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US vs OPEC "Oil War" (trade war)?

To think someone actually wrote a book a few years ago called "The end of oil".  ::)

Associated Press

Oil glut: U.S. running out of room to store crude; prices for oil and gasoline could plunge
By Jonathan Fahey, The Associated Press

NEW YORK, N.Y. - The U.S. has so much crude that it is running out of places to put it, and that could drive oil and gasoline prices even lower in the coming months.

For the past seven weeks, the United States has been producing and importing an average of 1 million more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country's main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy Department reported last week.

If this keeps up, storage tanks could approach their operational limits, known in the industry as "tank tops," by mid-April and send the price of crude — and probably gasoline, too — plummeting.


"The fact of the matter is we are running out of storage capacity in the U.S.," Ed Morse, head of commodities research at Citibank, said at a recent symposium at the Council on Foreign Relations in New York.

(...SNIPPED)
 
More on how the US industry is reacting to the Saudi initiatives. I think the Saudis badly miscalculated how much they could hurt the US oil industry, but they are probably comitted to their strategy since they can ride out the oil glut (although probably not for "20 years" given the amount of spending they need to prop up their internal welfare state) while still hurting Iran and Russia, Iran becasue they are apostates and a true challenger for regional hegemony and Russia because they are enablers of Iran and Syria (an Iranian ally).

One other factor to consider is any Republican Administration in the post 2016 period will likely open federal lands to oil exploration (something the current administration has banned), and allow the Keystone XL pipeline to be completed, allowing even more oil into the market. The Americans will also be very keen on using the oil weapon against Iran and Russia, as well as hammering regional troublemakers like Venezuela.

http://www.the-american-interest.com/2015/03/16/irrepressible-us-shale-defies-opec/

Irrepressible US Shale Defies OPEC

When OPEC, led by Saudi Arabia, chose not to cut production last November, it effectively consigned its members to a prolonged period of low prices and the financial strain, palliated only by the hope that the bear market would soon squeeze American shale producers. The petrostate cartel essentially abdicated its market-fixing role on a bet that the relatively high cost of hydraulic fracturing would make American firms the world’s new swing producers, but as the FT reports, that bet is looking more and more suspect:

So far, overall US output seems to be only levelling off, rather than collapsing. If US crude stays at its present level of about $45 per barrel, then it seems likely that production will start falling later this year. But Wood Mackenzie, a consultancy, is forecasting that US oil production will grow this year and next, if there is a rebound in prices to about $60 per barrel. […]

The cost cuts and productivity gains that shale oil producers expect come in three categories…First, there are savings from putting pressure on suppliers of drilling rigs, hydraulic fracturing and other services. Companies have generally been saying they expect reductions of 20 to 30 per cent this year.

Second, companies benefit from focusing spending on their most productive assets. “You’re dropping all your worst-performing rigs and worst-performing rig crews and moving the rigs you have to your core areas,” says Randall Collum of Genscape, an energy research firm…Finally, there are productivity gains available from improved techniques.

OPEC is now saying that it expects U.S. production to possibly taper off in late 2015, certainly later than most member countries would like. Every month that American output continues in the face of cheap pricing puts tremendous strain on petrostate regimes that rely so heavily on oil sales for budgetary revenue. The Saudis have a sovereign wealth fund big enough to allow them to weather these market conditions for another 20 years, but the rest of OPEC is not so well-prepared.

The cartel is next scheduled to meet in June, but all signs point to continued inaction as the group battles for its share of an oversupplied market. Meanwhile, U.S. companies will continue to find ways to bring down their own costs. We’ve said it before, but it bears repeating: bet against American innovation at your own peril.
 
Low prices is a boon to the consumer and freedom from the tyranny of OPEC.
 
Prices are not that low here in NS with respect to the price of oil.  I'd like some freedom from the tyranny of taxes we pay for our fuel.  We are getting screwed by someone, it may be the government or big oil or a combo of the two...
 
Saudi Arabia (and many (most?) of the Gulf States, too, I think) has a serious problem. As in China, the legitimacy of the ruling party, the royal family - House of Saud, depends upon satisfying the needs and wants of enough people. The Saudis, unlike the Chinese, have been poor managers: they have simply spent as though the oil would never, every run out. Saudi Arabia needs oil to be priced at about $100/bbl to balance its bloated (heavy on social services/transfers to individuals) budget, but $100/bbl oil could make America a (temporary)* energy superpower and change the energy power balance in the markets.

Cui bono? As T6 suggests: the American consumer and, that includes e.g. industries and public utilities, too; also China, which still has an insatiable demand for oil; ditto India where demand has been constrained mainly by the high price of oil. Western Europe also benefits for the same reasons America does.

Who loses? Canada? No, not really ... some strain, in Alberta, but Ontario gains, so it's a wash, really, from a national perspective. The Middle East? Yes! Africa? Yes! Venezuela? Yes! Russia? Yes! Yes!! Yes!!!

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* There are many reports that the economical output from fracking has a very limited life - I have read estimates as low as 15 years and as high as 50. Contrast that with e.g. Canada's heavy oil which is guesstimated to have a life of 100+ years, even 200+ by some estimates.
 
jollyjacktar said:
Prices are not that low here in NS with respect to the price of oil.  I'd like some freedom from the tyranny of taxes we pay for our fuel.  We are getting screwed by someone, it may be the government or big oil or a combo of the two...

With Canada sitting (give or take) somewhere midway between the USA and Scandanavian countries regarding taxation and the social support that such levels of taxation support, only you can decide if the tax you pay for the social services you receive is acceptably balanced compared to other nations with lower or higher levels of taxation.  If you want to pay less taxes...
 
- In the "Nothing is More Nervous Than a Dollar Bill" department, the recent Sprting and RV shows in Edmonton barely broke even, rumour has it.

- Also, daily vehicle counts in and out of "The Mac" for January 2015 are down by 200 - 300 vehicles per day compared to January 2014.
 
TCBF said:
- In the "Nothing is More Nervous Than a Dollar Bill" department, the recent Sprting and RV shows in Edmonton barely broke even, rumour has it.

I can confirm that here in Wpg. The haulers always clean their trailers before delivering them, and this year the traffic in haulers is down about 50-60 %. The dealers are just not ordering in as many trailers...and this is the busy season because of the RV shows....
 
Let's see how much longer they can keep this up:

Reuters

OPEC won't bear burden of propping up oil price: Saudi minister
By By Rania El Gamal, Reem Shamseddine and Andrew Torchia

By Rania El Gamal, Reem Shamseddine and Andrew Torchia

RIYADH (Reuters) - OPEC will not take sole responsibility for propping up the oil price, Saudi Arabia's oil minister said on Sunday, signaling the world's top petroleum exporter is determined to ride out a market slump that has roughly halved prices since last June.

Last November, Organization of the Petroleum Exporting Countries kingpin Saudi Arabia persuaded members to keep production unchanged to defend market share.

The move accelerated an already sharp oil price drop from peaks last year of more than $100 per barrel that was precipitated by an oversupply of crude and weakening demand.

Since the oil price collapse, top OPEC exporter Saudi Arabia has said it wants non-OPEC producers to cooperate with the group. But Saudi oil minister Ali al-Naimi said on Sunday that plan had so far not worked.

(...SNIPPED)
 
Saudi Arabia has said it wants non-OPEC producers to cooperate with the group. But Saudi oil minister Ali al-Naimi said on Sunday that plan had so far not worked.


Ya figure?  ;D
 
This could go in any number of threads, but, Ian Bremmer, a well known and respected academic, entrepreneur and strategist, has just posted this graphic ...

9c79b437-d56a-4704-8100-b8ef070eb820-original.jpeg


    ... with the comment: "Oh my, the Middle East is screwed."

It's not fracking that will give Australia, America, Canada, China and Europe energy security, it's a balanced approach; it (hydraulic fracturing) will release a lot of 'new' energy in a short time but it has a finite limit ~ maybe 15 to 25 years; Canada and the USA, and the world, in fact, also have access to Canada's abundant heavy oil and to several renewable technologies ~ Texas, amongst others states, has abundant land that is not terribly productive for anything much except collecting solar energy; and the Danes and Germans are demonstrating that wind energy can be reliable and cheap.

It is to be hoped that Dr Bremmer is right.
 
E.R. Campbell said:
............ and the Danes and Germans are demonstrating that wind energy can be reliable and cheap.

Not if you have the Ontario liberals in charge :facepalm:
 
recceguy said:
Not if you have the Ontario liberals in charge :facepalm:

- Corruption is not limited to China, clearly. As well, we could certainly look at adopting their maximum penalty for it. It does cut down on repeat offences.
 
But it's hard to hang a politician who has already left office and public life*


*For the most part
 
Robert0288 said:
But it's hard to hang a politician who has already left office and public life*


*For the most part

- In many ways, it is easier, as their security detail may have been pulled back or diminished.
 
In 2004 I permitted a LNG import facility, because we had 10 years of domestic gas left. In 2008 we revised that permit to change it to a export facility because there was now 70 years worth of exportable gas, beyond domestic needs.

Solar and wind can help, but for Canada there are significant difficulties with both. Geothermal and hydro is the best bet for most of Canada. Smaller run of the river systems near towns is a big help. Atlin went from Diesel generators to small hydro and is saving money for BC Hydro who had to pay for fuel to be shipped in every week.

What I like best about Fracking is that it's broken the OPEC lock on oil supply, which will affect geopolitical thinking for generations to come.


 
Colin P said:
In 2004 I permitted a LNG import facility, because we had 10 years of domestic gas left. In 2008 we revised that permit to change it to a export facility because there was now 70 years worth of exportable gas, beyond domestic needs.

Solar and wind can help, but for Canada there are significant difficulties with both. Geothermal and hydro is the best bet for most of Canada. Smaller run of the river systems near towns is a big help. Atlin went from Diesel generators to small hydro and is saving money for BC Hydro who had to pay for fuel to be shipped in every week.

What I like best about Fracking is that it's broken the OPEC lock on oil supply, which will affect geopolitical thinking for generations to come.


I think we Canadians need to look at the global or, at the very least, regional energy supply and demand. To the degree that the Americans can, for example, build and integrate large scale solar power then our oil lasts longer; equally to the degree that we can harness and integrate wind power (and some people think it can be developed, on a large scale, in some regions) then, once again, oil can be focused on its best use - mobile applications where its power : size/weight ratio is unsurpassed - and it will last longer. We can buy solar energy from the USA and sell them oil.
 
Using oil and gas to provide anything but peak power is crazy. Developing cleaner burning of coal would be a better idea, but any work in that area is unsexy for the moment, the amount of coal we have in North America is staggering.
 
Colin P said:
Using oil and gas to provide anything but peak power is crazy. Developing cleaner burning of coal would be a better idea, but any work in that area is unsexy for the moment, the amount of coal we have in North America is staggering.


Is "clean* coal" achievable in the near term, say the next 25 years?

_____
* I guess the big question: is what's clean enough?
 
pulverizing it and injecting it certainly ensure better burning at higher temps which reduces emissions, not a SME to really get into it. I did review one project where the power plant was to be built beside the coal seam and the front end loader takes a chunk out of the hillside and dumps it into the hopper which shortens the supply chain considerably. That project died on a change in regulations as I recall. interesting link  http://www.world-nuclear.org/info/Energy-and-Environment/-Clean-Coal--Technologies/
 
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