Friday, November 28, 2014

OPEC's Not Torpedoing the Bakken...Yet

A big concern right now is that the Saudis and OPEC in general have been flooding the market with oil, driving prices down in the hopes of driving Bakken (and other) US oil firms out of business.  The Saudi's can pump oil and remain profitable at a much lower price than their American counterparts, and it is speculated that the recent and dramatic drop in gas prices has been due to OPEC flooding the market.

The opposite is quite true.  It's American oil flooding the market that threatens themselves;


























Source

You combine this with fears of slowing global economic growth and crusaderist wimps green-conscious-fuel-saving Americans and Europeans, demand for oil has also gone down, driving prices down.

OPEC is planning a closed door meeting in which they will collude like the monopolies you'd all like to think "Big Oil Companies" collude like in an attempt to cut oil production and jack up prices.  Thankfully they all hate each other almost as much as they hate the US, so they will unlikely cut oil production despite what they say. 

The real issue is whether fracking technologies can be improved that American oil producers can still remain profitable at lower oil prices, and I believe since they largely employ the last vestiges of real, innovative and industrious Americans, they can.  Better yet, the good news is that "peak oil" or a "post oil world" has been postponed beyond our lifetimes.  We will not run out of oil in our lifetimes AND even if the mideast runs out, we got enough here in the US to last.

It is one of the rare bits of good news to enjoy in today's world, especially given this reality will continue to piss off environmentalists for the rest of their lives.

13 comments:

Anonymous said...

USA! USA! USA!

Anonymous said...

US wants to keep oil prizes down to put additional pressure on Russia which economy is highly depended on oil prizes.

Russians had a meeting with Saudis this week to try get them to cut production but failed to convince them.

kurt9 said...

Yeah.

Then there's both fusion and deep-burn fission that will come on line in the next decade:

http://nextbigfuture.com/2014/11/dynomak-fusion-details-and-summary-of.html

http://nextbigfuture.com/2014/10/how-terrestrial-energy-integral-molten.html

1 cent per kilowatt/hour?

http://nextbigfuture.com/2014/09/integrated-molten-salt-reactor-should.html

Albert said...

For that matter, due to thermal depolymerization technology, it is not possible to "run out of oil" while we still have a biosphere and a functional tech-base.

Anonymous said...

My theory of current cheap oil, is that it's because of Syria. Syria is weak enough to take all the pressure from global jihadists, but just strong enough to hold them back. The rest of the Arab world is safe, and the Arab Spring premium to oil is now negligible.

Shale oil is just too small by itself to have caused the current crash in oil. It's too big in magnitude, no matter how you draw the cost curves. Chinese worries and the gradual realization that the great peoples revolutions of the Middle East did nothing, are what really matter here.

"Peak Oil" wasn't ever meaningful to America, because of coal to oil options even before shale technology came out. It was always a European problem, and it was correctly predicted that it would cause Europe's current depression. Especially in Southern European economies with bad trade deficit problems.

thenewcenturyman said...

Looks like it's time to buy and hold some oil ETF's....I'd love to buy some acreage in 5 years and f**k off

Paul, Dammit! said...

With respect to anonymous, there's a lot of feels in that comment, and not a lot of data.

I shouldn't be surprised that the press is completely clueless about the specifics of oil trading, and yet here I am.

Bakken oil does not trade at benchmark price. Benchmark pricing groups are based on predominately sour source oil, stuff that is loaded with sulfur and has a modest percentage of lightweight, valuable distillates in the blend. Bakken crude tops out at well above 50% distillates and has very little sulfur... and, ironically, this makes it more difficult to process here in the US, where our refineries are mostly geared towards processing sour crudes. As a result, while Bakken crude pricing does respond to benchmark pricing in the commodities market, it is a premium product, and contract pricing is more often than not 20-40% higher than benchmark for the VERY limited but soon to be expanded export market for places with the ability to take advantage of sweet crude processing. As a result, changes in policy will become key to Bakken contract pricing, and the ability to change export regs will be a massive blunt force means to backdoor oil-reliant economies in OPEC and Russia (and Venezuela and Mexico, which is more of a mixed bag).

Robert What? said...

@kurt9 - as much as I would like to see practical fusion power, I think it will not be for many decades if ever. The technological hurdles are immense, and the US public are only interested in solutions that carry zero risk.

Toilet Cleaner said...

Captain,

We will NEVER run out of oil and it will only get cheaper and cheaper as time moves forward and oil in the future will even be carbon neutral.

All thanks to the work of a government paid woman scientist, Dr. Heather Willauer, who developped a method to turn carbon from sea water into hydrocarbons.

In the future, companies will build large nuclear vessels that will sail the high seas and synthesize oil from carbonic acid in sea water and then ship the synthesized oil all around the world.

It will be carbon neutral because we will recycle sea carbon instead of adding fresh new carbon from fossil fuels. The sea will simply reabsorb the carbon from our burnt sea fuel and we will reproduce hydrocarbons from it. So environmentalists will not be able to criticize this synthetic fuel.

Coal also can be made into hydrocarbon fuels by superheating it with water. The heat energy will also come from nuclear power.

The future of energy is nuclear derived hydrocarbons.

This will make oil a lot cheaper than it is now and it's price will be a lot more stable and deflationary.

Glen Filthie said...

It's not that simple Cap. This may be one of those situations where classic economics don't apply - and things still work anyway.

I think we are all sick of those fuggin moslems and having them use oil against us as a weapon. It's pretty obvious we can't rely on them, and maybe they are better off pulling their shit with the Russians and Chinese. WE need a reliable supply of oil, and we will have it - IF we cut those mud flaps out of the picture.

Do you mind paying a few more bucks at the pump knowing you are putting Americans to work, giving Obama and the moslems the finger, and asserting American energy independence? I know I would not be happy with it...but I would understand the need for it.

The moslems need to learn that NOBODY wins in a trade war. Everyone loses and the only guy that really "wins" is the one left standing afterward.

OregonGuy said...

Want less of a thing? Then, regulate it.

As long as price determines resource allocation, input substitution and innovation assures us that utilization of inputs will be determined by the purchaser of those inputs.

When inputs are determined by political fiat, all bets are off. Shortages occur. Mis-allocation of resources is rewarded by government subsidies, or what is referred to as "investment in innovation."

Never underestimate the destructive power of good ideas.
.

The First Joe said...

Which other large nation relies largely on oil income? That would be... Russia. The ruble has dropped steeply recently. Reflect that most OPEC members are Sunni Arab states who want to see Assad's Alawite regime in Syria brought to its knees, and Russia is Assad's main friend on the global stage. Tanking the value of the ruble is how the Regan regime broke the USSR.

Further, IS being a non-state actor is also (now it thre) considered an enemy by the authoritarian OPEC states, and IS also derives most of its income from the sale of stolen oil. Tanking the cost of oil reduces IS funding too.

The Bakken oilfields may be merely incidentally awash in the tides of geopolitics.

Anonymous said...

Toilet Cleaner, got any idea of what the actual production costs of doing that sea hydrocarbon extraction would be? In the world of engineering, there's a wide difference between "can be done in principle" and "is actually economical and practical to do".

Synthesizing hydrocarbon fuel is something that has been possible in principle for ages. Heck, Japan made oil from pine cones during WW2!

-Red Knight