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OIL PRICES HAVE today hit their lowest level for five-and-a-half years.
West Texas Intermediate – a grade of crude oil used as a benchmark for oil pricing – marked prices down to $48.49 (€40.70) a barrel, a low that hasn’t been seen since April 2009.
In London this morning, Brent North Sea crude had its delivery for February down to $51.23 (€43) a barrel.
Speaking about this today, head of research at trading firm Accendo Markets Mike van Dulken, said:
The oil price fell further to pring fresh five-year lows… on a combination of over-supply fears, a Saudi state-owned oil company cutting prices to Europe and the US, a strong dollar and the increased bets on further falls.
The Dollar
The dollar has been enjoying a period of strength that has attributed to the fall in oil prices.
Yesterday the euro hit a nine-year low against the US currency – this comes before expected quantitative easing stimulus from the European Central Bank.
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There are also concerns regarding Greece’s possible exit from the Eurozone.
Ireland
While the crash in oil prices is bad for oil traders and producing countries – it is good news for the Irish consumer.
According to consumer website fuels.ie, prices have fallen to as low as 121.9c for a litre of petrol and 114.9c for a litre of diesel. The cheapest petrol was to be found at a station on Enniskillen Road in Belturbet, Co Cavan – while the country’s cheapest diesel is being sold at Gabota Oil Ltd in Clondalkin, Dublin 22.
fuels.ie
fuels.ie
There had previously been criticism around savings in the global oil market not being passed on at the fuel pumps. Figures from the CSO showed that prices had gone down by only 3% for petrol and 5.5% for diesel during 2014.
This was mostly put down to the high taxes placed on fuel in Ireland – which are not adjusted in line with the decline in the global price of oil.
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The price is around 40c a litre.. The Government get the other 90c in tax.. A complete joke when you consider how high our motor tax is and the illegal vrt we’re charged in this country..
I don’t know what you mean by lately, but it was ~1.50/litre for diesel in August last year and 1.21 this morning. Given that 0.59 goes to the government and will not change, that’s a 30% decrease on the balance.
We are now at a point where half of the price you pay is tax so will not be affected by crude prices either way.
You have to admire OPEC. They have some balls. They’re willing to prop up the dollar and damage their own economies to destroy US energy self sufficiency in the long run. Brutal tactics and they’ll probably work. Destroying Russia is just a convenient side effect.
Seeing as it costs about 45-50$ to produce oil in the US, it probably means that anytime the oil price threatens to go above 60$, that the US will be able to ramp up production. Places like Nigeria, Venezuela and Russia are in much bigger trouble (80-100$ is their break-even).
Saudi Arabia is still making lots of money, only costs them 5$ a barrel to produce.
Sean I think this has more to do with the Saudis fear of IS than trying to kill off the competition in USA or Russia. They are terrified of IS getting even richer through the oil and gas fields they seised in North Iraq. Why would they try and kill of the competition if they are getting 20 times their cost of production?
I doubt it Pat. The Saudis have full protection from the US. They’re much more worried about losing their biggest customers to domestic unconventional plays. Which I suppose would indirectly lead to increased vulnerability to IS. The US wouldn’t protect a client state if they have no use for it. But the real threat to the Saudi royal family is their own people.
Well we’ll agree to disagree but in any case it is incredible to see the price collapse like this. Hopefully it will stimulate the world economy again. But I would have concerns about $100 barrel returning in the future.
The Saudi’s main motivation is their rivalry with Iran. Iran’s influence has been increasing in the region since the collapse of the Taliban and Saddam’s regime.
This was not unintentional. 15 of 19 9/11 hijackers were Saudis.
” Saudi Arabia’s chief antagonist is fellow OPEC member, and main geopolitical rival, Iran. Lower oil prices squeeze Iran’s finances and capacity to oppose Riyadh’s aims in regional warzones such as Syria. As an added bonus, lower oil prices also hurt non-member Russia, another antagonist”. [Liam Denning, The Wall Street Journal]
Troy, Is that their(OPEC) end game? To make US and other less efficient producers give up/strike out? Why? Is it not v short-term thinking on their part as most OPEC countries are net importers of technology/food/cars/education and rely on their customers for those products?
OPEC wants to maximise profits by tightly controlling the price of oil to suit itself. Saudi Arabia has a ridiculously large reserve of oil which it can use to flood the market anytime it wants to lower the price. And it goes without saying that they can withhold exports as well to drive up the price. De Beers does the same with diamonds. The problem for OPEC is that their biggest customer which is the US is desperate to be energy self sufficient. The US is doing this by scaling up production of what’s called unconventional play systems. This is where fracking and tar sands are. They are alternative sources of hydrocarbons which are much more expensive to exploit than typical sources of oil. They are only economical when the price of oil is reasonably high. So by lowering oil prices, OPEC is annihilating VC funds into projects that are trying to exploit this unconventional play systems in North America meaning that the Yanks will continue to rely on Middle Eastern oil which is much cheaper to produce.
OPEC will keep this going just long enough to spook the market and scare off any investors who see a long term future in domestic energy production within the US.
Ok Sean now you sound like the annoying guy in the bar who just knows everything. Granted most points you make have merit. But looking at Ch 4 news the Saudis looked pretty panicked now themselves. Their economy differs little to that of the Russian just a much smaller population. This is an oil price collapse the control they have over it is limited. While of course I’m delighted at the price at the pump the long term fallout will be serious if it continues.
I study a lot of Petroleum Geoscience. That’s why I’ve read into it quite a bit. The Saudis have a lot more control over this than you might think. And as a previous commenter said, the Saudi price of extraction is dramatically lower than Russia’s who are at breaking point. Saudi Arabia is hurting in the short term, but it’s a calculated move to put companies like Transcanada on their arse and it will work to their advantage in the long term.
Pat, Sean is right – OPEC itself voted to keep production high to deliberately maintain oil prices at a level which makes US fracking uneconomical. Think of it like a supermarket price war – OPEC (and the Saudis in particular) are prepared to take a hit in the short term in order to kill off a potential long-term competitor.
@Sean O’Keeffe
Don’t forget that the OPEC vote was unanimous – although Iran expressed reservations they ultimately also voted in favour of maintaining production. There is more at play here than a Saudi vs Iran stand off.
Ideal time to transfer the obscene Car Tax on to fuel. Pay as You Go …. not pay to subsidise wealthy NEW CAR owners. Ireland a disgusting lobby ridden place to live.
But then you make everything more expensive to transport and benefit the family who want two cars instead of one for show.
Living in the country I pay 800 quid in road tax but sticking that on petrol would cripple those who require a car to function, not those in the cities who buy the latest BMW as a status symbol rather then actual need. Tax luxury’s not necessities.
It’s a selfish attitude that those with a integrated transport network at there door want to be subsided in owning a car by those who require it most.
Good news for consumers at the petrol pumps (you would presume but driving around doesn’t seem that way!) and good news for domestic economies with the availability of cheaper oil. Bad news for oil companies overall; the Saudis and Americans can produce oil at lower costs but North Sea and Russian producers are in quite a lot of trouble if this trend continues in the near future as their production costs are higher.
That analogy is literally the complete opposite of what peak theory actually means.
Peak oil refers to the event when oil supply and distribution is at its highest and most productive. Which would correlate with a drop in oil prices and and be prefaced by a rise in production.
The reason why this is a bad thing is because once you reach the peak, there’s only the fall and a slow steady decline in production. Peak oil happens all the time in different oil fields. The North Sea oil fields peaked in the 80s and 90s for example. Saudi Arabia is probably the only major play which hasn’t peaked yet, it also happens to the best the second largest oil producer in the world. They have immense political and economic power which they are using to artificially lower the price of oil to make unconventional play systems in North America like tar sands and shale gas uneconomic.
Enjoy the prices now guys, I work with IT in Boston and the stats we had were on par with what we’re seeing.
This slide will only last for as long as fracking is profitable in the states, once it hits 40$ per barrel you’ll see trouble.
Basic economic games from the Saudis trying to bankrupt the world :D
Fracking extraction costs are actually $60-100 per barrel – the whole point of OPEC keeping prices low is to cripple the development of the US shale oil industry by making extraction uneconomic. They’re playing the long game.
USA Gallon = 3.8 litres = €4.36 at our cheapest station = US$5.20 shows how much tax we pay, enjoy! Use the savings to pay for your health insurance though.
I think oil plunged in value after the credit crunch crash not before. The crash happened in October 2008. I believe we had quite high oil prices earlier in that year.
“Don’t consent to the OBSCENE CAR TAX where owners of older cars subsidise the wealthy who can afford NEW CARS. €951 p.a for a 10 yr old car while owners of new cars get the LOW CAR TAX of €280. Disgusting place to live.
So why has the price not dropped as much as it should do, the oil pumping stations are still making a vast profit and so is the tax man? Explains why no one says a word as it is about half the price per barrel of oil now in dollars as it once was but the price at the stations is not halved yet and no one politically has said a word about this, why?
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