Just to be clear here, Saudi Arabia has already come out and said they would be open to discussing a cut but they were very clear that they, themselves haven't proposed any form of cut by OPEC members. I think the article makes this clear but the headline is misleading.
The biggest issue for many of the first world oil produces and services is that they levered up on debt in the past 6 years when money was cheap and now alot of loans are coming due in the next 18 months.
Larry Fink, of BlackRock fame, has come out and said as many as 400 energy companies may not survive due to their debt loads and the current value of WTI. [1]
The junk bond market is about to become overcrowded.
As for the OPEC members, they are in a tough deflationary spiral where the lower price of oil means they need to produce more barrels to meet their governmental budget demands, which pushes down the price of oil, which leads to them needing to produce more barrels of oil, and so on and so on.....
It's crazy how the world is held hostage economically if they aren't paying enough for oil.
"Squeeze consumers or the world gets it!"
Still, I'd like to see taxes go up on gas in the USA with a specifically funded program based on the excess. Something like holding gas at $2/gallon - if it goes up, then the extra tax ends.
Something like holding gas at $2/gallon - if it goes up, then the extra tax ends.
It's an interesting idea, but I think it would cause havoc with gov't budgets. Could you imagine if oil prices went up and suddenly that $0.50/gal tax disappeared overnight?
It seems like gov'ts in oil producing countries have a hard enough time budgeting based on the oil royalties they receive. I know Alberta, Canada has gotten hammered again and again when they assumed royalty revenue would stay high and it dropped like a rock.
> Could you imagine if oil prices went up and suddenly that $0.50/gal tax disappeared overnight?
Great point. This is the same thing that's happening now with tobacco taxes and lottery revenue. Tax money is fungible so the repercussions will cascade beyond the original programs the money would be allocated to.
I don't mean the funds should be used for a continuous project that needs continuous funds, like how lottery/cigarette taxes are used to replace other taxes.
I mean it should fund something not being funded right now because the money simply doesn't exist and the tax law should be ONLY for that project and not fungible.
That would be a fantastic idea in general (tax money funds a specific project), but you'd still have the problem of the unpredictability of the tax revenue.
It would be great to fund a new program using a gas tax like the one you suggested, but could you imagine the blow-back if oil prices went back up and suddenly closed the new program down?
Title should read "Russia hopes Saudis will propose global oil production cut". With Iran coming back into the world market, Saudi Arabia has an interest in keeping prices low to prevent Iran from pulling in billions in oil revenue. Further, there's a hard limit on how high prices can climb now that natural gas wells in North America (and elsewhere) are ready to resume production as soon as the price warrants it.
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[ 1.5 ms ] story [ 33.5 ms ] threadThe biggest issue for many of the first world oil produces and services is that they levered up on debt in the past 6 years when money was cheap and now alot of loans are coming due in the next 18 months.
Larry Fink, of BlackRock fame, has come out and said as many as 400 energy companies may not survive due to their debt loads and the current value of WTI. [1]
The junk bond market is about to become overcrowded.
As for the OPEC members, they are in a tough deflationary spiral where the lower price of oil means they need to produce more barrels to meet their governmental budget demands, which pushes down the price of oil, which leads to them needing to produce more barrels of oil, and so on and so on.....
[1] http://www.bloomberg.com/news/articles/2016-01-27/blackrock-...
"Squeeze consumers or the world gets it!"
Still, I'd like to see taxes go up on gas in the USA with a specifically funded program based on the excess. Something like holding gas at $2/gallon - if it goes up, then the extra tax ends.
It's an interesting idea, but I think it would cause havoc with gov't budgets. Could you imagine if oil prices went up and suddenly that $0.50/gal tax disappeared overnight?
It seems like gov'ts in oil producing countries have a hard enough time budgeting based on the oil royalties they receive. I know Alberta, Canada has gotten hammered again and again when they assumed royalty revenue would stay high and it dropped like a rock.
Great point. This is the same thing that's happening now with tobacco taxes and lottery revenue. Tax money is fungible so the repercussions will cascade beyond the original programs the money would be allocated to.
I mean it should fund something not being funded right now because the money simply doesn't exist and the tax law should be ONLY for that project and not fungible.
It would be great to fund a new program using a gas tax like the one you suggested, but could you imagine the blow-back if oil prices went back up and suddenly closed the new program down?
Basically he says that the Saudis don't trust OPEC, are pro production cuts but won't cut their own production because they got burned in the past.