Saudi Arabia Minister said they no longer will limit oil production. When demand for oil goes up, the minister said, the Kingdom will pump more oil. It does appear like oil prices won't be going up any time soon. Not great news for oil investors I suppose.
It's just talk. The Saudi government cannot survive financially with the current oil prices. They are at a huge deficit and are already taking steps to control it but they do need oil to bounce back at some point.
Of course they are going to continue to say that - they need to keep the price low to finish up what they want done or they just wasted their time. They know if they cut production, other countries will fill the hole. So they have to pump away.
Saudi Arabia will no longer limit the pumping of oil. That means they are going to flood the world market with the supply of oil. And as per the law of supply and demand, the more supply, the lower the price. So what happens to the shares of stocks of oil companies? They probably would fluctuate for now but I guess the share prices will stabilize in a few months. And as a side effect, the lowered price will remain low until such time that demand for oil overtakes the amount of supplye. And that would probably take years.
I agree. Don't think oil prices will be rising any time soon. It's a good thing for us regular folk. Price at the pump has been the lowest I've seen in ages.
Demand for oil is flat, if not dropping. Land-based storage tanks are full as OPEC plays their games, and I am looking to $SFL to make a bit of change. Do your due diligence and see why.
If you live in those states depending upon tax revenue from the oil and gas producers, the exceedingly low price at the pump is not a good thing. Alaska's state budget has a shortfall of two-thirds of the total budget, even with retrenchment. Massive tax increases for the citizenry are required. North Dakota isn't quite as badly off, but it isn't good. Read the online newspapers from those states. And the contagion spreads to other states depending upon oil tax revenue. Laid off oil workers going on unemployment rolls further strain state coffers. States borrow from the federal unemployment coffer, and guess who pays? It just isn't the citizens in oil-dependant states. A barrel of oil needs to be ~$50 to avoid budget chaos. OPEC can't agree to throttle production (see the other threads on the board), creating problems around the world.
Those states (like all others) should not be relying on a single industry to cover taxes in the first place. At least the federal and state tax for public roadways will remain steady or increase.
I'll reserve judgement. They may very well try this practice in spirit, but I'm not sure that it is sustainable.
You're right, no entity, whether it be a state or a country or a continent, shouldn't base their budget on a single industry. But in places where that industry caused the area to expand... well there is little choice. People come there to work on the oil fields, and the services in these areas are mainly geared towards oil workers. Over a looong period of time it should balance out but cities, states and countries take decades to develop, the price of oil spiked up in a matter of years and caused a boom in the industry. (and also a boom in the tax income)
