• 6 minutes Can the World Survive without Saudi Oil?
  • 10 minutes Saudis Threaten Retaliation If Sanctions are Imposed
  • 15 minutes Closing the circle around Saudi Arabia: Where did Khashoggi disappear?
  • 1 min U.N. About Climate Change: World Must Take 'Unprecedented' Steps To Avert Worst Effects
  • 14 mins Saudis Pull Hyperloop Funding As Branson Temporarily Cuts Ties With The Kingdom
  • 2 hours WTI @ $75.75, headed for $64 - 67
  • 7 hours How High Can Oil Prices Rise? (Part 2 of my previous thread)
  • 8 hours UN Report Suggests USD $240 Per Gallon Gasoline Tax to Fight Global Warming
  • 13 hours Judge Approves SEC Settlement With Tesla, Musk
  • 11 hours EU to Splash Billions on Battery Factories
  • 8 hours China Thirsty for Canadian Crude
  • 13 hours Gold price on a rise...
  • 8 hours Shell, partners approve huge $31 billion LNG Canada project. How long till Canadian Federal government Environmentalates it into the ground?
  • 12 hours Porsche Says That it ‘Enters the Electric Era With The New Taycan’
  • 12 hours Dow logs 830-point loss
  • 10 hours Iranian Sanctions - What Are The Facts?
Alt Text

Permian Producers Have A Power Problem

Permian producers don’t just have…

Alt Text

Disappearance Of Saudi Journalist Could Rock Oil Markets

The disappearance of Saudi journalist…

Alt Text

Trump Threatens Iran’s Oil Clients

Trump has directed yet another…

Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Trending Discussions

Bad Has Never Looked So Good

Bad Has Never Looked So Good

Not meaning to be villainous – like my British counterparts in the Jaguar commercial - but it would seem that sometimes ‘it’s good to be bad‘. And here are some immediate examples across commodityland™.

The first topic we are going to look at in dastardly detail is retail gasoline prices. Prices generally peak in the first half of the year ahead of driving season. We then take the exit ramp from this period when we pass Labor Day, and demand takes a turn for the worse.

A combination of record refining this summer (taking advantage of lower domestic crude prices), tepid gasoline demand (helping to keep stockpiles plentiful), and a recent easing in global crude benchmarks (on a stronger dollar, weaker economic data, tempered global oil demand growth and improving supply) have all contributed to retail gasoline prices dropping by nearly 30 cents (7%) from the summer highs of $3.70/gal.

Further downside should continue, as is the seasonal trend as we head toward the end of the year (hark, see below), while supportive profit margins should deter refinery maintenance season from being too harsh. On this basis, last year’s low in December at $3.20/gal is a destination we should speed straight past:

AAA retail Gas price average

Why is this good? Because of the one-penny-to-one-billion spending rule. The rule of thumb is that a one-penny change in the price of gasoline leads to a $1 billion increase in household consumption on an annualized basis. As the below chart illustrates, gasoline accounts for $2,500 of household spending each year. As retail gasoline prices reach their lowest level for the time of year since 2010, lower prices await. Hurrah!

Household spending on Gasoline

Moving on to round two of this rogue regaling, this good-to-be-bad example comes courtesy of Russia. For the Russian ruble has been gradually depreciating throughout this year amid rising geopolitical tension in Ukraine. It has now dropped 12% versus the US dollar in 2014.

Yet while a falling ruble hurts Russian imports (as they become increasingly more expensive to buy), Russia reaps the rewards when it comes to exports. And it is seeing the greatest benefit from its largest export: oil. (to the tune of 7 million barrels a day).

Hence, while crude prices in US dollars have dropped 12% in value since the beginning of July, crude oil in rubles has only dropped 3.4%. For Russian coffers, it is good for the ruble to be bad:

Oil in Rubles and Dollars

The third and final round of disagreeable data comes courtesy of United Kingdom (UK) oil production. The fact that UK oil production is tanking so much could be economically crippling for an independent Scotland. Oil production has dropped 40% from 2010 to 2013, and the likelihood of ongoing falling flows means that Scotland would struggle to be an oil-financed welfare state – unless considerable technological developments were made, or oil prices were to spike to incentivize higher-cost production.

For those who wish Scotland to remain part of the UK, this badly weakening source of revenue is one of the better arguments to deter them from exiting.

UK petrol and other liquids production and consumption

Once again, thanks for playing! Wherever you are in the world, keep an eye on the developments mentioned in this post – from US gasoline to Russian rubles to UK oil production……..commodityland™ is never dull!

By Matt Smith

(Source:  Energy Burrito)




Back to homepage

Trending Discussions


Leave a comment
  • Ronald Wagner on September 16 2014 said:
    Low energy prices are crushing Russia, their long term outlook is dismal unless they make nice with a lot of people. Am I wrong?

    My understanding is that they require a much higher price for oil than many other producers. Even the Middle Eastern exporters will be hurting as more exporters come on line.

    See The Geopolitics of Natural Gas and Oil: https://docs.google.com/document/d/1xI2divir7UBIall_FiHmucF4Rkp63o1BkWQbeP-fOrw/edit

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News