USD at 1.27 today. The sky is falling

[Reef Supplies]

The cost of crude was pushed down to strangle Russia. Once the crude goes back up, the USD will drop once again. This is crap, the USD is NOT worth this much.

[Aqua-Digital]

Thats more conjecture really.

The short version of the story goes like this: For much of the past decade, oil prices have been high — bouncing around $100 per barrel since 2010 — because of soaring oil consumption in countries like China and conflicts in key oil nations like Iraq. Oil production in conventional fields couldn't keep up with demand, so prices spiked.

BY 2014, OIL SUPPLY WAS MUCH HIGHER THAN DEMAND

But beneath the surface, many of those dynamics were rapidly shifting. High prices spurred companies in the US and Canada to start drilling for new, hard-to-extract crude in North Dakota's shale formations and Alberta's oil sands. Then, over the last year, demand for oil in places like Europe, Asia, and the US began tapering off, thanks to weakening economies and new efficiency measures.

By late 2014, world oil supply was on track to rise much higher than actual demand. A lot of unused oil was simply being stockpiled away for later. So, in September, prices started falling sharply.

As prices slid, many observers waited to see whether OPEC, the world's largest oil cartel, would cut back on production to push prices back up. (Many OPEC states, like Saudi Arabia and Iran, need higher prices to balance their budgets.) But at its big meeting last November, OPEC did nothing. Saudi Arabia didn't want to give up market share and refused to cut production — in the hopes that lower prices would help throttle the US shale boom. That was a surprise. So oil went into free-fall.

The oil price crash is now upending the global economy, with ramifications for every country in the world. Low prices are excellent news for oil consumers in places like Japan or the US, where gasoline is the cheapest it's been in years. But it's a different story for nations reliant on oil sales. Russia's economy is facing a potential meltdown. Venezuela is facing unrest and may default on its debt. Even better-prepared countries like Saudi Arabia could face heavy pressure if oil prices stay low.

[mikellini]

Originally Posted by Reef Supplies

The cost of crude was pushed down to strangle Russia. Once the crude goes back up, the USD will drop once again. This is crap, the USD is NOT worth this much.

Russian oil is actually a small part of the global oil market. The biggest consumer of oil is the US, and Canadian oil has made (by far) the largest gains in that market, most of which was taken from Saudi oil. Plus, Canadian oil is now reaching world markets in Europe and Asia in significant numbers and was projected to take even more market share from the Saudi's. In contrast, Russia has seen a slow, predictable growth in oil exports.

Ideally, the Saudi's would like to decrease production of Canadian oil from oilsands and American shale. However, shale is a fast return project and can be started and stopped at any time, so oil prices won't have much of an effect on production over time. But low oil prices for about 3-4 years should have a significant effect on Canadian oilsands development, enough to allow the Saudi's to regain most of what they lost. They can afford to have oil as low as $15/barrel and still make significant profit... I don't see oil going back up any time soon

[Reef Pilot]

Well, there are quite a few reasons for our low loonie, as has been discussed. But the latest straw was when our central banker, Polaz, dropped our interest rates by a 1/4 percent, while the US fed reaffirmed their intentions to raise them in the 2nd qtr (don't think it will happen, though, personally).

In Canada we are under the false hope that with our lower loonie our manufacturing industries will once again flourish. I don't think that will happen, as our labor costs are too high (as compared to Alabama and Georgia, not to mention China) and many of our raw materials are based on USD. Last time we needed a 65 cent loonie, now we probably will need a 40 cent loonie to make it work. And then we are also up against the Buy America First program.

So, we are in for some tough times in Canada, not just in Alberta, but also Ontario and Quebec... Adapt or perish, as they say...

[Aqua-Digital]

Originally Posted by Reef Pilot

Adapt or perish, as they say...

Agreed, we are now looking more towards Europe for new product lines, the Euro/vs CAD is fairly stable in the mid range. Its still trading on interbank around the low 1.40's where we have structures in place to cater for anything up to 1.70 as seen only a few years ago.

[Reef Pilot]

Originally Posted by Aqua-Digital

Agreed, we are now looking more towards Europe for new product lines, the Euro/vs CAD is fairly stable in the mid range. Its still trading on interbank around the low 1.40's where we have structures in place to cater for anything up to 1.70 as seen only a few years ago.

And the Euro could drop a lot further, as they start up their QE (printing money) program, not to mention what will happen with Greece, and maybe Spain and Italy.

[Aqua-Digital]

True, I am working Q2 pricing now for 1.35 I dont think the CAD has the strength to go much lower.

One that is hard to predict and is causing me headaches whether to get a futures on is the GBP, with a general election round the corner and so much on it riding on an entry exit from Europe, it really could go either way. Futures are great on the ascending but a Butt kick on the opposing.

[Rice Reef]

Originally Posted by Reef Pilot

And the Euro could drop a lot further, as they start up their QE (printing money) program, not to mention what will happen with Greece, and maybe Spain and Italy.

Yes, where the Cdn dollar was not so affected was against the Euro. Canada will try to change its focus to the European market but I doubt it.

[Reef Pilot]

Originally Posted by Rice Reef

Yes, where the Cdn dollar was not so affected was against the Euro. Canada will try to change its focus to the European market but I doubt it.

Well, they have been working hard and long on a free trade agreement with the EU. Still not final, but that could help.

I think we also need to focus more on China, and Asia in general. Big market there, and they do want things that we have, and I don't just mean oil. But domestically, we have to make the most of what we do have and can do, and stop trying to artificially support failing industries.

I was in retail (big box) all my career, and it is unbelievable the hoops and regulations you now need to go through to build or remodel a store. What used to take 2 or 3 years (from plans to completion) now takes 5 - 7 years, and what used to cost 2 - 4 million, now costs 5 -7, and more. This is over a span of just 10 years. With all the govt fingers (municipal are the worst, then provincial) involved, with all their assessments, consultations, and delays, it is making it very, very difficult to do business in Canada. Only the guys with very deep pockets and very long strategic time frames (like Walmart, Costco, etc) can survive. Cdn companies are at a huge disadvantage, caused by their own govts.

Sorry for the rant..., but I had to live this for the last part of my career,... and have very strong opinions here.

[Rice Reef]

Originally Posted by Reef Pilot

Well, there are quite a few reasons for our low loonie, as has been discussed. But the latest straw was when our central banker, Polaz, dropped our interest rates by a 1/4 percent, while the US fed reaffirmed their intentions to raise them in the 2nd qtr (don't think it will happen, though, personally).

In Canada we are under the false hope that with our lower loonie our manufacturing industries will once again flourish. I don't think that will happen, as our labor costs are too high (as compared to Alabama and Georgia, not to mention China) and many of our raw materials are based on USD. Last time we needed a 65 cent loonie, now we probably will need a 40 cent loonie to make it work. And then we are also up against the Buy America First program.

So, we are in for some tough times in Canada, not just in Alberta, but also Ontario and Quebec... Adapt or perish, as they say...

Agree. When we drop rates it is another way of printing money. When this was announced the Feds had also signalled that they were raising rates which is a way of slowing down spending and is also a way of strengthening currency.