So Long Oil DA, We hardly Knew Yee

Based on the debates I’ve judged cutting uniqueness updates is about as popular as going line by line, so for those of you to busy cutting your fear of the ocean updates here is a little newsflash. Oil prices have plummeted recently, falling way below most disad threshold cards prices of 100$ a barrel

 

Crude oil prices accelerated their decline on Thursday, with the main international benchmark falling about 2 percent and the American equivalent dropping below $90 a barrel.

Now at their lowest levels since 2012, crude prices have been under pressure in recent months. The increase in global demand for oil this year is turning out to be slower because of weaker-than-anticipated growth in China and Europe, while oil supplies remain strong, leading to growing inventories.

But the sudden drop on Thursday was seen as a response to Saudi Arabia’s signaling on Wednesday to the markets that it was more interested in maintaining market share than in defending prices. Saudi Aramco, the national oil company, stunned markets by announcing that it was cutting prices by about $1 a barrel to Asia, the crucial growth market for the Persian Gulf producers, as well as by 40 cents a barrel to the United States.

This is particularly harmful to the disad because the “backstopping”link that most of you read is exactly what is happening. Saudi Arabia is a “low cost” producer- they can produce oil at a per barrel price far below the global price. They sell oil at higher prices when they want to, but given the choice they could lower the price and still make a profit. Russia, on the other hand, is a high cost producer. To get oil in Russia you need to drill through all kinds of ice and broken WW2 tanks and what not which makes their price to turn a profit higher than Saudi Arabias. “Backstopping”is the idea that even though Saudi Arabia makes more per barrel at a high price, they might adopt a market strategy that keeps prices low so they make less per barrel but sell more barrels- essentially becoming a sort of oil costco.

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3 responses to “So Long Oil DA, We hardly Knew Yee

  1. Happened to stumble across a potential neg lifeline — “Oil prices continued falling Thursday, dipping to levels last seen almost two years ago, despite a steady drumbeat of perilous developments from Ukraine to Iraq to Hong Kong.

    But for all the turmoil in oil markets, not all petrostates are panicking. Although big producers, from Saudi Arabia to Russia, rely on high crude prices to balance their budgets, the price hasn’t dropped low enough, or long enough, to fiscally squeeze them just yet. ” http://www.foreignpolicy.com/articles/2014/10/02/oil_prices_are_falling_not_oil_regimes_opec_russia_saudis_iraq

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