O&G sector (specifically the oil-heavy companies - CLR ~-20%). We obviously have one of the largest oil and gas presences in the country with companies that are heavily involved in the community. If OPEC keeps the production at the same level, oil prices sustained at this level could have a relatively large impact on OKC (whether it is decreased development, community donations, etc.).

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## gopokes88

Just a Black Friday sale of oil companies. CLR now 20% off.

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## bchris02

I think the question at this point is this. How low will oil go? When will we start seeing lower prices effecting OKC and how bad will it get?

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## gopokes88

> I think the question at this point is this. How low will oil go? When will we start seeing lower prices effecting OKC and how bad will it get?


Nobody knows. The Saudis, U.S. producers, the rest of opec and Russia are basically playing Russian roulette with prices to see who goes bankrupt first.

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## sooner88

> Oil over 60 now.


It's been predominantly over 60 for a couple weeks now.

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## OKCPetro83

> This is representative of the kind of arrogant viewpoint that O&G people have of alternative energy.  Lol. Probably still selling buggy whips too.  As long as they keep underestimating energy development progress they will keep falling more and more behind modern times.  At least some of the  big international energy companies have moved heavily Into renewables. Its more about energy development, not about o&g production.  Its a holistic approach that satisfies energy requirements while minimizing negative effects on our world.


Despite what my name may imply, I am not naive enough to realize that the world has changed dramatically and is going to change even more dramatically over this decade. There a convergence of technology that is taking place this decade with solar, batteries, electric vehicles, and autonomous driving that is going to completely change the dynamics of transportation and the delivery of energy. The morons can poo-poo it all they want but they can do that at their own peril. It is going to destroy the demand side of the equation.

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## Pete

Oil up to nearly $65 today.

Highest prices since 2018.

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## Richard at Remax

I'm very pleased I bought Exxon at $33  :Big Grin:

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## SouthOfTheVillage

> I'm very pleased I bought Exxon at $33


Yep, and it will beat the pants off of ICLN and NEE as the Fed moves the economy away from ZIRP. Had to happen at some point, of course.

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## G.Walker

It's going up!

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## G.Walker

https://oilprice.com/Energy/Energy-G...EC-Report.html

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## Plutonic Panda

Gas is over 5 a gallon in California in needles and 3$ across the river in AZ.

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## G.Walker

Back to $100 a barrel? 

https://oilprice.com/Energy/Oil-Pric...ng-To-100.html

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## PoliSciGuy

> https://oilprice.com/Energy/Energy-G...EC-Report.html


Interesting, so oil prices are soaring *now* because demand *might* skyrocket in 6 months?

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## Bellaboo

They are called 'futures'.

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## soonergolfer

The price will continue to go up rapidly, especially if the $3.5 Trillion budget plan gets passed as it stands right now.

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## Rover

> The price will continue to go up rapidly, especially if the $3.5 Trillion budget plan gets passed as it stands right now.


Please link the two. What in this budget affects the price of oil?

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## soonergolfer

The reconciliation cuts back or eliminates all kinds of drilling tax credits and exemptions (drilling cost deduction, step down depletion, marginal well credits, etc.). However, the bigger issue is the added fees and costs that are proposed (increased federal land royalties, federal land per acre price increase, reducing federal lease terms, and probably the biggest is a $500B methane and greenhouse gas tax on producers). 
I promise you, these restrictions are not going to spur more development. Especially in the federal land department.

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## sooner88

> The reconciliation cuts back or eliminates all kinds of drilling tax credits and exemptions (drilling cost deduction, step down depletion, marginal well credits, etc.). However, the bigger issue is the added fees and costs that are proposed (increased federal land royalties, federal land per acre price increase, reducing federal lease terms, and probably the biggest is a $500B methane and greenhouse gas tax on producers). 
> I promise you, these restrictions are not going to spur more development. Especially in the federal land department.


Production from federal lands makes up a relatively small percentage of the total US production....

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## Bellaboo

> Production from federal lands makes up a relatively small percentage of the total US production....


I just looked it up - 1/4 of oil production and 1/8 of NG production is on Federal lands. It's significant. Article was as of January 2021.

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## jedicurt

the Biden Administration in on a pace to approve more drilling on Federal Lands than any other year since 2008...  and that was while not approving any for 90 days.   had that 90 days of no approvals not occurred.  we would be on pace for the DOI to have approved more drilling permits for federal lands than ever before.   Oil Companies will be fine under this administration.

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## soonergolfer

> Production from federal lands makes up a relatively small percentage of the total US production....


That includes offshore drilling. It is a larger portion than you would think.

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## Rover

Less than 1/2 of the leased federal land is actually under production.  Lots left to develop even without more leasing.

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## BG918

Oil hovering around $85.  If only it could just stay in that range.

https://www.nytimes.com/2021/10/19/b...ices-peak.html

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## king183

> Oil hovering around $85.  If only it could just stay in that range.
> 
> https://www.nytimes.com/2021/10/19/b...ices-peak.html


I know we have several experts on this forum, so perhaps one or many of you can respond to this. It seems that the price of oil is only going to go higher as more, aggressive government regulations on fossil fuels increase and more incentives to move into green energy come online in the US and across the world. Large investors are going to be very hesitant to put their money in an industry that’s increasingly under attack, leading to lower or level production at a time when demand is not decreasing as at commensurate rate. Thus, we’re going to see a temporary (2-5 years?) spike in oil prices  while the US transitions to greener fuels but most people are still driving gasoline-powered cars. More people will try to transition to electric cars, while gas-powered cars become less desirable and more difficult to sell on the used market.

Obviously, I’ve made a lot of assumptions above (such as gov’t regulation on fossil fuels being aggressive AND sustained, investors not flooding back into oil production once prices go higher for fear of the aforementioned regulation/taxes killing their investment, etc.)  so please tear those apart.

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## Rover

> I know we have several experts on this forum, so perhaps one or many of you can respond to this. It seems that the price of oil is only going to go higher as more, aggressive government regulations on fossil fuels increase and more incentives to move into green energy come online in the US and across the world. Large investors are going to be very hesitant to put their money in an industry thats increasingly under attack, leading to lower or level production at a time when demand is not decreasing as at commensurate rate. Thus, were going to see a temporary (2-5 years?) spike in oil prices  while the US transitions to greener fuels but most people are still driving gasoline-powered cars. More people will try to transition to electric cars, while gas-powered cars become less desirable and more difficult to sell on the used market.
> 
> Obviously, Ive made a lot of assumptions above (such as govt regulation on fossil fuels being aggressive AND sustained, investors not flooding back into oil production once prices go higher for fear of the aforementioned regulation/taxes killing their investment, etc.)  so please tear those apart.


What govt regulations are keeping them from drilling on the millions of acres leased now?

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## pw405

I'm an employee in one of OKC's larger energy co's.  While I'm certainly not trained in prognosticating the oil futures market, I've followed things closely for the last ~8 years and below are my thoughts on a few points:




> ...
> It seems that the price of oil is only going to go higher as more, aggressive government regulations on fossil fuels increase and more incentives to move into green energy come online in the US and across the world. 
> ...


I believe the above theory to be mostly right, however we're yet to TRULY tests this idea.  Biden's EO to ban new drilling permits on federal land (currently overruled and not in effect) was the closest such action to truly testing this theory.  While it would have taken a year or longer to have a material effect on crude prices - drillers generally have permits ready to drill new wells long before the actual drilling occurs - the cause and effect of this theory is clear and I think few would argue that more aggressive reg's like this can reduce future supply. 




> ...
> 
> Large investors are going to be very hesitant to put their money in an industry thats increasingly under attack... 
> ...


Lending from the large financial institutions to US Oil & Gas producers is a key part of a company's strategy to expand.  Running a drilling rig on land can easily cost $50,000/day. (Likely much more now, I've been out of drilling for a few years.)    Bringing new oil supplies online is VERY capital intensive. And Risky.  Not only are fossil fuel co's under pressure from the green crowd - the lenders get pressure from their shareholders to not lend to fossil fuel co's.  Additionally, the US shale industry had god awful financial performance once oil prices fell back in 2015.  Even with no green-activism pressure on the big investment banks, many banks/lenders are very hesitant to loan money to drillers in fear that another 2015 or 2020 price crash could wipe out many drillers and blow up their entire loan.  US oil producers themselves are a bit hesitant to roll out an aggressive drilling program this year.  After watching oil fall to -$40 just 18 months ago, many drillers are aggressively protecting their capital.  The wrong bet could bankrupt them.




> ...
> 
> Thus, were going to see a temporary (2-5 years?) spike in oil prices  while the US transitions to greener fuels but most people are still driving gasoline-powered cars. More people will try to transition to electric cars, while gas-powered cars become less desirable and more difficult to sell on the used market.
> ...


While it certainly seems we could be entering a ~5 period of higher oil prices now, I get the feeling that the the Exec's of US drillers aren't so confident that high prices will be sustained for 2-5 years.  Maybe their 2022 budgets will begin to reflect this, but as mentioned above, the wrong bet now could put a company out of business.  There is too much uncertainty for many drillers to invest heavily in an aggressive drilling program.   Additionally - the transition to alternative fuels, (natural gas doesn't count) or battery cars will not occur in 2-5 years.  Could we see material progress in 5 years measured by the % of electric vehicles on the road? Sure... will it make a sizeable dent in overall US Oil demand?  Seems unlikely.  

The size, scale, cost, and time of what must be built to "transition" is truly mind boggling to comprehend - from alternative sources (solar panels, windmills, nuclear, hydropower, etc.) to distribution ("smart grids",  new grid transmission lines, some from of grid storage) could take 100+ of years at the pace the US has been building.  This is the one thing I see the general public get EXTREMELY wrong - estimating the size of the job to transition and how much energy production it would take to replace the chemical energy of fossil fuels.

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## BG918

> The size, scale, cost, and time of what must be built to "transition" is truly mind boggling to comprehend - from alternative sources (solar panels, windmills, nuclear, hydropower, etc.) to distribution ("smart grids",  new grid transmission lines, some from of grid storage) could take 100+ of years at the pace the US has been building.  This is the one thing I see the general public get EXTREMELY wrong - estimating the size of the job to transition and how much energy production it would take to replace the chemical energy of fossil fuels.


Agree the full conversion to green energy is a monumental undertaking.  A lot of headway has been made over the past couple decades with regard to wind and solar energy but the percentage that is still tied to fossils fuels is very large.  So while green energy and electric-everything are popular buzz words the reality is that there will still be a need for fossil fuels for several more decades, maybe longer.  Smart companies will begin to diversify from strictly oil & gas to overall energy - possibly incorporating, for example, biofuels and carbon capture technology.  We can't power everything with renewables but can begin to further explore alternative sources like fusion.

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## Rover

> Agree the full conversion to green energy is a monumental undertaking.  A lot of headway has been made over the past couple decades with regard to wind and solar energy but the percentage that is still tied to fossils fuels is very large.  So while green energy and electric-everything are popular buzz words the reality is that there will still be a need for fossil fuels for several more decades, maybe longer.  Smart companies will begin to diversify from strictly oil & gas to overall energy - possibly incorporating, for example, biofuels and carbon capture technology.  We can't power everything with renewables but can begin to further explore alternative sources like fusion.


And we can extend fossil fuel usefulness through some improvements in its processing and infrastructure to significantly impact its negative ecological impact.

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## pw405

> And we can extend fossil fuel usefulness through some improvements in its processing and infrastructure to significantly impact its negative ecological impact.


Even though I'm an "oil man"... I fully believe in climate change and consider it a real risk.  The problem many countries & states have faced that are leading in wind/solar/(others) rollouts is that they have to fight the dreaded "duck curve" - a graph that shows the inverse relationship between solar/wind output & grid demand.  During the day, solar and wind output is high, but then tapers off in the evening.  Power demand ramps up in the evening as people get home, cook meals, run HVAC, electronics, etc. 

Carbon capture is something we need to be talking about more, and funding more.  There is more than 1 way to pull the carbon out of the air and put it back.   One company has direct air carbon capture that changes carbon in to pellets.  Another company injects carbon in to basalt rock formations on the sea floor where it becomes stone and sticks to the pores in the rock.  

A few really helpful videos to explain:

Duck Curve & Challenges:
https://youtu.be/YYLzss58CLs

Direct air capture tech:  
https://youtu.be/XHX9pmQ6m_s

Follow up 2 years later:  
https://youtu.be/cxVFopLpIQY

Sea bed injection tech: 
https://www.youtube.com/watch?v=Ar4tDqDbn3k

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## Canoe

Oil is at a decade long high. This has to be good news for local companies and development.

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## Bits_Of_Real_Panther

$125 this evening 
How high will it go?

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## Plutonic Panda

I’m also reading that Oklahoma oil producers are reluctant to boost production why is that? Gas is getting over seven dollars a gallon in some areas in LA

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## chssooner

> I’m also reading that Oklahoma oil producers are reluctant to boost production why is that? Gas is getting over seven dollars a gallon in some areas in LA


Because what goes up, must come down. The oil producers get bashed when they don't over-hire and extend too far, then get bashed when they have to let people go because of lower prices. So they are just going to stay status quo. 

And this isn't just Oklahoma oil producers, but pretty much all around the country. They are learning from past mistakes.

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## April in the Plaza

> I’m also reading that Oklahoma oil producers are reluctant to boost production why is that? Gas is getting over seven dollars a gallon in some areas in LA


It’s also not easy, in this market, to increase production. There’s only so many rigs / service companies available because of labor shortages. Of course, high o&g prices might solve some of the labor issues.

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## soonergolfer

The O&G companies have been backed into this corner. There is absolutely no financing available to fund large sale projects. They have been so vilified over the last year that banks will not lend. Therefore, there are no smaller E&P companies that can fund decent sized projects. 
The companies that have seen a windfall of cash flows recently are not going to reinvest like the old days. They are quite happy being flush with cash and riding it out. There is no reason for large companies to spend much more, only to risk more taxes, regulations and red tape. Most of the bigs are looking at 100% over their 2022 projections as it sits now.

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## Bits_Of_Real_Panther

Historically, a surge in crude-oil prices of this magnitude have ended U.S. economic expansions and tipped the U.S. economy into recession, according to Pictet Asset Management. 

In the past 50 years, every time oil prices, adjusted for inflation, rose 50% above trend, a recession followed, data from Luca Paolini, chief strategist at Pictet, show. Brent, the international gauge for prices, climbed well above $110 a barrel this week, crossing that threshold on worries about disruption to Russias exports after https://www.bloomberg.com/news/artic...-u-s-recession

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## OKC Guy

Keystone Pipeline Would Have Delivered 830,000 BARRELS OF OIL PER DAY to US — More than Current Daily Russian Imports..  Was shut down, not good.  We are funding both sides of war, not good.

Green energy pressure on large banking industry shut down major financing to oil industry, not good.

US is now going to release more SPR which is already at 19 year low and leaves us vulnerable if we have any real oil emergency, not good.

US is now going to reduce sanctions on Venz for oil, not good.

US is going to make a deal with sworn enemy Iran to buy oil from them and agree to nuke deal, not good.

US is going to beg SA to release more oil, not good.

Elon Musk said we must get back to producing more oil, and if he is saying that as an electric car company its serious.  He agrees we cannot go green overnight and now we’re in a pickle.

All this has happened in just over 1 year.  We were mostly energy independent now we are in crisis begging bad countries to sell us more oil and as always the US citizens pay the price.

Actions have consequences

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## Ryan

> Keystone Pipeline Would Have Delivered 830,000 BARRELS OF OIL PER DAY to US  More than Current Daily Russian Imports..  Was shut down, not good.  We are funding both sides of war, not good.
> 
> Green energy pressure on large banking industry shut down major financing to oil industry, not good.
> 
> US is now going to release more SPR which is already at 19 year low and leaves us vulnerable if we have any real oil emergency, not good.
> 
> US is now going to reduce sanctions on Venz for oil, not good.
> 
> US is going to make a deal with sworn enemy Iran to buy oil from them and agree to nuke deal, not good.
> ...


This is somewhat shortsighted. We still havent recouped the 3 milllion barrels per day we discontinued due to pandemic shutdowns. Also paying Canada isnt much better. Smart play would be to use the oil as leverage on a company that is crashing and burning. Better yet would be some direct action  But I imagine if a crazed dictator holding the world hostage with nukes may need to look at long game options to avoid nuclear issues. I promise you gas will go down. Hell they layoff have the statewide workforce every 18 months. Not to mention my energy stocks in Devon and CR have increased nearing 300% in the last 12 months. The more we pay at the pump the better it is for oklahomas economy. Maybe even get a new Devon tower out of it. Look were nearing 1 million deaths,( certainly most were voters) truckers are clogging the freeways like BLM over mask  vaccine mandates.  I mean some say tomato some say infantile foot stomping over a minor inconvenience. I say have a coke and a smile and get your robinhood account open. Play your cards right and those stock dividends could pay for your gas for the next few years.

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## Plutonic Panda

I support the Keystone Pipeline but I thought that oil was going to be shipped out of the US once refined?

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## PhiAlpha

> I support the Keystone Pipeline but I thought that oil was going to be shipped out of the US once refined?


That was a popular anti-pipeline talking point but was not likely to be reality. The pipeline was being built to move heavier oil from Canada down to refineries that are set up to refine heavier oil on the Gulf Coast. At that point, the refined products would go to whoever the purchasers of them were.

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## PhiAlpha

> I’m also reading that Oklahoma oil producers are reluctant to boost production why is that? Gas is getting over seven dollars a gallon in some areas in LA


As others have said, producers are pretty gun shy about ramping up operations based on a temporary price spike, especially after the massive losses sustained over the last few years. There are also labor shortages after all the layoffs over the last 2 years (especially on the service company side) which has made lining up rigs and completion crews much more difficult than during the 2010-2019 timeframe. 

On the financing side, private equity, which helped keep the independent sector of the industry going between 2014-2019 has all but dried up due to the losses that private equity firms took during that time frame. Too many good ideas that didn't pan out nearly as well as projected which led to reserve estimates (and asset/company values) being slashed. The anti-fossil fuel push has also had an effect on industry investment but not near as much as poor performance and the low commodity price environment have. Also, I don't know to what extent this is the case across the board but I know a few of my clients are hedged at between $60-$80 per bbl so there's not much incentive to ramp up production until those hedges get closer to falling off. 

While many of the majors and publicly traded companies are actually exercising restraint for a change, many private companies that are in good financial condition are gearing up their exploration programs in an attempt to capitalize on what seems like will be a favorable pricing environment for the foreseeable future. If prices stay over $80/bbl I would guess the majors and public companies will follow suit later this year or into Q1 2023. 

As for the reasons that prices are so high right now...other than the obvious (geopolitical instability), the lack of outside investment as well as the consolidation and massive production cuts that occurred due to the pandemic oversupply crisis are the main contributors. The price was always going to increase when demand returned and corrected the imbalance caused by the pandemic and inability of the industry to quickly return to pre-pandemic production levels. I and many others thought we'd be looking at $100+ oil this summer and the instability in Russia/Ukraine has sped that up. What's interesting is that all of this price movement has been completely based on speculation that a bunch of Russian oil is about to be taken off the market...but nothing has actually been taken off the market yet. There was an announcement that Iran was going to be allowed to trade their oil on the market again which only caused a minor dip before oil resumed it's climb. If a full embargo goes into effect, it will be interesting to see how high it goes. 

From a political perspective, as tired as I am of all of the Biden administration's anti-oil and gas rhetoric and illogical/ineffective policy decisions regarding the oil and gas industry, the Biden administration really has had little to do with the price going up. Anyone who has followed my posts here knows I'm definitely not a democrat or supporter of Joe Biden but any attempt to lay all the blame at the foot of his administration without also explaining the other factors that got us to this point is dishonest (just as politicians like Bernie Sanders blaming oil and gas companies for the price increase is). Any pundit or politician that puts all the blame on Biden or the Oil and Gas Industry is being either being ignorant or dishonest. That said, the Biden administration certainly is not doing anything to help the situation. Approving the Keystone XL Pipeline wouldn't immediately bring more oil onto the domestic market but would by mid-2023 if approved now. Given that it is a publicly traded commodity, the sentiment that more oil would eventually be on the market would likely help drive the price down. Same story for resuming the onshore and offshore federal leasing programs. If resumed, it would take a few years to see production from new leases (longer for offshore), but again, the sentiment that more domestic oil would enter the market eventually might help drive down the price. Doing nothing because those options don't immediately bring production onto the market and acting like they're trying to find a short term solution (that doesn't exist), is both shortsighted and frankly ridiculous, which is a word that accurately summarizes this administration's energy policy so far. It should say something when even Elon Musk supports increasing oil and gas production and said that in his opinion, renewable energy isn't anywhere near being capable of making up the difference right now.

I don't know at what point the price starts negatively effecting OK's economy but in the short term, the high prices should significantly increase royalties going directly to the state and will absolutely help any companies in the E&P sector here. If the price can stabilize and land consistently in the $80-$100 range, I think that's a sweet spot that will work well for both producers and consumers. If natural gas can stay over $3-4/mmbtu that helps as well.

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## Plutonic Panda

^^^ okay good to know! Maybe this crisis will get it started again.


Hopefully this situation can have a silver lining for Oklahoma.

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## Ryan

> I support the Keystone Pipeline but I thought that oil was going to be shipped out of the US once refined?


Actually I think I stand corrected. I was thinking DAPL

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## Ryan

> As others have said, producers are pretty gun shy about ramping up operations based on a temporary price spike, especially after the massive losses sustained over the last few years. There are also labor shortages after all the layoffs over the last 2 years (especially on the service company side) which has made lining up rigs and completion crews much more difficult than during the 2010-2019 timeframe. 
> On the financing side, private equity, which helped keep the independent sector of the industry going between 2014-2019 has all but dried up due to the losses that private equity firms took during that time frame. Too many good ideas that didn't pan out nearly as well as projected which led to reserve estimates (and asset/company values) being slashed. The anti-fossil fuel push has also had an effect on industry investment but not near as much as poor performance and the low commodity price environment have. Also, I don't know to what extent this is the case across the board but I know a few of my clients are hedged at between $60-$80 per bbl so there's not much incentive to ramp up production until those hedges get closer to falling off. 
> 
> While many of the majors and publicly traded companies are actually exercising restraint for a change, many private companies that are in good financial condition are gearing up their exploration programs in an attempt to capitalize on what seems like will be a favorable pricing environment for the foreseeable future. If prices stay over $80/bbl I would guess the majors and public companies will follow suit later this year or into Q1 2023. 
> 
> As for the reasons that prices are so high right now...other than the obvious (geopolitical instability), the lack of outside investment as well as the consolidation and massive production cuts that occurred due to the pandemic oversupply crisis are the main contributors. The price was always going to increase when demand returned and corrected the imbalance caused by the pandemic and inability of the industry to quickly return to pre-pandemic production levels. I and many others thought we'd be looking at $100+ oil this summer and the instability in Russia/Ukraine has sped that up. What's interesting is that all of this price movement has been completely based on speculation that a bunch of Russian oil is about to be taken off the market...but nothing has actually been taken off the market yet. There was an announcement that Iran was going to be allowed to trade their oil on the market again which only caused a minor dip before oil resumed it's climb. If a full embargo goes into effect, it will be interesting to see how high it goes. 
> 
> From a political perspective, as tired as I am of all of the Biden administration's anti-oil and gas rhetoric and illogical/ineffective policy decisions regarding the oil and gas industry, the Biden administration really has had little to do with the price going up. Anyone who has followed my posts here knows I'm definitely not a democrat or supporter of Joe Biden but any attempt to lay all the blame at the foot of his administration without also explaining the other factors that got us to this point is dishonest (just as politicians like Bernie Sanders blaming oil and gas companies for the price increase is). Any pundit or politician that puts all the blame on Biden or the Oil and Gas Industry is being either being ignorant or dishonest. That said, the Biden administration certainly is not doing anything to help the situation. Approving the Keystone XL Pipeline wouldn't immediately bring more oil onto the domestic market but would by mid-2023 if approved now. Given that it is a publicly traded commodity, the sentiment that more oil would eventually be on the market would likely help drive the price down. Same story for resuming the onshore and offshore federal leasing programs. If resumed, it would take a few years to see production from new leases (longer for offshore), but again, the sentiment that more domestic oil would enter the market eventually might help drive down the price. Doing nothing because those options don't immediately bring production onto the market and acting like they're trying to find a short term solution (that doesn't exist), is both shortsighted and frankly ridiculous, which is a word that accurately summarizes this administration's energy policy so far. It should say something when even Elon Musk supports increasing oil and gas production and said that in his opinion, renewable energy isn't anywhere near being capable of making up the difference right now.
> 
> I don't know at what point the price starts negatively effecting OK's economy but in the short term, the high prices should significantly increase royalties going directly to the state and will absolutely help any companies in the E&P sector here. If the price can stabilize and land consistently in the $80-$100 range, I think that's a sweet spot that will work well for both producers and consumers. If natural gas can stay over $3-4/mmbtu that helps as well.


Another thing to keep in mind. O&G is the most volatile commodity  currently and one of the most volatile in history. They have a responsibility to bleed us as much as they can. While the can. Before the next bust. Oil will tumble again. It’s a a postulate not a theory. Meanwhile. I say buy some stock. And enjoy the fact that you can’t walk outside in Oklahoma without getting slapped in the face with a new job or someone trying to hire you.

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## Rover

> As others have said, producers are pretty gun shy about ramping up operations based on a temporary price spike, especially after the massive losses sustained over the last few years. There are also labor shortages after all the layoffs over the last 2 years (especially on the service company side) which has made lining up rigs and completion crews much more difficult than during the 2010-2019 timeframe. 
> 
> On the financing side, private equity, which helped keep the independent sector of the industry going between 2014-2019 has all but dried up due to the losses that private equity firms took during that time frame. Too many good ideas that didn't pan out nearly as well as projected which led to reserve estimates (and asset/company values) being slashed. The anti-fossil fuel push has also had an effect on industry investment but not near as much as poor performance and the low commodity price environment have. Also, I don't know to what extent this is the case across the board but I know a few of my clients are hedged at between $60-$80 per bbl so there's not much incentive to ramp up production until those hedges get closer to falling off. 
> 
> While many of the majors and publicly traded companies are actually exercising restraint for a change, many private companies that are in good financial condition are gearing up their exploration programs in an attempt to capitalize on what seems like will be a favorable pricing environment for the foreseeable future. If prices stay over $80/bbl I would guess the majors and public companies will follow suit later this year or into Q1 2023. 
> 
> As for the reasons that prices are so high right now...other than the obvious (geopolitical instability), the lack of outside investment as well as the consolidation and massive production cuts that occurred due to the pandemic oversupply crisis are the main contributors. The price was always going to increase when demand returned and corrected the imbalance caused by the pandemic and inability of the industry to quickly return to pre-pandemic production levels. I and many others thought we'd be looking at $100+ oil this summer and the instability in Russia/Ukraine has sped that up. What's interesting is that all of this price movement has been completely based on speculation that a bunch of Russian oil is about to be taken off the market...but nothing has actually been taken off the market yet. There was an announcement that Iran was going to be allowed to trade their oil on the market again which only caused a minor dip before oil resumed it's climb. If a full embargo goes into effect, it will be interesting to see how high it goes. 
> 
> From a political perspective, as tired as I am of all of the Biden administration's anti-oil and gas rhetoric and illogical/ineffective policy decisions regarding the oil and gas industry, the Biden administration really has had little to do with the price going up. Anyone who has followed my posts here knows I'm definitely not a democrat or supporter of Joe Biden but any attempt to lay all the blame at the foot of his administration without also explaining the other factors that got us to this point is dishonest (just as politicians like Bernie Sanders blaming oil and gas companies for the price increase is). Any pundit or politician that puts all the blame on Biden or the Oil and Gas Industry is being either being ignorant or dishonest. That said, the Biden administration certainly is not doing anything to help the situation. Approving the Keystone XL Pipeline wouldn't immediately bring more oil onto the domestic market but would by mid-2023 if approved now. Given that it is a publicly traded commodity, the sentiment that more oil would eventually be on the market would likely help drive the price down. Same story for resuming the onshore and offshore federal leasing programs. If resumed, it would take a few years to see production from new leases (longer for offshore), but again, the sentiment that more domestic oil would enter the market eventually might help drive down the price. Doing nothing because those options don't immediately bring production onto the market and acting like they're trying to find a short term solution (that doesn't exist), is both shortsighted and frankly ridiculous, which is a word that accurately summarizes this administration's energy policy so far. It should say something when even Elon Musk supports increasing oil and gas production and said that in his opinion, renewable energy isn't anywhere near being capable of making up the difference right now.
> ...


Meanwhile large o&g companies have made more than $2 Trillion in the last 2 decades, $174 BILLION just in 2021.  Keep in mind that it is easy to change the P&L numbers based on value of reserves, which are based on pricing.  It's easy to be making cash and still showing a big loss.  It is an art.

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## PhiAlpha

> Meanwhile large o&g companies have made more than $2 Trillion in the last 2 decades, $174 BILLION just in 2021.  Keep in mind that it is easy to change the P&L numbers based on value of reserves, which are based on pricing.  It's easy to be making cash and still showing a big loss.  It is an art.


Reserve values aren’t just based on commodity pricing but a number of variables. The write down that most of the industry took between 2018 and 2020 was largely due to well results showing that a third to half as many wells could be drilled within the target formations in a unit in some play areas than than their  overly optimistic initial projections indicated were possible. That was an issue across the board, no matter the company size.

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## BG918

> Oil is at a decade long high. This has to be good news for local companies and development.


Double-edged sword.  Good for the companies and royalty owners' bottom line, bad for consumers paying much higher prices for not only gasoline but everything else transported by trucks.  IF there is a significant increase in production there would be a hiring surge but as others have stated most companies are reluctant to increase due to lack of private equity/financing and adequate labor.

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## April in the Plaza

> Meanwhile large o&g companies have made more than $2 Trillion in the last 2 decades, $174 BILLION just in 2021.  Keep in mind that it is easy to change the P&L numbers based on value of reserves, which are based on pricing.  *It's easy to be making cash and still showing a big loss.  It is an art.*


An art that isn't all that unique to the o&g business. Plenty of companies have figured out that game.

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## Rover

> An art that isn't all that unique to the o&g business. Plenty of companies have figured out that game.


True. But O&G and commercial real estate have huge breaks most dont enjoy.

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## jedicurt

> Keystone Pipeline Would Have Delivered 830,000 BARRELS OF OIL PER DAY to US — More than Current Daily Russian Imports..  Was shut down, not good.


Keystone Pipeline was not shut down. it still pushes oil to this day.   the XL Expansion was scrapped.   But Canadian Oil is still flowing to our refineries via the Keystone Pipeline and then being sold on the world market, but not to the US...

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## jarrington00

Question (Non-Political):
Would the US being energy independent be good or bad for Oklahoma?  Would prices be too low as they were in 2019?

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## PhiAlpha

> Keystone Pipeline was not shut down. it still pushes oil to this day.   the XL Expansion was scrapped.   But Canadian Oil is still flowing to our refineries via the Keystone Pipeline and then being sold on the world market, but not to the US...


Most of the Canadian oil from the current keystone pipeline has flowed to refineries in the Midwest since 2010. We import around 4.5 million bbls per day from Canada, who is our largest source of imported oil making up 61% of our total yearly imports. You mean to tell me that you know for a fact that none of the Canadian oil transported by the keystone pipeline and refined in our refineries is used domestically?

You also know for a fact that none of the additional 830k bbl per day from the keystone XL pipeline would be refined and consumed in the US?

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## PhiAlpha

> Question (Non-Political):
> Would the US being energy independent be good or bad for Oklahoma?  Would prices be too low as they were in 2019?


From an energy security standpoint it would absolutely be better. Price would still all depend on how much was produced vs how much was being consumed. The commodity pricing environment is cyclical and would be no matter what the market. Oversupply in 2019 caused the price to drop and that paired with the demand destruction caused by the pandemic caused it to drop historically lower. Just like in the past, new drilling and production were cut and the price rebounded. It would still be a globally traded commodity and affected by global supply/demand and geopolitical issues, just as it was between 2015-2020 but it would likely help keep the cost of WTI lower than Brent and other international indexes. Right now the price is going to the moon based on the concern that Russian oil will be taken off the world/domestic market. If we were producing enough additional oil to offset at minimum what we consume from Russia, it would definitely help.

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## PhiAlpha

> True. But O&G and commercial real estate have huge breaks most don’t enjoy.


Do you have any info to back that up? Im genuinely curious as i haven’t compared the P&L tax deductions available across the board.

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## sooner88

> Do you have any info to back that up? Im genuinely curious as i havent compared the P&L tax deductions available across the board.


The ability for O&G companies to deduct IDCs, write off tangible drilling costs, plus standard DD&A is extremely advantageous. 

Real estate has numerous options for reducing or deferring debt (deducting expenses, depreciation, 1031 exchanges, pass-through deductions, etc.)

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## PhiAlpha

> The ability for O&G companies to deduct IDCs, write off tangible drilling costs, plus standard DD&A is extremely advantageous. 
> 
> Real estate has numerous options for reducing or deferring debt (deducting expenses, depreciation, 1031 exchanges, pass-through deductions, etc.)


I definitely agree, I just wasn’t aware that there weren’t also advantageous deductions in other mining industries or other industries.

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## jedicurt

if you took that i was saying zero percent would be used domestically, that wasn't what was intended.   I just think that TC Energy has made it pretty clear they are intent on sending a majority of the refined products to the international market after their splits with ConocoPhillips on interests in production areas, as well as stake in keystone itself.  i'm much more positive about projects like Enbridge 3.  Enbridge has a longer track record of willing to keep their refined products back to Canada and in the US

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## Bunty

> Because what goes up, must come down. The oil producers get bashed when they don't over-hire and extend too far, then get bashed when they have to let people go because of lower prices. So they are just going to stay status quo. 
> 
> And this isn't just Oklahoma oil producers, but pretty much all around the country. They are learning from past mistakes.


The lack of interest to increase oil drilling in Oklahoma is reflected from the lack of earthquakes going on in Oklahoma for the past week.  Only 3 or so weak ones.  During the wildly booming past, that figure would often be over *60* earthquakes.  I bet the problem from earthquakes doesn't help encourage increased drilling in Oklahoma.  Earlier this year, due to a 4.5 earthquake in northern Oklahoma, the state corporation commission had to make restrictions on oil companies in the area affected.

Recent Oklahoma Earthquakes: https://stillwaterweather.com/okareaearthquakes

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## April in the Plaza

> The lack of interest to increase oil drilling in Oklahoma is reflected from the lack of earthquakes going on in Oklahoma for the past week.  Only 3 or so weak ones.  During the wildly booming past, that figure would often be over 60 earthquakes.  *I bet the problem from earthquakes doesn't help encourage increased drilling in Oklahoma.*  Earlier this year, due to a 4.5 earthquake in northern Oklahoma, the state corporation commission had to make restrictions on oil companies in the area affected.
> 
> Recent Oklahoma Earthquakes: https://stillwaterweather.com/okareaearthquakes


It's not really part of the current calculus at all.

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## OKCRealtor

Some good info in here, appreciate the input from you guys. How high do you think gas prices get and how many months before we maybe see some relief? Both of our vehicles call for 91 octane and it's adding up already. Really feel for people already going month to month. Inflation with current oil crises and war are going to make it much more difficult for a lot of folks.

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## OkiePoke

> Some good info in here, appreciate the input from you guys. How high do you think gas prices get and how many months before we maybe see some relief? Both of our vehicles call for 91 octane and it's adding up already. Really feel for people already going month to month. Inflation with current oil crises and war are going to make it much more difficult for a lot of folks.


Unless you are racing your vehicle, you can get away with using 87. Your car's computer will retard the timing if it sees any detonation. Something that may only happen during the summer once the temps increase.

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## OKCRealtor

> Unless you are racing your vehicle, you can get away with using 87. Your car's computer will retard the timing if it sees any detonation. Something that may only happen during the summer once the temps increase.


One is a BMW which I lease. The dealership told me they can tell when it's hooked up to computer if the car has had less than 91..any insight on that? BS? Our other vehicle I'm not worried about as we own it outright and have an extended warranty and it runs fine on 87 but I don't want to mess around with the BMW since it's a lease.

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## Zuplar

> One is a BMW which I lease. The dealership told me they can tell when it's hooked up to computer if the car has had less than 91..any insight on that? BS? Our other vehicle I'm not worried about as we own it outright and have an extended warranty and it runs fine on 87 but I don't want to mess around with the BMW since it's a lease.


They may be looking at the timing curves and see when it retards the timing to compensate for the lower octane fuel. I'm not sure if that is indeed a thing, but seems plausible with the data loggers these cars have now a days.

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## FighttheGoodFight

> One is a BMW which I lease. The dealership told me they can tell when it's hooked up to computer if the car has had less than 91..any insight on that? BS? Our other vehicle I'm not worried about as we own it outright and have an extended warranty and it runs fine on 87 but I don't want to mess around with the BMW since it's a lease.


Dependent on the model I would make sure to run 91 in it. I'd read the manual. If it says 91 is required then do it.

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## Bunty

> It's not really part of the current calculus at all.


In other words, it has much to do with the highly volatile price of oil.  Today it plunged to $15 or more.  As well as other issues already brought up.

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## PhiAlpha

> if you took that i was saying zero percent would be used domestically, that wasn't what was intended.   I just think that TC Energy has made it pretty clear they are intent on sending a majority of the refined products to the international market after their splits with ConocoPhillips on interests in production areas, as well as stake in keystone itself.  i'm much more positive about projects like Enbridge 3.  Enbridge has a longer track record of willing to keep their refined products back to Canada and in the US


Gotcha. Shouldn’t have made that assumption.

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## PhiAlpha

> In other words, it has much to do with the highly volatile price of oil.  Today it plunged to $15 or more.  As well as other issues already brought up.


Yes it’s been about as wild to watch over the last week or two as it was back in March-April 2020. Though no doubt from an industry and OK economy perspective, I much prefer these fluctuations over those lol. Who would’ve thought we’d get to watch the commodity market react on opposite ends of the spectrum to two events that seem slightly apocalyptic (obviously that’s an exaggeration but still lol) over the span of two years? *We’ve seen a price swing of $165/bbl (WTI) in under 23 months* and there’s a decent chance that it may end up a $200 swing when all is said and done. Never thought I’d see anything like that. 

That said, it’s great that things have settled down a bit. Though we’re still at the highest WTI price since 2008, at least it’s jumped off the rocket for a minute.

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## Bits_Of_Real_Panther

Natural gas prices are high, wonder if if continues. I tried to paste a natty price chart in, but I'm having copy/ paste/embed issues.

Link instead:

https://finviz.com/futures_charts.ashx?p=d1&t=NG

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## Pete

Gasoline prices are now under $3.40 in spots with some even lower than that.

Looks like we could be below $3 before long.

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## Pete

Quick search on Gasbuddy.com reveals some area stations are already below the $3 mark:

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## Bill Robertson

I like hearing that. Cheapest I've actually seen is 3.41 this morning. But it's been dropping almost daily for at least a week.

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## soonergolfer

> Natural gas prices are high, wonder if if continues. I tried to paste a natty price chart in, but I'm having copy/ paste/embed issues.
> 
> Link instead:
> 
> https://finviz.com/futures_charts.ashx?p=d1&t=NG


You should look up the spot price for NG in Europe, it’s about 7-8X more than in the US. I don’t see it going down much, especially rolling into the winter. A lot of the US supply will be going to Europe unless something dramatically changes with the Russian war.

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## Bill Robertson

> You should look up the spot price for NG in Europe, its about 7-8X more than in the US. I dont see it going down much, especially rolling into the winter. A lot of the US supply will be going to Europe unless something dramatically changes with the Russian war.


I heard a piece on NPR recently about Europe quickly building a few liquified NG offloading and storage facilities for product that will be exported from here. So that will keep our domestic NG prices up.

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## BDP

> I heard a piece on NPR recently about Europe quickly building a few liquified NG offloading and storage facilities for product that will be exported from here. So that will keep our domestic NG prices up.


How much LNG gets used domestically? I thought most of it is CNG?

How much would a rise in LNG costs affect CNG? I imagine it wouldn't be 1:1, but a full understanding of commodities pricing has always eluded me, lol.

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## liirogue

> How much LNG gets used domestically? I thought most of it is CNG?
> 
> How much would a rise in LNG costs affect CNG? I imagine it wouldn't be 1:1, but a full understanding of commodities pricing has always eluded me, lol.


Both LNG and CNG come from natural gas - natural gas can be compressed (CNG) or liquified (LNG) as a way to transport the gas, such as using a ship. Bill is saying that the increase in demand (for either of those products really) will drive up the cost of natural gas here, even if it’s used domestically and not turned into LNG or CNG.

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## Snowman

> How much LNG gets used domestically? I thought most of it is CNG?
> 
> How much would a rise in LNG costs affect CNG? I imagine it wouldn't be 1:1, but a full understanding of commodities pricing has always eluded me, lol.


There are limits to how much LNG they can get out of the country, both as far as facilities and ships to transport it, which is a tiny fraction of domestic use. So they are not exactly tied, and this is on top of there are a range of costs to cool it to the point of being a liquid and storying it that way which does not effect CNG.

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