It's been fascinating to watch Saudi influence wane over the last few years as this sinks in as the new reality. We live in a completely different power structure now from 20 years ago. They're certainly still obscenely rich, but the power they had over geopolitics via OPEC is effectively gone at this point due to tar sands, renewables, and natural gas.
"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but
his son will ride a camel"
> They're certainly still obscenely rich, but the power they had over geopolitics via OPEC is effectively gone at this point due to tar sands, renewables, and natural gas.
You missed the other significant factor in reducing OPEC political power, horizontal drilling, IE fracking. Almost all the new oil and natural gas in the US is coming from horizontally drilled wells.
The US has _always_ been the first or second largest crude oil producer since the beginning. Not much has changed. We just have millions of oil wells, whereas Saudi has only a few hundred, many of which had naturally pressureized well heads (no pumping required). In fact the largest single oil well on the planet is in Saudi (it's called Ghawar https://en.wikipedia.org/wiki/Ghawar_Field, which is such a lovely name) and it's over 150 miles long!
They don't need to influence all of us to affect all of us. U.S. taxes are funding Al-Nusra in Syria at Israel's (who hospitalizes them) and the Saudis' request in a larger war on Shiite rebels.
Enabled entirely by tar sands and fracking tech. OPEC made oil really expensive incentivizing technology development and now US*Canada have put a cap on oil prices and could bankrupt any nation relying on oil for the majority of their GDP.
History books might cite oil technology, electric cars, Trumpism, the failure of European unity, and the coming recession to be the collection of triggers for the most "interesting" times we've seen since WWII. The legitimacy and power of the American government is at a low point, if we bankrupt our adversaries and fall into a recession ourselves, who knows what could happen.
We live in a completely different power structure
now from 20 years ago.
The US has always imported <10% of its oil/gas (if you don't count Canadian sources). There has never been a large scale dependence on foreign oil. Most of this was conservative propaganda from the Bush Administration to help justify the war in Iraq.
That being said OPEC had some control over the price that oil was traded at, but never the volumes.
There are some question marks on how sustainable the US oil boom is as the extraction methods are quite capital intensive. We are at historic low capital price and have a fairly high oil price and still the profitability picture is not pretty.
Oil and Gas producers are also facing severe price discounts due to a lack of pipeline capacity in the United States[1]. One could argue that as more pipelines come on line, shale producers will start to see significantly more profits.
True, but the reason it doesn't deploy it is that it has decided it cannot drive the U.S. frackers out of business, even if it drives them into bankruptcy. The initial investor may lose their investment, but the oil keeps flowing. So, they are trying to bring the price back up by holding back some of their capacity. Either way, it doesn't seem like the amount of money they got when a barrel of oil cost $125 or more, is coming back any time soon.
Nobody really knows what Saudi reserves are. Including, very possibly, the Saudi's themselves. Moreover, very old fields and, I believe, little in the way of new discoveries.
Good on them. But what a sorry state to be in, when global warming and sea level rise related problems already are a reality in Miami or - of all places - Norfolk's naval base.
(3rd chart down - look at number immediately below).
In the most recent wk, 9/7, production dropped back from 11 to 10.9.
Production for SA, Russia and the US have been nip and tuck for a while and (provided capital and markets hold up) the US will likely surpass the other two - but maybe not just yet.
Not that I doubt that they're right about this data point, but interesting choice of source... appears to be some sort of climate-change-denial organization?
i still have the feeling that the next big bust will come from the fracking industry by 2020. The reserves are vastly overestimated, profitability muddled by financially wizardry, and capital flow about to get squeezed as interest rates rise.
Fracking is actually far more resilient to market swings than traditional oil fields/wells. If prices for crude/natural gas drop, you just shutdown the well. Spinning it back up is far faster and cheaper than normal wells.
>...fracking could not have taken off so dramatically were it not for record low interest rates after the 2008 financial crisis. In other words, the Federal Reserve is responsible for the fracking boom.
>Frackers haven’t proven that they can make money. “The industry has a very bad history of money going into it and never coming out,”
If we are talking strictly about the economic measures going into a business decision, using (cheap QE) debt to finance capital expenditures was a good idea. The profit being made off of the capex justifies it well. It is not unsustainable in the sense of a business decision.
There is not much here about whether or not the US can sustain this position long term but in the short term this development puts in an advantageous position geopolitically. NATO is very reliant on Russian oil and if the US is a top producer we can export more to Europe, although Russia will most likely remain the preferred exporter.
Also, this allows us to have a more aggressive stance with Saudi Arabia, especially when it comes to their disastrous human rights record in Yemen. Although the issue with that is that the current administration has shown no interest in SA's human rights record and defense contractors would lobby strongly against any sort of stirring of the relationship.
I take pleasure in knowing that on another timeline the US is a truly great nation that has managed to completely remove its dependency on fossil fuels, and is now switching its focus to helping poorer nations do the same.
It’s just a shame we are all stuck on this timeline...good for them though!
Hey now, oil is fantastic. The U.S. will be able to use the proceeds from this bounty of natural resources to fund an excellent public health system, just like Norway!
Looking at China and India, I forget how big the US actually is compared to an average country. Same goes for our abundant natural resources which we don’t really talk about much (in the media at least).
Daniel Yergin is an energy analyst who has written several good books on oil and energy, The Prize and The Quest. The Prize is a history explaning how to got to 1990. And The Quest explains how we got to 2011. By the end of The Quest, you will understand how we got to here. Why Russia is a major natural gas provider to Europe. Why Venezuela's economy is collapsing. Why Saudi Arabia may follow. And mostly importantly, why the US is now one of the top energy exporters in the world (TL;DR we have tons of resources and the capital and business structures to exploit them).
Right now the US seems to be using oil exports to weaken other countries, rather than banking the oil and exploiting it when supply starts to dry up. I also think that some methods aren't long-term a good idea.
Right now the US seems to be using oil exports to weaken other countries, rather than banking the oil and exploiting it when supply starts to dry up. I also think that some methods aren't long-term a good idea.
I will second the book recommendations and I will also note that by far the best thing the U.S. can do in the short term is switch to electric and plug-in hybrid vehicles. (And I mean "vehicles" in the broadest sense, including but not limited to cars: https://www.vox.com/the-goods/2018/9/10/17631318/electric-sc...). That will cut the influence of bad political actors considerably. And almost everyone can, as individuals, take important steps in that direction.
I second the Yergin recommendation but don't understand this:
> Right now the US seems to be using oil exports to weaken other countries, rather than banking the oil and exploiting it when supply starts to dry up. I also think that some methods aren't long-term a good idea.
The US is still a net importer. It exports some because its refineries are more setup for heavy grade imports. The light, sweet crude from its newer shale efforts command a premium price on the world market from those refineries that are less able to handle heavy crude, so are exported.
I am going to side track the discussion a bit, what are the implication of this to Petrol Dollar as the world's reserve currency?
One of the reason US dollar is being used as reserved is its absolute influence / Protection in Oil and OPEC. Now US is producing more Oil than anyone else, China is buying more from and start to settle those deals in RMM, what happen next?
So if USA is producing so much oil why is it not able to pay for things like Healthcare? Presumably oil coming out of the ground is free. Where is that money going?
As a side note, the GWPF (Global Warming Policy Forum / Foundation) is a climate change denialist organisation set up by Nigel Lawson (UK politician of the Thatcher years) [0]:
> On 23 November 2009 Lawson became chairman of a new think tank, the Global Warming Policy Foundation, a registered education charity, involved in promoting climate change scepticism.
This is a political disaster. Fracked crude is only profitable because the externalised costs of the catastrophic environmental damage are born by others.
This is another direct wealth transfer from the general population i.e. 99% to the 1%.
If instead of allowing fracking we invested massively in renewables we'd have more jobs, a path to much-cheaper-than oil energy, and we wouldn't be leaving toxic residue all over our water tables to make our children and grandchildren sick with any number of diseases.
As usual capitalism is taking the quick easy cash with large externalities because they aren't affected by them.
Also, abundant cheap energy is wildly important to the 99%. I can't believe that even needs to be pointed out. Thats why we deal with the pollution externalities the way we do.
Its a bridge from dirtiest energy (coal), hopefully to better things, but an important bridge it has been. The real mistake was letting nuclear go under if we cared about pollution and carbon.
Fracked crude might not even be first-order profitable. There is an assertion here by a book author being interviewed that the fracking industry is largely not long-run profitable and that only low interest rates allowed them to run speculatively at all.
This was new to me, and I don't really know if it's a correct assessment. But it's very interesting to mull over. I wonder if anyone has other information in this vein?
Except it hasn't been at all, because much of the oil is more profitable to sell and refine abroad than use domestically. So if we actually wanted to force independence we'd need to prohibit companies from exporting their oil.
I doubt that's ever happening. Watch the "energy independence" talking point evaporate now that the new millionaires have been minted. It's almost as if that's what it was always about, isn't it?
[+] [-] aphextron|7 years ago|reply
[+] [-] GuiA|7 years ago|reply
"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel"
https://en.wikipedia.org/wiki/Rashid_bin_Saeed_Al_Maktoum#De...
[+] [-] 2trill2spill|7 years ago|reply
You missed the other significant factor in reducing OPEC political power, horizontal drilling, IE fracking. Almost all the new oil and natural gas in the US is coming from horizontally drilled wells.
[+] [-] pjc50|7 years ago|reply
[+] [-] tonyedgecombe|7 years ago|reply
[+] [-] nickbauman|7 years ago|reply
[+] [-] BrandonMarc|7 years ago|reply
[+] [-] 0x8BADF00D|7 years ago|reply
[+] [-] man2525|7 years ago|reply
[+] [-] jackfoxy|7 years ago|reply
[+] [-] colechristensen|7 years ago|reply
History books might cite oil technology, electric cars, Trumpism, the failure of European unity, and the coming recession to be the collection of triggers for the most "interesting" times we've seen since WWII. The legitimacy and power of the American government is at a low point, if we bankrupt our adversaries and fall into a recession ourselves, who knows what could happen.
[+] [-] enraged_camel|7 years ago|reply
No, not really. They still have the ability to flood the market and cause prices to tank, which would wreak havoc on the US fracking industry.
[+] [-] valarauca1|7 years ago|reply
That being said OPEC had some control over the price that oil was traded at, but never the volumes.
[+] [-] heisenbit|7 years ago|reply
To dig deeper see: https://wolfstreet.com/2018/08/15/shale-profits-remain-elusi...
[+] [-] clumsysmurf|7 years ago|reply
"Water use for fracking has risen by up to 770 percent since 2011"
https://www.sciencedaily.com/releases/2018/08/180815141441.h...
[+] [-] 2trill2spill|7 years ago|reply
[1]: https://oilprice.com/Energy/Energy-General/Permian-Discount-...
[+] [-] djsumdog|7 years ago|reply
[+] [-] 8ytecoder|7 years ago|reply
https://www.reuters.com/article/us-oil-opec-saudi-trump/can-...
[+] [-] ChristianBundy|7 years ago|reply
[+] [-] rossdavidh|7 years ago|reply
[+] [-] patfla|7 years ago|reply
[+] [-] ddebernardy|7 years ago|reply
[+] [-] reaperducer|7 years ago|reply
Unless I'm thinking of another coastal Virginia city. Anyone from VA know?
[+] [-] singularity2001|7 years ago|reply
[+] [-] patfla|7 years ago|reply
[+] [-] patfla|7 years ago|reply
"the Permian region in eastern Texas and western New Mexico,"
that's got it backwards actually (western TX and ...).
And the _current_ EIA's Short-Term Energy Outlook (reference by gwpf.com) says nothing about either Russia or Saudi Arabia.
I'd question the gwpf's research.
The latest weekly US production figures are here:
https://www.eia.gov/petroleum/weekly/crude.php
(3rd chart down - look at number immediately below).
In the most recent wk, 9/7, production dropped back from 11 to 10.9.
Production for SA, Russia and the US have been nip and tuck for a while and (provided capital and markets hold up) the US will likely surpass the other two - but maybe not just yet.
[+] [-] bjourne|7 years ago|reply
[+] [-] dbatten|7 years ago|reply
[+] [-] jedberg|7 years ago|reply
[+] [-] bigodbiel|7 years ago|reply
[+] [-] greedo|7 years ago|reply
[+] [-] tim333|7 years ago|reply
arguing:
>...fracking could not have taken off so dramatically were it not for record low interest rates after the 2008 financial crisis. In other words, the Federal Reserve is responsible for the fracking boom.
>Frackers haven’t proven that they can make money. “The industry has a very bad history of money going into it and never coming out,”
and that it may not be sustainable.
[+] [-] CompelTechnic|7 years ago|reply
[+] [-] 40acres|7 years ago|reply
Also, this allows us to have a more aggressive stance with Saudi Arabia, especially when it comes to their disastrous human rights record in Yemen. Although the issue with that is that the current administration has shown no interest in SA's human rights record and defense contractors would lobby strongly against any sort of stirring of the relationship.
[+] [-] verelo|7 years ago|reply
It’s just a shame we are all stuck on this timeline...good for them though!
[+] [-] drblast|7 years ago|reply
[+] [-] Anglobilly_F|7 years ago|reply
[deleted]
[+] [-] sgillen|7 years ago|reply
[+] [-] dekhn|7 years ago|reply
Right now the US seems to be using oil exports to weaken other countries, rather than banking the oil and exploiting it when supply starts to dry up. I also think that some methods aren't long-term a good idea.
[+] [-] jseliger|7 years ago|reply
I will second the book recommendations and I will also note that by far the best thing the U.S. can do in the short term is switch to electric and plug-in hybrid vehicles. (And I mean "vehicles" in the broadest sense, including but not limited to cars: https://www.vox.com/the-goods/2018/9/10/17631318/electric-sc...). That will cut the influence of bad political actors considerably. And almost everyone can, as individuals, take important steps in that direction.
[+] [-] thinkcontext|7 years ago|reply
> Right now the US seems to be using oil exports to weaken other countries, rather than banking the oil and exploiting it when supply starts to dry up. I also think that some methods aren't long-term a good idea.
The US is still a net importer. It exports some because its refineries are more setup for heavy grade imports. The light, sweet crude from its newer shale efforts command a premium price on the world market from those refineries that are less able to handle heavy crude, so are exported.
See for example:
https://www.cnbc.com/2018/04/17/shale-oil-has-a-refining-pro...
What reason do you have for saying oil exports are being used to weaken other countries?
[+] [-] ksec|7 years ago|reply
One of the reason US dollar is being used as reserved is its absolute influence / Protection in Oil and OPEC. Now US is producing more Oil than anyone else, China is buying more from and start to settle those deals in RMM, what happen next?
[+] [-] byebyetech|7 years ago|reply
[+] [-] icc97|7 years ago|reply
> On 23 November 2009 Lawson became chairman of a new think tank, the Global Warming Policy Foundation, a registered education charity, involved in promoting climate change scepticism.
[0]: https://en.wikipedia.org/wiki/Nigel_Lawson#Position_on_globa...
[+] [-] dang|7 years ago|reply
[+] [-] viburnum|7 years ago|reply
[+] [-] kavabean|7 years ago|reply
This is another direct wealth transfer from the general population i.e. 99% to the 1%.
If instead of allowing fracking we invested massively in renewables we'd have more jobs, a path to much-cheaper-than oil energy, and we wouldn't be leaving toxic residue all over our water tables to make our children and grandchildren sick with any number of diseases.
As usual capitalism is taking the quick easy cash with large externalities because they aren't affected by them.
[+] [-] jeffbax|7 years ago|reply
Also, abundant cheap energy is wildly important to the 99%. I can't believe that even needs to be pointed out. Thats why we deal with the pollution externalities the way we do.
Its a bridge from dirtiest energy (coal), hopefully to better things, but an important bridge it has been. The real mistake was letting nuclear go under if we cared about pollution and carbon.
[+] [-] dv_dt|7 years ago|reply
https://www.marketplace.org/2018/09/11/economy/economics-fra...
This was new to me, and I don't really know if it's a correct assessment. But it's very interesting to mull over. I wonder if anyone has other information in this vein?
[+] [-] crunchlibrarian|7 years ago|reply
Except it hasn't been at all, because much of the oil is more profitable to sell and refine abroad than use domestically. So if we actually wanted to force independence we'd need to prohibit companies from exporting their oil.
I doubt that's ever happening. Watch the "energy independence" talking point evaporate now that the new millionaires have been minted. It's almost as if that's what it was always about, isn't it?