有关比特币的几点疑问

如果说比特币是一种商品:

比特币本身价值在哪里?

交易价值从何而来?受到何种因素影响?

比特币满足了何种市场需求?至少在短期内,这种市场需求的不可替代性在哪里?

如果说比特币是一种通货:

脱离货币机构,但仍旧以现有世界国家体系来定价,定价依据是什么,涨跌反应的本质理论是什么?

在去中心化的货币生产里,是否仍然需要有具有实体身份和政治地位的庄家来维护市场秩序?

 

 

[转载]6 Red Ocean Traps You Should Know

Very good resources for MBA teaching and for daily food for thoughts. The Google Glass case is worth of an in-depth discussion. Originally published at https://www.blueoceanstrategy.com/blog/six-red-ocean-traps-you-should-know/#.  Would kindly direct readers to the website for more information.

Some quick explanation for Red Ocean/Blue Ocean strategy (http://txmqstaffing.com/fishing-in-a-blue-ocean/):red-ocean-vs-blue-ocean-strategiesFor more visual representations, see: https://www.blueoceanstrategy.com/tools/


The mental models that undermine market-creating strategies


W. Chan Kim and Renée Mauborgne

When it comes to building a blue ocean, what organization wouldn’t want to have an offering like Google’s Search division? Its search engine is easy, fast, accurate – with an underlying algorithm that instantaneously sorts and ranks documents, images, and videos, making people more productive in finding information than most ever imagined.Everyone from first graders to senior citizens use it. It’s even become a verb. With nearly 65% of world market share, Google created a veritable blue ocean.

wearable technology

Then there’s Google Glass. Announced to the public in 2012, it was selected by Time Magazine as one of the “Best Inventions of the Year.” With this revolutionary digital eyewear, Google intended to create a new mass market for wearable computers. However, the initial excitement soon gave way to disappointment. Priced at $1,500 and launched with great fanfare, people found Glass more like a high-tech high-end toy than a groundbreaking killer app gadget that will revolutionize the human experience. And as wearable tech its futuristic look tended to side more with the weird than the fashionable not to mention the serious privacy issues it raised. Less than two years after the launch of the prototype, Glass was sent back to the lab for redesign.

What went wrong? And what should the team behind Google Glass’s reset do differently to avoid a repeat scenario and create instead a blue ocean like Google’s search? For starters it should understand the six red ocean traps. The six red ocean traps are the explicit and implicit assumptions managers often act under in setting out to make market-creating strategic moves. The trouble is, instead of abetting the creation of profitable new markets, they anchor managers in red oceans and prevent them from entering blue waters. It was some of these assumptions that trapped Google in its drive to create a new market with Glass.

What are the six red ocean traps? Are you caught too? Read on.

 

Trap One: Looking to Existing Customers for Insight into Creating New Demand


Generating new demand lies at the heart of any market-creating strategy. But marketing managers – trained to believe that the customer is king – or queen – often assume that in order to generate new demand they must focus on making their existing customers happier.

Customer is king

While having happy customers is a good thing, it is unlikely to create new markets. To do that, an organization needs to turn its focus on noncustomers, for they hold the greatest insight into the points of pain and intimidation that limit the size and boundaries of an offering’s industry. A focus on existing customers, by contrast, tends to drive organizations to offer better solutions for them than what competitors currently offer – but keeps companies moored in red oceans. Just think: How many ground-breaking ideas have you received by asking your existing customers how to make them happier?

noncustomers

Consider the orchestra industry. To create new demand, orchestras sought to understand how to make existing customers happier hosting, for example, even more renowned guest soloists. These efforts, however, were largely made irrelevant, when Andre Rieu and his Dutch orchestra, the Johann Strauss Orchestra, turned their attention to the ocean of noncustomers. Noncustomers revealed a host of factors that discouraged them from ever attending an orchestra performance from the lengthy and sophisticated musical pieces played, to the expected dress code and audience protocols that were unknown to them, to the fancy theaters, and more. The result is that Andre Rieu created a non-intimidating orchestra experience enjoyed in stadiums not traditional venues, with dancing in aisles, a focus on a highly accessible, enjoyable repertoire of waltzes, and laughter. For more than ten years his world tours have been in the top twenty-five billboard tours right alongside Bruce Springsteen and David Bowie. Andre Rieu created new all new market space, introducing an ocean of once noncustomers to the beautiful world of classical music.

Noncustomers, not customers, hold the key to creating new markets.

Click to tweet

 

Trap Two: Treating Market-Creating Strategies as Niche Strategies


The field of marketing has placed great emphasis on using ever-finer market segmentation to identify and capture niche markets. Though niche strategies can be very effective, uncovering a niche in an existing space is not the same thing as identifying a new market space.

Delta’s short-lived Song Airlines, for example, targeted a distinct customer segment – stylish professional women travellers — who presumably had needs and preferences different from those of businessmen and other passengers. The strategy was intended to fill a gap in the existing market. But the segment proved too small to be sustainable, let alone generate a blue ocean of new market space.

Market segmentation - a red ocean trap

Successful market-creating strategies, in contrast, “desegment” markets by identifying key commonalities across buyer groups that could help generate broader demand. The British food chain “Pret A Manger,” for example, created a new market space of sustained profitable growth in the prepared lunch market by desgementing three customer segments -restaurant-going professionals, fast food customers, and the brown bag set – based on their key commonalities: they wanted a lunch that was fresh and healthful, wanted it fast and at a reasonable price.

Market creation isn’t about uncovering a niche in an existing market.

Click to tweet

 

Trap Three: Confusing Technology Innovation with Market-Creating Strategies


R&D and technology innovation are widely recognized as key drivers of market development and industry growth, so managers would be forgiven for assuming that both are key drivers in the discovery of new markets. But market creation is not inevitably about technological innovation. Starbucks turned the coffee industry on its head by shifting its focus from commodity coffee sales to the customer experience. Or consider JCDecaux, which unlocked a blue ocean in outdoor advertising by providing and maintaining “street furniture” for municipalities in exchange for prime stationary downtown locations for ad displays. These strategic moves opened new markets without any bleeding-edge technology.

segway failed to create new market

Even when technology is involved, however, it is not the reason that new offerings like Google’s search engine, Intuit’s Quicken, Wikipedia, or Uber are successful. Such products and services succeed because they offer buyers a leap in value – they are so simple to use, fun, and productive that people fall in love with them. This trap is one that Google Glass fell into. Google Glass may have represented a technology innovation. However, it was not a value innovation. It was too conspicuously high-tech to provide real style and fashion and it set off alarm bells of privacy violation, causing bars, movie theaters, hospitals, locker rooms, classrooms and more to ban its use. To get out of this trap Google should aim to rejuvenate Glass by focusing on value innovation, not technology innovation. Unless it makes buyers’ lives more productive, less risky, more stylish and fun, and easy to use it won’t unlock a blue ocean the way Google’s search engine did.

value innovation

Value innovation, not tech innovation, is what launches commercially compelling new markets. Successful new products or services open market spaces by offering a leap in productivity, simplicity, ease of use, convenience, fun and fashion, or environmental friendliness.

 

Value innovation and NOT tech innovation is key to creating new markets.

Click to tweet

 

Trap Four: Equating Creative Destruction with Market Creation


Joseph Schumpeter’s theory of creative destruction lies at the heart of innovation economics. Creative destruction occurs when an invention disrupts a market by displacing an earlier technology or existing product or service. In Schumpeter’s framework, the old is incessantly destroyed and replaced by the new.

creative destruction

viagra example of nondestructive creation

But market creation does not always involve destruction. It also involves nondestructive creation where new demand is created without displacing existing products or services. Viagra, for example, established a new market in lifestyle drugs without making any earlier technology or existing product/service obsolete.

Nondestructive market-creating moves offer solutions where none previously existed. And even when a certain amount of destruction is involved, nondestructive creation often plays a larger role than you might think. Nintendo’s Wii game player, for example, complemented more than replaced existing game systems, because the Wii attracted younger children and older adults who hadn’t previously played video games.

Conflating market creation with creative destruction not only limits an organization’s set of opportunities; it can also build resistance to market-creating strategies within established companies and lead start-ups to unnecessarily take on larger companies with multiple times the resources and market reach. Commercially compelling new markets are at least as much —if not more —about nondestructive creation as they are about disruption.

Market creation isn’t necessarily about creative destruction, it can involve nondestructive creation.

Click to tweet

 

Trap Five: Equating Market-Creating Strategies with Differentiation


In a competitive industry companies tend to choose their position on what economists call the “productivity frontier,” the range of value-cost trade-offs that are available given the structure and norms of their industry. A commonly chosen strategic position is differentiation, meaning that companies stand out from competitors by providing premium value; the trade-off is usually higher costs to the company and higher prices for customers. Many managers assume that market creation is the same thing. In reality, a market-creating move breaks the value-cost trade-off. It pursues differentiation and low cost simultaneously. A market-creating move is a “both-and,” not an “either-or,” strategy.

trade-off quality or low cost

When companies mistakenly assume that market creation is synonymous with differentiation, they focus on what to improve or create to stand apart and pay scant heed to what they can eliminate or reduce to simultaneously achieve low cost. As a result, they often inadvertently become premium competitors in an existing industry space rather than discovering a new market space of their own. Tesla, with its lofty price and all the differentiated advantages of its vehicles (speed, beauty, luxury, and environmental friendliness), has been such a premium competitor in the existing luxury segment of the automobile market.

Successful as Tesla is in the large luxury segment, the overall size of this segment is small – in the US the overall luxury segment takes up 10% of the total automobile market at best and Tesla’s share in this market remains tiny. To achieve its promise to electrify the automobile industry, Tesla needs to significantly lower the sticker price and cost of its vehicles. Until it does, it won’t open up an expansive blue ocean of commercial opportunity.

Market-creating strategies break the value-cost trade-off.

Click to tweet

 

Trap Six: Equating Market-Creating Strategies with Low-Cost Strategies


Low cost strategies

When an organization sees market-creating strategies as synonymous with low-cost strategies, they focus on what to eliminate and reduce in current offerings and largely ignore what they should improve or create to increase the value of offerings.

A market-creating strategy takes a “both-and” approach: It pursues both differentiation and low cost. In this framework, new market space is created not by pricing against the competition within an industry but by pricing against substitutes and alternatives that noncustomers are currently using. Accordingly, a new market does not have to be created at the low end of an industry. Instead it can be created at the high end, as Cirque du Soleil did in the circus industry, iPhone did in smart phones, and Dyson did in vacuum cleaners.

quality and low cost

Even when companies do successfully create new markets at the low end, their offerings also are clearly differentiated. Salesforce.com, for instance, stands out for its ease of deployment, flexible subscription terms, hassle-free maintenance and ubiquitous access, while IKEA appeals to millions of people around the world with its standardized, stylish and easy to assemble furniture of reliable quality and its family embracing store environment. Both are differentiated and low cost.

At Google’s May 2015 developer conference, Astro Teller, the head of Google’s research lab Google X, did not don Google Glass, the product he had been touting in previous years. Instead he spoke of Google’s mistake in launching the product with such fanfare it sent the signal Google Glass had arrived — from having four skydivers jump out of a zeppelin while wearing Glass to putting Glass in a fashion show. Such fanfare is not the path to test a prototype. That’s the path that proclaims we’ve arrived, which they hadn’t. Teller assured people at the conference that Google now gets it. That in effect, they will strive to avoid the red ocean trap of treating technology innovation as value innovation and will focus on offering a quantum leap in buyer value for Glass’s next rendition. Will Glass ultimately unlock a blue ocean of new market space? That depends on what Google does to address the issues of privacy, looks, and wearability among others. Being cognizant of the red ocean traps will certainly help.

A market-creating strategy involves the pursuit of both low cost AND differentiation.

GALLUP June 12,2015|Most in U.S. Say Low Gas Prices Make Difference in Finances

ECONOMY

June 12, 2015

Story Highlights

  • 57% say cheaper gas in the last year is making some monetary difference
  • “Paying down bills” most popular way to spend money saved on gas
  • The bigger the effect on finances, the more likely to pay down bills

WASHINGTON, D.C. — U.S. gas prices are nearly a dollar lower than they were a year ago and have been running below their 2014 peak since last spring. But what is the effect of the increase in disposable income on Americans? And where is that money going?

A majority of Americans, 57%, say lower gas prices are making a noticeable difference in their household finances, including 27% who say they are making a “big difference.”

The Effect of Gas Prices on Americans' Finances

The June 2-7 Gallup poll finds only modest differences by income, meaning lower gas prices are not disproportionately helping lower- or middle-income Americans more.

Oil prices began a rapid slide last summer because of oversupply, increased efficiency in production and Saudi Arabia’s willingness to allow prices to drop lower than they had been in recent years. After years of prices being higher than $3 per gallon for regular gas, the average price in the U.S. has been lower than $3 since November of last year. In much of the country, gas fell below $2 per gallon as 2015 began, though the average price in the U.S. has been rising recently.

Americans Say They Are Paying Down Bills With Gas Savings

When asked what they are doing with the money they are saving because of lower gas prices, 42% say they are “paying down bills,” as opposed to “spending it” (24%) or “saving it” (28%). This suggests that the extra money in Americans’ pockets is not bolstering the economy as some predicted in 2014.

What Americans Are Doing With the Money They're Saving on Gas, \nby Effect on Household Finances

While paying down bills could technically be considered a form of spending, it is not spending that generally helps the economy because it covers previous purchases that were already recorded in the nation’s gross domestic product. With spending across the U.S. sluggish in the early months of 2015, it is possible that lower gas prices are not contributing to greater spending or GDP growth.

Paying down bills is the most common way consumers are using the money they are saving on gas, regardless of whether they say the savings make “a big difference,” “some difference” or “little to no difference” to them financially. Among those who say savings from lower gas prices are making a big difference, a majority (53%) say they are using the extra money to pay down bills, greater than the overall average nationwide. However, using this extra money to pay bills diminishes with lessening financial effect, as those who say lower gas prices have made little to no difference are the least likely to say they are using the extra cash to pay down bills.

Bottom Line

As gas prices remain below $3 per gallon nationwide, with analysts saying that prices will stay that way for the foreseeable future, many Americans have more money to spend. With GDP growth in negative territory in the first quarter of 2015, the money Americans are not spending on gas isn’t necessarily being spent on goods and services, which would bolster the economy. It is possible that people are buying more gas, however, as driving is up from last year, according to researchers at New York brokerage Convergex.

Americans using their newfound savings on gas to pay down bills is not unexpected, as that seems to be their normal inclination when they get extra money. For example, when President George W. Bush spearheaded a rebate for U.S. taxpayers in 2001, more Americans then saidthey planned to pay bills than opted for saving or spending. Some forecasters have said that the drop in oil has stabilized, so it is also conceivable that Americans may enter a “new normal” of expecting more disposable income and that it may not seem like extra money in time after all.

Survey Methods

Results for this Gallup poll are based on telephone interviews conducted June 2-7, 2015, on the Gallup U.S. Daily survey, with a random sample of 1,527 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia. For results based on the total sample of national adults, the margin of sampling error is ±3 percentage points at the 95% confidence level.

Each sample of national adults includes a minimum quota of 50% cellphone respondents and 50% landline respondents, with additional minimum quotas by time zone within region. Landline and cellular telephone numbers are selected using random-digit-dial methods.

Original Link:http://www.gallup.com/poll/183596/say-low-gas-prices-difference-finances.aspx?utm_source=Economy&utm_medium=newsfeed&utm_campaign=tiles

Market Observer | 近期油价下跌

作为一个更称职的Social Scientist, 需要时刻保持对市场和经济状况的敏感度。因此特别给自己开辟一个群组,记录一些自己的所见、所思、所想。

第一篇先聚合一些关于近期油价下滑的新闻分析。按照时间顺序排列,可以大概看出舆论对此事件分析的演进。

—–http://www.bloomberg.com/bw/articles/2014-09-29/oil-prices-fall-and-the-global-economy-wins—–

Oil Prices Fall, and the Global Economy Wins

October 02, 2014

The refinery at Shaybah Oil Field in Saudi Arabia

Photograph by George Steinmetz/Corbis

The refinery at Shaybah Oil Field in Saudi Arabia

An earlier version of this story appeared online.

Oil is in the middle of one of its steepest selloffs since the financial crisis, with prices on the international market falling 18 percent since mid-June, to $94 a barrel on Sept. 30. There are two explanations—not enough demand or too much supply. Supporting the weak demand argument: a stagnant economy in Europe, slower growth in China, and flat gasoline consumption in the U.S. According to the International Energy Agency, in 2014 world demand for oil will grow only 1.5 percent.

But the bigger factor appears to be surging global oil production, which outpaced demand last year and is shaping up to do so again in 2014. To try to keep prices high, Saudi Arabia, the world’s biggest petroleum exporter, has reduced its oil production from 10 million barrels a day—a record high—in September 2013 to 9.6 million as of Sept. 30. That hasn’t done much to raise prices, mostly because other OPEC countries are pumping more crude as the Saudis try to slow down. Sharply higher production increases from Libya and Angola, along with surprisingly steady flows out of war-torn Iraq, have pushed OPEC’s total output to almost 31 million barrels a day, its highest level this year and 352,000 barrels a day higher than last September. Combined with the continued increase in U.S. oil production, the world has more than enough oil to satisfy current demand. “I would definitely give the edge to thesupply story at the moment,” says John Kilduff, a partner at Again Capital, a hedge fund in New York that focuses on energy.

“That money is going to be moving into cash registers this fall. … This couldn’t have come at a better time.”—David Rosenberg, Gluskin Sheff

Although that might not be good news for oil producers, it’s great for consumers and the global economy. A report by Andrew Kenningham, senior global economist at Capital Economics, attempts to gauge the difficult-to-measure global lift from lower oil prices. “A $10 fall in the price of oil transfers the equivalent of 0.5 percent of world GDP from oil producers to oil consumers,” he writes. That in turn will have a knock-on effect on global consumption, because consumers tend to spend more of their income than businesses. Assuming consumers spend half their savings from cheaper oil, Kenningham continues, “a $10 fall in the oil price would boost global demand [for goods and services] by 0.2 to 0.3 percent.”

By lowering gasoline bills, cheaper oil prices could potentially increase purchasing power for U.S. consumers in time for the holiday sales season. “That money is going to be moving into cash registers this fall,” says David Rosenberg, chief economist at Canadian investment firm Gluskin Sheff (GS:CN). “Cheap gasoline acts like a tax cut that will flow through the U.S. economy in a big way. This couldn’t have come at a better time.”

Cheaper oil, though, means different things for different parts of the world. In Europe, where policymakers are struggling with deflation, lower oil prices will only make the European Central Bank’s challenge harder as it loosens monetary policy to try to raise consumer prices. Abundant oil also might not be good news for some big petro states. Kenningham says Russia and most of the Middle East can weather lower prices because they socked away enough oil revenue, but countries such as Brazil, Mexico, and Venezuela will be more negatively affected “primarily because they have not been saving much of their oil windfalls.”

American consumers shouldn’t consider their savings a windfall quite yet. For one, they’re driving fewer miles than they used to and doing so in more fuel-efficient vehicles, reducing the impact gas prices have on their overall spending. Through the end of September the average price for a gallon of regular gas in the U.S. was $3.51; that’s only 5¢ cheaper than during the same period in 2013. “When you think about the impact compared to last year, it’s a rounding error,” says Jacob Oubina, senior U.S. economist at RBC Capital Markets (RY). “Gasoline will have to keep getting cheaper before you can start the conversation about this being a big positive for the U.S. consumer.”

 ————–http://www.forbes.com/sites/realspin/2014/11/24/why-are-oil-prices-dropping/———-

Why Are Oil Prices Dropping?

11/24/2014

GUEST POST WRITTEN BY
Habib Al Mulla
Mr. Habib is the founder and executive chairman of the UAE law firm Habib Al Mulla.
With the price of oil down 28 percent in recent months, financial analysts and political pundits are all asking the same questions: What are the reasons behind this drop and why isn’t OPEC taking steps to stop the bleeding?

It’s Economics 101. When the price falls, you cut supply. OPEC nations are amongst the world’s top oil exporters. It’s certainly within their capability. If there was even a hint they would slow production, prices would certainly jump from current lows of about $82 a barrel.

According to recent estimates, Saudi Arabia needs the price at $99.20 to break even. Even at that point, many OPEC nations would still be in the red. So why is OPEC sitting on its hands?

Theories why oil prices are so low

A number of theories have emerged. OPEC itself posits that the declines are due largely to speculation in the market and that demand isn’t as low as many may think. Others contend that increased competition—in the form of increased U.S. shale oil production—provides incentives for OPEC to keep prices down. However, some studies suggest that oil prices have to fall to $60 or even lower to halt shale production growth.

Both would explain the recent move by U.S. driller Continental Resources Inc. to monetize its hedges in the oil market. Not only does it show great confidence that demand will recover; it also provides Continental with added liquidity ahead of a potential price war with OPEC.

Some argue that Saudi Arabia, the world’s largest producer, is defending its market share by cutting prices rather than production. Others would go so far as to say that Saudi Arabia is pushing prices down to hit its regional rival, Iran, where it hurts most; the economy. Some estimate that Iran needs oil at $136 a barrel to finance its growing spending plans.

The problem with all of these theories is that they do not provide an explanation for the relatively short period in which prices have fallen, particularly if one accounts for continued economic growth in the U.S. and the UK.

A way to combat the Islamic State?

Perhaps that is why yet another theory is making the rounds—and it may be the most interesting of all; not because of its validity, but because of the important geopolitical questions it raises. Could OPEC be keeping prices down to combat the Islamic State? There is no question that the best funded terrorist organization ever relies heavily on seized energy assets to support a burgeoning population and intensifying war effort. Why wouldn’t the OPEC nations at IS’s doorstep do everything in their power to slow its flow of revenue and stop its murderous rampage?

Because, when it comes to oil prices, IS profits either way.

Consider that the OPEC nations in the Middle East and North Africa are universally confronting massive budget cuts due to shortfalls in oil profits. Now, consider the programs those cuts will most acutely impact: Welfare programs. Even rich Gulf Oil exporters face inevitable cuts. Look at the recent statement issued by the Kuwaiti Finance Minister. Kuwait has already revealed plans to slash costly subsidies on diesel, kerosene, and jet fuel. Electricity and water subsidies may also come under scrutiny.

Budget cuts and the risk of losing popular support

Whenever welfare programs are cut, oil producing nations run the risk of eroding the popular support their governments enjoy. In other words, falling oil prices are a boon for IS recruiting and networking. With little aid from their governments, how many more marginalized and disaffected Sunnis will pour into IS-controlled territory, become militarized, and join the fight for the Caliphate? With fewer resources to prevent domestic strife in OPEC nations, how many radical groups throughout the region will be emboldened to work with IS, or alongside it?
Worst of all: When prices do rise again—perhaps because of the very disorder and turmoil created while prices were low—IS will be better positioned to fund its growing territory and influence. It’s a win-win for IS and a loss-loss for the world, no matter how you slice it.

If oil price manipulation is indeed an element of regional strategy to combat IS, then OPEC nations on the front lines need to rethink their approach. While we all share the burden of lost revenue, IS alone reaps a significant benefit. Increased radicalization and destabilization are precisely what IS wants. When the impacts of falling oil prices hit home, we’ll be handing them over on a silver platter.

———— http://www.economist.com/blogs/economist-explains/2014/12/economist-explains-4—————

The Economist explains

Why the oil price is falling

THE oil price has fallen by more than 40% since June, when it was $115 a barrel. It is now below $70. This comes after nearly five years of stability. At a meeting in Vienna on November 27th the Organisation of Petroleum Exporting Countries, which controls nearly 40% of the world market, failed to reach agreement on production curbs, sending the price tumbling. Also hard hit are oil-exporting countries such as Russia (where the rouble has hit record lows), Nigeria, Iran and Venezuela. Why is the price of oil falling?

The oil price is partly determined by actual supply and demand, and partly by expectation. Demand for energy is closely related to economic activity. It also spikes in the winter in the northern hemisphere, and during summers in countries which use air conditioning. Supply can be affected by weather (which prevents tankers loading) and by geopolitical upsets. If producers think the price is staying high, they invest, which after a lag boosts supply. Similarly, low prices lead to an investment drought. OPEC’s decisions shape expectations: if it curbs supply sharply, it can send prices spiking. Saudi Arabia produces nearly 10m barrels a day—a third of the OPEC total.

Four things are now affecting the picture. Demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to other fuels. Second, turmoil in Iraq and Libya—two big oil producers with nearly 4m barrels a day combined—has not affected their output. The market is more sanguine about geopolitical risk. Thirdly, America has become the world’s largest oil producer. Though it does not export crude oil, it now imports much less, creating a lot of spare supply. Finally, the Saudis and their Gulf allies have decided not to sacrifice their own market share to restore the price. They could curb production sharply, but the main benefits would go to countries they detest such as Iran and Russia. Saudi Arabia can tolerate lower oil prices quite easily. It has $900 billion in reserves. Its own oil costs very little (around $5-6 per barrel) to get out of the ground.

The main effect of this is on the riskiest and most vulnerable bits of the oil industry. These include American frackers who have borrowed heavily on the expectation of continuing high prices. They also include Western oil companies with high-cost projects involving drilling in deep water or in the Arctic, or dealing with maturing and increasingly expensive fields such as the North Sea. But the greatest pain is in countries where the regimes are dependent on a high oil price to pay for costly foreign adventures and expensive social programmes. These include Russia (which is already hit by Western sanctions following its meddling in Ukraine) and Iran (which is paying to keep the Assad regime afloat in Syria). Optimists think economic pain may make these countries more amenable to international pressure. Pessimists fear that when cornered, they may lash out in desperation.

Dig deeper:
The economics of oil have changed (Dec 2014)
Will falling oil prices curb America’s shale boom? (Dec 2014)
What is the oil cartel up to? (Dec 2014)

—————————-http://fortune.com/2014/12/08/oil-prices-drop-impact/———————–

Oil price drops: Don’t panic, really

Oil prices have a lot more room to fall before things get really scary. Here’s why.

The recent drop in crude prices won’t kill off the US shale oil industry. It’ll just make it more efficient.

Profit margins and break-even points are relative not only to the price of oil, but also to the cost of doing business. As oil prices drop, producers will undoubtedly renegotiate their ludicrously expensive oil service contracts, slash wages for their workforce and cut perks to bring their costs in line with the depressed price for crude. The demand for oil remains strong, which should provide an adequate floor for producers in the long run, but only after they get their finances in order.

How oil prices ever reached $100 a barrel still remains a mystery to many who have followed the industry for years. But the 40% drop in oil prices over the past six months has been shocking for oil bears and bulls alike. Why on earth did it fall so hard, so fast? There is plenty of speculation, ranging from the Saudi’s wish to “crush” the U.S. shale industry, to the U.S. colluding with the Saudi’s to flood the market in order to bankrupt an aggressive Russia and an obstinate Iran.

Conspiracy theories aside, the fact is oil prices have dropped and they may stay “low” for a while. This has analysts, journalists, and pundits running around claiming that it’s the end of the world.

It is understandable that people are nervous. After all, the oil industry is a major producer of jobs and wealth for the U.S. It contributes around $1.2 trillion to U.S. GDP and supports over 9.3 million permanent jobs, according to a study from The Perryman Group. Not all that money and jobs come directly from the shale oil industry or even the energy industry as a whole but instead derive from the multiplier effect the industry has on local economies. Given this, it’s clear why any drop in the oil price, let alone a 40% drop, is cause for concern.

Nowhere in the U.S. is that concern felt more acutely than in Houston, Texas, the nation’s oil capital. The falling price of crude hasn’t had a major impact on the city’s economy, at least not yet. But people, especially the under-40 crowd—the Shale Boomers, as I call them—are starting to grow very worried. At bars and restaurants in Houston’s newly gentrified East End and Midtown districts, you often hear the young bucks (and does) comparing notes on their company’s break-even points with respect to oil prices. Those who work for producers with large acreage in the Bakken shale in North Dakota are saying West Texas Intermediate (WTI) crude needs to stay above $60 a barrel for their companies to stay in the black. Those who work for producers with large acreage in the Eagleford shale play in south Texas say their companies can stay above water with oil as low as $45 to $50 a barrel.

Both groups say that they have heard their companies are starting to walk away from some of the more “speculative” parts of their fields, which translates to a decrease in production, the first such decrease in years. This was confirmed Wednesday when the Fed’s Beige Book noted that oil and gas activity in North Dakota decreased in early November due to the rapid fall in oil prices. Nevertheless, the Fed added the outlook from “officials” in North Dakota “remained optimistic,” and that they expect oil production to continue to increase over the next two years.

What are these “officials,” thinking? Don’t they worry about the break-even price of oil? Sure they do, but unlike the Shale Boomers, they also probably remember drilling for oil when it traded in the single digits, which really wasn’t that long ago. For these seasoned oil men, crude at $60 a barrel still looks mighty appealing.

Doug Sheridan, the founder of EnergyPoint Research, which conducts satisfaction surveys, ratings, and reports for the energy industry, recalls when he had lunch with an oil executive of a major energy giant 10 years ago who confided in him that his firm was worried that oil prices had risen too high, too fast. “He was concerned that the high prices would attract negative attention from the press and Congress,” Sheridan toldFortune. “The funny thing was, oil prices were only around $33 a barrel.”

The shale boom has perpetuated the notion that drilling for oil, especially in shale formations, is somehow super complicated and expensive. It really isn’t. Fracking a well involves just shooting a bunch of water and chemicals down a hole at high pressure—not exactly rocket science. The drilling technique has been around since the 1940s, and the energy industry has gotten very good at doing it over the decades. Recent advances in technology, such as horizontal drilling, have made fracking wells even easier and more efficient.

But even though drilling for oil has become easier and more efficient, production costs have gone through the roof. Why? There are a few reasons for this, but the main one is the high price of oil. When oil service firms like Halliburton and Schlumberger negotiate contracts with producers, they usually take the oil price into consideration. The higher the oil price, the higher the cost for their services. This, combined with the boom in cheap credit over the last few years, has increased demand for everything related to the oil service sector—from men to material to housing. In what other industry do you know where someone without a college degree can start out making six figures for doing manual labor? You can in the oil and gas sectors, especially in places like Western North Dakota. There, McDonald’s employees make $20 an hour and rent for a modest place can top $2,000 a month.

But as the oil price drops, so will costs, bringing the “break-even” price down with it. Seasoned oil men know how to get this done—it involves a little Texas theater, which is sort of like bargaining at a Turkish bazaar. The producers will first clutch their hearts and tell their suppliers that they simply cannot afford to drill any more given the sharp slump in oil prices. Their suppliers will offer a slight discount on their services but the producer will say he’s “walking away.” This is where we are in the negotiating cycle.

After letting the oil service firms sweat a bit (traditionally around two to four months), a producer will give their former suppliers a call, saying they are “thinking” of getting back in the game. Desperate for work, the suppliers will now be willing to renegotiate a whole new agreement based on a lower oil price. The aim of the new contract is to give producers close to the same margin they had when prices were much higher. Profits are restored and everyone is happy.

This negotiation will happen across all parts of the oil and gas cost structure. So welders who were making $135,000 a year will probably see a pay cut, while the administrative staff back at headquarters will probably miss out on that fat bonus check they have come to rely on. Rig workers and engineers will see their pay and benefits slashed as well. Anyone who complains will be sent to Alaska or somewhere even worse than Western North Dakota in the winter, like Siberia (seriously). And as with any bursting bubble, asset prices will start to fall for everything from oil leases to jack-up rigs to townhouses in Houston. Oh, and that McDonald’s employee in Western North Dakota will probably need to settle for $15 an hour.

But oil production will continue, that is, until prices reach a point at which it truly makes no sense for anyone to drill anywhere.

So, what is the absolute lowest price oil can be produced for in the U.S.? Consider this—fracking last boomed in the U.S. back in the mid-1980s, when a barrel of oil fetched around $23. That is equivalent to around $50 a barrel today, when adjusted for inflation. That fracking boom went bust after prices fell to around $8 a barrel, which is worth around $18 in today’s money. With oil last week hitting $63 a barrel, it seems that prices have a lot more room to fall before things get really scary.

————————- http://www.bbc.com/news/business-29643612 ————————-

Falling oil prices: Who are the winners and losers?

A woman walks past a board listing foreign currency rates against the Russian ruble in central MoscowA woman walks past a board listing currency exchange rates in Moscow

Global oil prices have fallen sharply over the past seven months, leading to significant revenue shortfalls in many energy exporting nations, while consumers in many importing countries are likely to have to pay less to heat their homes or drive their cars.

From 2010 until mid-2014, world oil prices had been fairly stable, at around $110 a barrel. But since June prices have more than halved.Brent crude oil has now dipped below $50 a barrel for the first time since May 2009 and US crude is down to below $48 a barrel.

The reasons for this change are twofold – weak demand in many countries due to insipid economic growth, coupled with surging US production.

Added to this is the fact that the oil cartel Opec is determined not to cut production as a way to prop up prices.

So who are some of the winners and losers?

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Russia: Propping up the rouble

Vladimir PutinThe falling rouble and plunging oil revenue are some of President Putin’s biggest challenges

Russia is one of the world’s largest oil producers, and its dramatic interest rate hike to 17% in support of its troubled rouble underscores how heavily its economy depends on energy revenues, with oil and gas accounting for 70% of export incomes.

US Dollar v Russian Rouble

LAST UPDATED AT 10 FEB 2015, 11:06 ET*CHART SHOWS LOCAL TIMEUSD:RUB intraday chart

$1 buys change %
66.3520 +

+0.49
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Russia loses about $2bn in revenues for every dollar fall in the oil price, and the World Bank has warned that Russia’s economy would shrink by at least 0.7% in 2015 if oil prices do not recover.

Despite this, Russia has confirmed it will not cut production to shore up oil prices.

“If we cut, the importer countries will increase their production and this will mean a loss of our niche market,” said Energy Minister Alexander Novak.

Falling oil prices, coupled with western sanctions over Russia’s support for separatists in eastern Ukraine have hit the country hard.

The government has cut its growth forecast for 2015, predicting that the economy will sink into recession.

Former finance minister, Alexei Kudrin, said the currency’s fall was not just a reaction to lower oil prices and western sanctions, “but also [a show of] distrust to the economic policies of the government”.

Given the pressures facing Moscow now, some economists expect further measures to shore up the currency.

“We think capital controls as a policy measure cannot be off the table now,” said Luis Costa, a senior analyst at Citi.

Pedestrians walk past a board listing foreign currency rates against the Russian rouble outside an exchange office in Moscow on December 3, 2014Russia’s economy is forecast to fall into recession in 2015 if oil prices do not regain ground

While President Putin is not using the word “crisis”, Prime Minister Dmitry Medvedev has been more forthright on Russia’s economic problems.

“Frankly, we, strictly speaking, have not fully recovered from the crisis of 2008,” he said in a recent interview.

Because of the twin impact of falling oil prices and sanctions, he said the government had had to cut spending. “We had to abandon a number of programmes and make certain sacrifices.”

Russia’s interest rate rise may also bring its own problems, as high rates can choke economic growth by making it harder for businesses to borrow and spend.

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Venezuela: No subsidy cuts

A policeman kicks away a tear gas canister in Caracas, May 2014Venezuela saw mass anti-government protests earlier this year

Venezuela is one of the world’s largest oil exporters, but thanks to economic mismanagement it was already finding it difficult to pay its way even before the oil price started falling.

Inflation is running at about 60% and the economy is teetering on the brink of recession. The need for spending cuts is clear, but the government faces difficult choices.

The country already has some of the world’s cheapest petrol prices – fuel subsidies cost Caracas about $12.5bn a year – but President Maduro has ruled out subsidy cuts and higher petrol prices.

“I’ve considered as head of state, that the moment has not arrived,” he said. “There’s no rush, we’re not going to throw more gasoline on the fire that already exists with speculation and induced inflation.”

The government’s caution is understandable. A petrol price rise in 1989 saw widespread riots that left hundreds dead.

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Saudi Arabia: Price versus market share

The skyline of Riyadh, Saudi ArabiaSaudi Arabia is not expected to cut production to prop up oil prices in the short term

Saudi Arabia, the world’s largest oil exporter and Opec’s most influential member, could support global oil prices by cutting back its own production, but there is little sign it wants to do this.

There could be two reasons – to try to instil some discipline among fellow Opec oil producers, and perhaps to put the US’s burgeoning shale oil and gas industry under pressure.

Although Saudi Arabia needs oil prices to be around $85 in the longer term, it has deep pockets with a reserve fund of some $700bn – so can withstand lower prices for some time.

“In terms of production and pricing of oil by Middle East producers, they are beginning to recognise the challenge of US production,” says Robin Mills, Manaar Energy’s head of consulting.

If a period of lower prices were to force some higher cost producers to shut down, then Riyadh might hope to pick up market share in the longer run.

However, there is also recent history behind Riyadh’s unwillingness to cut production. In the 1980s the country did cut production significantly in a bid to boost prices, but it had little effect and it also badly affected the Saudi economy.

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Opec: Not all are equal

oil refinery, Saudi ArabiaSome Opec members need oil to be above $120 a barrel to avoid hard spending choices

Alongside Saudi Arabia, Gulf producers such as the United Arab Emirates and Kuwait have also amassed considerable foreign currency reserves, which means that they could run deficits for several years if necessary.

Other Opec members such as Iran, Iraq and Nigeria, with greater domestic budgetary demands because of their large population sizes in relation to their oil revenues, have less room for manoeuvre.

Oil price budget balance graph

They have combined foreign currency reserves of less than $200bn, and are already under pressure from increased US competition.

Nigeria, which is Africa’s biggest oil producer, has seen growth in the rest of its economy but despite this it remains heavily oil-dependent. Energy sales account for up to 80% of all government revenue and more than 90% of the country’s exports.

The war in Syria and Iraq has also seen Isis, or Islamic State, capturing oil wells. It is estimated it is making about $3m a day through black market sales – and undercutting market prices by selling at a significant discount – around $30-60 a barrel.

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United States: Fracking boom

Pumps in a California oil field over the Monterey Shale formation where gas and oil extraction using hydraulic fracturing, or fracking, is on the verge of a boomUS domestic oil production has boomed due to fracking

“The growth of oil production in North America, particularly in the US, has been staggering,” says Columbia University’s Jason Bordoff.

Speaking to BBC World Service’s World Business Report, he said that US oil production levels were at their highest in almost 30 years.

It has been this growth in US energy production, where gas and oil is extracted from shale formations using hydraulic fracturing or fracking, that has been one of the main drivers of lower oil prices.

“Shale has essentially severed the linkage between geopolitical turmoil in the Middle East, and oil price and equities,” says Seth Kleinman, head of energy strategy at Citi.

Even though many US shale oil producers have far higher costs than conventional rivals, many need to carry on pumping to generate at least some revenue stream to pay off debts and other costs.

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Europe and Asia: Mixed blessings

EU flagsGrowth in the European Union remains weak

With Europe’s flagging economies characterised by low inflation and weak growth, any benefits of lower prices would be welcomed by beleaguered governments.

A 10% fall in oil prices should lead to a 0.1% increase in economic output, say some. In general consumers benefit through lower energy prices, but eventually low oil prices do erode the conditions that brought them about.

China, which is set to become the largest net importer of oil, should gain from falling prices. However, lower oil prices won’t fully offset the far wider effects of a slowing economy.

Japan imports nearly all of the oil it uses. But lower prices are a mixed blessing because high energy prices had helped to push inflation higher, which has been a key part of Japanese Prime Minister Shinzo Abe’s growth strategy to combat deflation.

India imports 75% of its oil, and analysts say falling oil prices will ease its current account deficit. At the same time, the cost of India’s fuel subsidies could fall by $2.5bn this year – but only if oil prices stay low.

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