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As The IEA-OPEC Nash Equilibrium Collapses, Is A 1973-Style OPEC Embargo Next?

Tyler Durden's picture





 

Last week's dramatic decision by the US administration to strongarm the IEA into releasing strategic petroleum reserves (of which the US would account for 30 million barrels, or half of the total), is nothing but yet another example of the hobbled and incredibly short-sighted thinking that permeates every corner of the Obama administration. Because as the WSJ reports, "the move by the U.S. and its allies to release strategic reserves of oil could provide a much-needed shot in the arm for the U.S. economy, but risks inflicting lasting damage on the already tense relationship between oil producers and consumers." The move comes on the heels of the dramatic collapse in OPEC talks in Vienna two weeks ago when Saudi Arabia was effectively kicked out of the cartel, further confirmed by reports that the IEA consulted with Saudi (and China and India) in advance of its decision (more later). Additionally, "OPEC and the European Union are due to hold an energy summit in Vienna Monday that will be the first official meeting of producers and consumers since the IEA's move, and will provide a platform for OPEC members to express their disquiet over the stocks' release. However, OPEC's biggest player, Saudi Arabia, won't be present." Make that former player, in an organization now headed by the previously #2 producer, Iran (which just happens is not all that pro-US). The biggest threat, however, is that in direct retaliation against the IEA's cartel-like decision, which comes at the expense of the remaining OPEC countries, is that as Zero Hedge suspected, the next step will be a more than proportionate cut in crude production by OPEC: "Some analysts speculated that OPEC could respond to the IEA release by cutting output to offset the increased supply." What happens next is complete Nash equilibrium collapse, with a high possibility of a 1973-type OPEC oil embargo announcement in the immediate future.

"Going ahead with an increase would cut into revenue, said Christof Ruehl, chief economist of BP PLC. But cutting production to offset the release, he said, "would be seen as hostile by IEA members" and "could lead to a war of attrition, at least as expensive," in which OPEC cuts production and the IEA keeps releasing stocks to make up for the shortage." The winner of all this, is of course, China, which will gladly benefit from ongoing blue light specials courtesy of the US Strtategic Petroleum Reserve to build up its own reserve holdings, as the rest of the world squabbles over a US-dominated status quo whose time has now officially passed. And just as the rare earth metal price spike in recent weeks demonstrates what happens when China is the marginal anything in any supply chain, one can be certain that the price of Crude will be far, far higher several years from now.

And speaking of Iran, its oil ministry SHANA wasted no time in firing the retaliating round against the IEA's decision, accusing the US of acting unilaterally and purely for the benefit of Obama's reelection campaign, warning that the drop in oil prices won't persist:

Iranian governor for OPEC Mohammad Ali Khtatibi says International Energy Agency (IEA) decision to draw oil from its emergency reserves implies intervention in the ordinary function of the oil market.

Speaking to Shana, Mr. Khatibi said that the trend of falling oil prices would not be sustainable.

‘Following the failure to bring down the prices at 159th ministerial meeting of OPEC in June 8, the United States of America and Europe are using all the means to push oil prices lower, Iranian governor for OPEC said.

Khatibi noted that IEA’s initiative to release oil from strategic petroleum reserves would followed by artificial falling of oil prices but those countries believing in open markets showed they are not genuine in their believes.

According to Khatibi recent days’ developments in oil market is not the result of issues relating to supply and demand or market needs but political pressures by the United States drives the initiative. 

The United States government plans to influence the results of the upcoming presidential elections of the country by putting pressure on oil prices’ top Iranian oil official said.

Khatibi pointed out that developed countries initiative to draw oil from strategic petroleum reserves is risky because they cannot continue the move in the long term.

He added: these reserves are being held for emergency situations so the consuming countries of the International Energy Agency will have no other choice except to replenish the reserves for further use. 

Indeed, if Obama's reelection campaign is such an emergency that it requires tapping the SPR, what will happen when there is a real emergency: such as a repeat of the 1973 OPEC embargo, which set the stage for Volcker's last minute and very painful intervention to prevent the US economy from tailspinning into an inflationary supernova?

And just to make sure things get even more polarized, Dow Jones reports that the "International Energy Agency consulted Saudi Arabia, China and India before it authorized the release of some of its emergency reserves, the agency's executive director said Sunday."

"They understand, and they appreciate the action," Nobuo Tanaka said on the sidelines of the second Global Think Tank Summit in Beijing.

The release of some of IEA's strategic stockpiles is meant only to fill the gap in supply until higher crude volumes from Saudi Arabia reach the global market, he added.

Oddly enough, the leadership at the IEA is just as clueless as that of the US:

Separately, Tanaka said he asked China once again to join the IEA on Saturday. Although there hasn't been any official response, Tanaka said he was encouraged by China's recent statement publicly welcoming the IEA's strategic stockpiles release.

Of course they welcome it you idiot, because they will be buying everything your member countries have to sell, and thanks to your stupidity, at a welcome discount. And why the hell would China want to join the IEA when it gets all the benefits of participation, without any of the obligations of being a member (i.e., adhering to your retarded politically-motivated agenda).

Good luck buying it back at the same price when OPEC fires its own warning shot and announces it is reducing crude output for all remaining OPEC countries (ex. Saudi) by 10-15%. And yes, Goldman will promptly move it Brent sell recommendation to a buy, within hours of said announcement.

 


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Sun, 06/26/2011 - 11:17 | Link to Comment Long-John-Silver
Long-John-Silver's picture
Construction of a Simplified Wood Gas Generator for Fueling Internal Combustion Engines in a Petroleum emergency

http://www.gengas.nu/byggbes/index.shtml

 

Prepare now Bitchez!

Sun, 06/26/2011 - 11:44 | Link to Comment Ahmeexnal
Sun, 06/26/2011 - 11:56 | Link to Comment Long-John-Silver
Long-John-Silver's picture

Running on wood

http://youtu.be/8Ag6LoqcVsM

Sun, 06/26/2011 - 12:44 | Link to Comment Rusty Shorts
Rusty Shorts's picture

Them West Virgina boys are ahead of the curve.

http://www.youtube.com/watch?v=zxikOauCZ-I

Sun, 06/26/2011 - 13:23 | Link to Comment Ahmeexnal
Ahmeexnal's picture

Now this is real SHTF event:

http://www.foxnews.com/world/2011/06/26/british-prime-ministers-friend-f...

A close friend of British Prime Minister David Cameron has been found dead in a portable toilet at the Glastonbury music festival. 

 

And in other news, the CIA/Google democratic revolution brigade has started it's next adventure: Russia.

http://www.foxnews.com/world/2011/06/26/police-detain-about-10-khodorkov...

 

Khodorkovsky....the Russian Mandela?

Sun, 06/26/2011 - 16:01 | Link to Comment StychoKiller
StychoKiller's picture

Porta-potty® fumes can get really obnoxious...

Sun, 06/26/2011 - 19:04 | Link to Comment Jiiins
Jiiins's picture

:-D

Sun, 06/26/2011 - 16:27 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Thanks for the links Ahmeexnal.
Very interesting twists and turns the world is taking.
When near and dear one's to PTB start dying under mysterious circumstances, it's time to pay attention. In Cliff's terminology, a temporal marker.

Plus, he was found dead in a toilet. Coincidental or otherwise, this is a loaded signature.

This coming weeks is going to be a mess by Friday it looks like. oil wars, war wars, word wars, world wars, losers and bigger losers.

ORI

http://aadivaahan.wordpress.com/2011/06/21/thunder-perfect-mind/

Sun, 06/26/2011 - 17:27 | Link to Comment spanish inquisition
spanish inquisition's picture

Signature explanation (Tin foil hat on).... (use Paul Harvey voice) It seems when the CIA created a terrorist organization and needed a name, they went with a slangy version of the toilet in Arabic. The slangy name...Al-queda

Now if he was found dead in a bathtub, I would suspect Jim Morrison. (hat off)

FYI -It is best to pre crinkle and double line your hat for maximum beam disruption effect.

Mon, 06/27/2011 - 00:30 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Hah!

ORI

Sun, 06/26/2011 - 12:23 | Link to Comment Salah
Salah's picture

What a coincidence: I'm shocked, shocked I tell you! (doing my best Claude Rains impersonation)

Bilderbergers meet....and 

1. Merkel & Germans suddenly get all compliant and "want to do the right thing", re: Greece crisis, Euro, et al

2. US & IEA orchestrate the release of some 60M barrels (all sources)

What about the stuff we don't know they've planned?  or, is it true they all have our best interests at heart?

 

 

Sun, 06/26/2011 - 12:37 | Link to Comment The Fonz
The Fonz's picture

Yeah those old wood gas generators are cool, work well and are cheap but man they are DIR-TAY.  I'd use it in an emergency perhaps but perhaps not too hot for the envioronment.

Sun, 06/26/2011 - 16:15 | Link to Comment A Nanny Moose
A Nanny Moose's picture

back to horse and buggy.

Buggy whips bitchez!

Sun, 06/26/2011 - 17:16 | Link to Comment msamour
msamour's picture

They work well on a small scale. A friend and I are planning to build a small one for a 5 HP motor that will power a 100 amp 12 volt alternator. That will be enough to generate the required electricity to power a small car, or small farm tractor, or whatever you need to operate. After much research we found that there needs to be a complete dismantling of the aparatus every 100 hours of operation, with a pertial cleaning every 20. Over all it's better than the alternative.

Good luck everyone.

Sun, 06/26/2011 - 12:42 | Link to Comment The Fonz
The Fonz's picture

ZH Guru meditation error! doublepost

Sun, 06/26/2011 - 18:41 | Link to Comment naughtius maximus
naughtius maximus's picture

Amiga user!

Sun, 06/26/2011 - 12:52 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

I use a bean can wood gas stove occasionally when Hiking although to be honest a convential commercial gas stove is better in a wet environment.

Also think the Heineken Home Keg is a perfect size for a Hobo stove and it can also be used as a more refined stove such as below.

www.youtube.com/watch?v=o_gNEmxvpO8

Did not think you could extract fuel from the wood gasification process but I imagine it is a inefficient mechanism to extract energy , it may be best to invest in a horse and a few acres of grazing land.

Sun, 06/26/2011 - 11:18 | Link to Comment dcb
dcb's picture

Drives me nots that they are releasing oil in responce to a monetary issues (barnake too cheap money). Hi we are going to fix something, which has nothing to do with the major cause. These shits won't address the real issue at all. the central bankers and too chap money. Another reason not to vote for Obama. (I voted for him before). Not again, based on the likely republican field I am not voting in the next presidential election

Sun, 06/26/2011 - 11:25 | Link to Comment Long-John-Silver
Long-John-Silver's picture

A simple spelling and math test should be required for voters.

Sun, 06/26/2011 - 12:03 | Link to Comment jeff montanye
jeff montanye's picture

i think dcb was typing at outraged speed, too fast for complete accuracy.  his conclusions seem cogent, even if a bit hasty should paul get the nod, imo.

Sun, 06/26/2011 - 12:51 | Link to Comment The Fonz
The Fonz's picture

I for one agree! Spelling is something that is sacred, like a cow. Aeftr all whtiuot proper sepillng cpmonreiosn and cmomnuiaciotn is Ipmsosblie!  

 

Just poking good natured fun :)

Sun, 06/26/2011 - 12:59 | Link to Comment Terminus C
Terminus C's picture

I hvae raed smoe sutdeis taht as lnog as the frsit and lsat leettrs are crroect the hmuan mnid can dcedoe it.

Who says spelling is important?

Sun, 06/26/2011 - 13:41 | Link to Comment dogbreath
dogbreath's picture

thats funnier than most of the shit here.

Sun, 06/26/2011 - 16:51 | Link to Comment A Nanny Moose
A Nanny Moose's picture

+1. We are all dyslexics now!

Sun, 06/26/2011 - 17:16 | Link to Comment Amish Hacker
Amish Hacker's picture

Dyslexics of the world untie!

Sun, 06/26/2011 - 17:49 | Link to Comment Blano
Blano's picture

Dyslexics !!zehctib

Sun, 06/26/2011 - 16:53 | Link to Comment A Nanny Moose
A Nanny Moose's picture

Dupe. deleted.

Sun, 06/26/2011 - 15:25 | Link to Comment Marty Rothbard
Marty Rothbard's picture

Dude!  Vote for Ron Paul, the UnPolitician.  He has actually read Menger, Von Mises, and Rothbard, and will end the wars, including the drug war.  You are not going to get a better offer, unless you vote Libertarian.   Oh, and he will almost certainly open the mint to gold and silver, delivered by citizens.

Sun, 06/26/2011 - 11:19 | Link to Comment buzzsaw99
buzzsaw99's picture

That reminds me, I need more popcorn.

Sun, 06/26/2011 - 11:31 | Link to Comment plocequ1
plocequ1's picture

All this talk about gas and oil reminds me. I need more propane for my Weber BBQ. I might as well enjoy my greasy phatburgers while im still alive.

Sun, 06/26/2011 - 11:31 | Link to Comment Urban Roman
Urban Roman's picture

For a popcorn woodgas generator?

Sounds like a plan ... maybe you could get a .gov subsidy like the ethanol producers.

Sun, 06/26/2011 - 12:08 | Link to Comment Long-John-Silver
Long-John-Silver's picture
Gasifying Corn or Cellulose to Power Electric Cars ‘Greener,’ Vastly More Efficient than Ethanol

http://www.worldfuels.com/archives/Gasification-News/XII/10/Gasifying-Co...

Sun, 06/26/2011 - 16:56 | Link to Comment A Nanny Moose
A Nanny Moose's picture

Liquified and fermented barley...powering ideas for thousands of years.

Sun, 06/26/2011 - 11:25 | Link to Comment knukles
knukles's picture

Well there ya go.
Achieve the higher energy prices, inducing further conservation without the blame, for external handy scapegoats thus abound.
Prices high enough to justify QEinfinity.
And reason aplenty for further expansion of kinetic activities throughout the oil producing and gold hoarding world.
Necessitating further expansion of UN global resolutions to further the peace to replace the wars so cleverly approved under the guise of R2P.

Priceless opportunity to further a very specific agenda.
There will be an open newspaper/MSM quiz later.

Sun, 06/26/2011 - 11:29 | Link to Comment ThisIsBob
ThisIsBob's picture

So they sold some people some oil and now they are pissed because its being used?

Sun, 06/26/2011 - 12:15 | Link to Comment Urban Roman
Urban Roman's picture

It's sort of like lending your neighbor bullets when he has a history of pointing his guns at you.

Sun, 06/26/2011 - 11:29 | Link to Comment cossack55
cossack55's picture

Oil? Oil? We don' need no stinkin' oil senor.

Sun, 06/26/2011 - 11:30 | Link to Comment dalkrin
dalkrin's picture

Let the oil cease to flow!  Let the peak be realized, and the panic-buying begin!  Come on world, just grant me this one little step closer to the promised doom!  I can't take the bleating sheep herds any longer!  Let them be ripped into a new dystopia!

Sun, 06/26/2011 - 11:31 | Link to Comment cossack55
cossack55's picture

Excuse me. I think you misspelled utopia.

Sun, 06/26/2011 - 11:47 | Link to Comment BobPaulson
BobPaulson's picture

But in the last article on the Future of Energy there was a quote saying the world demand would reach 100 million barrels/day in 2030. You mean, that might not happen?

Sun, 06/26/2011 - 11:34 | Link to Comment ArkansasAngie
ArkansasAngie's picture

Unelect Washington.

Sun, 06/26/2011 - 12:02 | Link to Comment Long-John-Silver
Long-John-Silver's picture

A guillotine party would be more effective for real "change".

Sun, 06/26/2011 - 11:35 | Link to Comment janchup
janchup's picture

The release of the equivalent to 36 hours worth of American oil consumption seems pretty insignificant.

Sun, 06/26/2011 - 12:45 | Link to Comment buzzsaw99
buzzsaw99's picture

Look at it from OPEC's point of view. Oil drops $4/bbl on the front month, they sell roughly 30 mb/d. $4 x 30 mb/d x (30 days per month) = $3.6B/month. Add in some bankster manipulation and they are losing money big time. Oil prices are set at the margin, and OPEC may just prove that works both ways.

Mon, 06/27/2011 - 02:21 | Link to Comment oldman
oldman's picture

Buzz,

Maybe there is no oil in the reserve

Perhaps this just another digital entry between friends

Are you going to see the oil shipped?

No, just a few ledger entries and we split the pot

The public doesn't care---they are not paying the bill

No one will say a word

Shhhh!!!!

Mon, 06/27/2011 - 07:17 | Link to Comment Bobbyrib
Bobbyrib's picture

At this point Saudi Arabia will keep selling us oil as long as we stay in Iraq. Saudi Arabia fears Iran and we can use the blunder that is the Invasion of Iraq as leverage over them. When the US withdraws its troops from Iraq there will be a massive civil war (Sunnis vs. Shiites) and everyone knows it. The real winner of the civil war will be Iran when the mostly Shiite populated Iraq goes towards a government in favor to Iran (which will be much to Saudi Arabia's discontent).

Do you ever notice that whenever we say we're going to withdraw from Iraq, Saudi Arabia freaks out? They don't want to see Iran grow even more in power. We will use the Invasion of Iraq (which destabilized the region) to keep getting oil from Saudi Arabia. Remember when W promised cheaper oil after the invasion? It may be time to start thanking him, but I would recommend thanking a veteran more than him.

If everyone knows there is eventually going to be a civil war in Iraq, why would Saudi Arabia not just give up? Perhaps they need time to expand their military power and be able to counter any threat from Iran.

Sun, 06/26/2011 - 17:01 | Link to Comment knukles
knukles's picture

Reality is it's the same as Greece actually defaulting; viz, why in hell do markets go through all these machinations, gyrations, swings when it is accepted that Greece will, in the end default.
Kabuki Fundamentals.

Sun, 06/26/2011 - 11:37 | Link to Comment Arch Duke Ferdinand
Sun, 06/26/2011 - 11:38 | Link to Comment Atomizer
Atomizer's picture

Petrodollar recycling scam

Debt Crisis: Origins and Consequences

http://www.youtube.com/watch?v=aTIRMtZa0QA

Recycling Petrodollars

http://www.newyorkfed.org/research/current_issues/ci12-9/ci12-9.html

 

Sun, 06/26/2011 - 12:25 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

Question?..........How far will the US go to maintain the Dollar as the worlds Reserve Currency? First the BRICS want a new reserve currency and now the S.C.O. wants one......

 

I come here to learn from you guys.......thats why im asking... 

 

Thanks in advance..

Sun, 06/26/2011 - 13:18 | Link to Comment Bolweevil
Bolweevil's picture

Beyond enslaving the population through debt servitude, fighting wars on 4 or 5 fronts, occupying how many countries(?), changing laws to suit the bankstas, false flag, stripping constitutional rights, subsidizing bread and circuses? All the way, perhaps?

Sun, 06/26/2011 - 13:21 | Link to Comment Bolweevil
Bolweevil's picture

Beyond enslaving the population through debt servitude, fighting wars on 4 or 5 fronts, occupying how many countries(?), changing laws to suit the bankstas, false flag, stripping constitutional rights, subsidizing bread and circuses? All the way, perhaps?

Sun, 06/26/2011 - 13:42 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

Some say that Kissenger engineered the 1973 (2 yrs after the US went off the gold standard) oil embargo as a way to recycle petro dollars to the US.........So anything that would happen today would be by design.............Do you think it is possible for the US to topple the House of Saud in order to order to maintain the dollar as the reserve currency?

Sun, 06/26/2011 - 13:52 | Link to Comment Urban Redneck
Urban Redneck's picture

What replaces the House of Saud?  The local discontent is that they are too close to the US- not fitting for the Custodian of the Two Holy Mosques.  Any replacement would have to significantly more anti-US in order to survive, and if there was any odor of US involvement in a regime change, 9/11 and the x number of current conflicts would look like a light warm-up.  This would definitely be way above Obama's pay grade.

Sun, 06/26/2011 - 14:06 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

Topple was the wrong word........sorry.......What is to prevent the Sociopaths in Washington from making Saudi Arabia the 51st State and having total and complete control of the oil? If Maintaining the Dollar as the reserve currency is the stated goal.........i could see it happening........Im just trying to think like a sociopath........

 

 

Sun, 06/26/2011 - 13:42 | Link to Comment Atomizer
Atomizer's picture

They need monies to fulfill existing trust funds obligations. Everyday, spin is created to blame others.

All tier II & tier III ponzi's moral hazards nevertheless hit the TV news.

This time, your governments has been caught stealing from the cookie jar. During the implementation phases, they looted high investment clients.

The cartel knows if clients continue to withdraw, the jig is up. The new interest, is to loot undeveloped countries to pay off the immediate trust obligations. All in the name of climate change & humanitary policies.

Bookmark this post, you will see in time.

Sun, 06/26/2011 - 17:07 | Link to Comment mickeyman
mickeyman's picture

If they create a severe enough emergency, couldn't they cancel the trust fund obligations? Or else roll them into some kind of War on Terror Bond--the kind that would make you look like a non-patriotic putz if you protested against.

Coming soon to your front doorstep. Door-to-door sales of War on Terror Bonds, guaranteed to be repaid (with generous interest) the moment the War on Terror ends.

Sun, 06/26/2011 - 13:04 | Link to Comment Urban Redneck
Urban Redneck's picture

OPEC & EU meeting...

If they were to move towards denominating the Brent & OPEC baskets in Euro and settling that trade in Euro, then the increased demand for Euros could kick the PIIGS can down the road several years- ironically the same way the US has been for 40 years.

Sun, 06/26/2011 - 11:44 | Link to Comment Laddie
Laddie's picture

A third factor added to the oil-related cost of the 1973 war (over and above the multi-billion dollar aid package to Israel which began in that year). Deciding to act preventively, as it were, the U.S. created, after some travail, a Strategic Petroleum Reserve ("SPR") designed to insulate Israel and the U.S. against the wielding of a future Arab "oil weapon." It was destined to contain one billion barrels of oil which could be released in the event of a supply crisis. To date the SPR, which still exists and is slowly being expanded, has cost $134 billion—since much of the oil was bought at high prices, and because the salvage value is relatively low. Thus, the 1973 oil crisis, all in all, cost the U.S. economy no less than $900 billion, and probably as much as $1,200 billion. Ironically, military costs themselves were negligible. The 1973 war illustrated the new dimension of Middle East conflicts, where the burdens are economic rather than military.

source

Sun, 06/26/2011 - 11:44 | Link to Comment Urban Roman
Urban Roman's picture

Did Nash have a term for zombie apocalypse?

Sun, 06/26/2011 - 12:02 | Link to Comment topcallingtroll
topcallingtroll's picture

Yes.

But if i give you the answer you wont read Nash and game theory.

For a student of statistics who likes to work on that dynamic interface between human emotion and quant theories nash makes me cum in my pants.

You should read on game theory and nash. It explains marriage, politics, everything.

Sun, 06/26/2011 - 12:14 | Link to Comment LudwigVon
LudwigVon's picture

nevermind, was lol, until post edited. :(

Sun, 06/26/2011 - 12:25 | Link to Comment QQQBall
QQQBall's picture

TCT - too much info

Sun, 06/26/2011 - 14:04 | Link to Comment topcallingtroll
topcallingtroll's picture

Didnt like the visual?

Sun, 06/26/2011 - 12:41 | Link to Comment Kayman
Kayman's picture

Math is never more than a poor corollary in explaining the human condition, on a macro or micro level.

The Nash Equilibrium is an academic exercise explaining a Mexican Standoff.

Any dynamic equilibrium involving human beings is inherently unstable.

Sun, 06/26/2011 - 14:05 | Link to Comment topcallingtroll
topcallingtroll's picture

But to study the cutting edge between quantitative methods and the human condition is exciting even though we look through a glass darkly.

Sun, 06/26/2011 - 16:28 | Link to Comment Kayman
Kayman's picture

Agreed.

Sun, 06/26/2011 - 13:24 | Link to Comment snowball777
Sun, 06/26/2011 - 11:45 | Link to Comment oldmanagain
oldmanagain's picture

"What happens next is complete Nash equilibrium collapse, with a high possibility of a 1973-type OPEC oil embargo announcement in the immediate future."

The actual genesis of the problem was the widening spread of Brent crude versus other grades and the European crisis.  Gasoline has a very hefty tax in Europe, which pays for other transportation venues. This added cost into a decling European econ.

Summers are a peak demand for gasoline. The amounts suggested not very large, big bang for the buck. Not enough to stop much price action but enough to maybe limit extreme tightness this summer.  Oil can be stored.  Hedged. This is not the end of the world.

OPEC destroying their own economies is not on the table regardless of the "Nash" collapse.

 

Sun, 06/26/2011 - 11:41 | Link to Comment Solarman
Solarman's picture

I am no fan of the Administration, but this move will turn out be the catalyst for a sharp correction in energy prices.  Long speculation is at 20x of supply for the futures period, leverage to purchase these contracts are at all time highs, and demand is falling.

 

In the U.S. any emergency will be met by uncapping wells, and in the case of Iran and you picke the hostile distator regime, they will be in bloody revolt due to lack of revenue long before they bring the west to its knees.

 

Oh, and these countries import food over through the sea lanes, which the U.S. controls.

 

Game theory is at work here, and the producers will blink.

Sun, 06/26/2011 - 11:57 | Link to Comment topcallingtroll
topcallingtroll's picture

Probably true, but in the more likely mild scenario of world stability and decreased demand my vde loses money...dammit!

Sun, 06/26/2011 - 12:12 | Link to Comment Kayman
Kayman's picture

Solarman

Nice tidy theory.  Getting desperate politicians and dictators on the same page is a little bit like herding cats.

I go for a lot of blinking on each side.

China gets to stock up on cheap oil and the USA replenishes strategic reserves at higher prices.

Sun, 06/26/2011 - 14:03 | Link to Comment MolotovCockhead
MolotovCockhead's picture

Don't worry about the high prices. Bernake can just print as much as he needs...hmmm...how much does it cost to print a $100 bill?

Sun, 06/26/2011 - 14:19 | Link to Comment MolotovCockhead
MolotovCockhead's picture

No wonder TPTB bomb the hell out of Libya and tried very hard to assasinate Qaddafi who in his moment of grandeur tried to convince his fellow Muslim oil producing countries to up an Islamic gold backed Dinar and trade oil in Dinar.

First, Saddam Hussien.....to sell oil in Euro and he became history. Next will be Iran, they have made their intention known to everyone that want to sell their oil in whatever currencies they choose. Hope they get lucky this time.

Sun, 06/26/2011 - 18:51 | Link to Comment Pure Evil
Pure Evil's picture

The Iranians already opened their own trading bourse in 2008.

No Dollars Please, We Are Iranian

The IOB accepts Iranian Rials and a host of other currencies including Russian Roubles, but no Federal Reserve Notes (FRNs). Iran has shifted all its assets out of FRN obligations in order to avoid an arbitrary confiscation by the USA.

Iran's first domestic toehold in oil trading is another blow to the ailing unbacked dollar. As more oil gets traded in other currencies, the demand for FRNs will further reduce.

The USA anxiously follows these developments that could easily spread to other commodities as well, again reducing the demand for dollars as a hitherto unchallenged currency of choice in commodities markets.

There is no sound reason why Euro countries will not prefer to settle their oil bills in their own currency, eliminating forex costs too.

OPEC has declared earlier that it too is looking into other options (OPEC mulls replacing FRNs with a basket of currencies).

http://seekingalpha.com/article/65003-iranian-oil-bourse-starts-trading-sans-dollar-contracts

Sun, 06/26/2011 - 17:31 | Link to Comment delacroix
delacroix's picture

2 cents (any denomination)

Sun, 06/26/2011 - 11:45 | Link to Comment apberusdisvet
apberusdisvet's picture

Oil at $200 = gold at $5000

Sun, 06/26/2011 - 11:54 | Link to Comment topcallingtroll
topcallingtroll's picture

Ok maybe I wasnt so stupid to buy VDE at 105-ish.

I still feel awfully stupid, but 60 million barrels is only one day of world consumption.

Letting it all go in one month, essentially adding a new two million barrel per day opec member in august, is designed for one thing only, an attempt to knock down the price.

Sun, 06/26/2011 - 11:58 | Link to Comment TempFlashback
TempFlashback's picture

Less than one day's worth of world oil consumption.

Sun, 06/26/2011 - 12:05 | Link to Comment topcallingtroll
topcallingtroll's picture

Thanks for the correction. I am having a brain fart thinking 83 equals 60

Sun, 06/26/2011 - 12:39 | Link to Comment oldmanagain
oldmanagain's picture

18 hours to be exact.  Absolute Koch induced histeria.

Sun, 06/26/2011 - 12:40 | Link to Comment oldmanagain
oldmanagain's picture

18 hours to be exact.  Absolute Koch induced histeria.

Sun, 06/26/2011 - 12:04 | Link to Comment RobotTrader
RobotTrader's picture

OPEC won't dare cut production.

With stock markets collapsing worldwide, nobody is going to do anything so stupid to accelerate the decline in the economy.

More consumer "tax cuts" are needed to boost growth, like collapsing gasoline prices in Los Angeles:

http://www.losangelesgasprices.com/Retail_Price_Chart.aspx

I can now get gas for $3.65/gal, down from $4.25/gal just weeks ago.

http://www.losangelesgasprices.com/

Sun, 06/26/2011 - 12:10 | Link to Comment topcallingtroll
topcallingtroll's picture

Robo is probably right this time.

With that extra money you save on gas go online and collect a harem of hot cougars to keep you busy.

You sound early thirties which is the upper limit to get the hot sexy cougars before they sag too much and have wrinkles.

Death, by boolah boolah! It is the only way to go!

Sun, 06/26/2011 - 12:37 | Link to Comment Paladin en passant
Paladin en passant's picture

Thank you very much.  Iran least of all.  Their economy is in shambles already.  Cutting off their income to spite Saudi Arabia and the evil West would be suicidal.  There would be chaos in Iran and probably another revolution.  Even if OPEC announces cuts, there will be rampant backdoor selling as usual. 

And if Saudi Arabia is kicked out of OPEC, OPEC's gone as a viable threat to prices.  Sounds like a win to me.

Sun, 06/26/2011 - 12:50 | Link to Comment lizzy36
lizzy36's picture

Well, it is a gamble for Iran.

But and just but what if OPEC does cut production just to prove that Saudi is UNABLE to fill the gap. That Saudi excess production capacity really is a myth, then what?

I agree by the way it is a huge gamble, due to revoltionary factors in Iran and most of the OPEC countries.

 

Sun, 06/26/2011 - 13:05 | Link to Comment Paladin en passant
Paladin en passant's picture

Announcements of production cuts will have the same impact as the endless European announcements they've got that whole Greek & PIIGS problem licked.  The market will react for a day or less and the real market...physical barrels of crude being loaded for transport...will undermine OPEC's statements and then the whole "We are the oil world" show that is OPEC will die an ugly death.  OPEC's demand for dollars exceeds their capacity to produce, therefore they cannot stand in the long run.

Sun, 06/26/2011 - 16:45 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Nor can civilization.

Sun, 06/26/2011 - 13:10 | Link to Comment Urban Redneck
Urban Redneck's picture

If they cut "production" 10% and prices 11% then there is no loss in income, even before the excess income on unofficial production.

Sun, 06/26/2011 - 13:45 | Link to Comment Paladin en passant
Paladin en passant's picture

In theory, but mathematical theories seldom take into account corrupt, thuggish governments' desire for more and more cash.  So, in reality, OPEC announces a ten percent cut in production and the next day half their members are offering an extra ten percent of product under the table to their "preferred customers". Within the month prices decline by 20% and the race is on to see who can sell enough product to prevent them from running out of the dollars necessary to stay in power. 

Saudi Arabia was the one producer that had both the brains and the capacity to swing production enough to keep things stable.  The other OPEC depots are idiots.  Without Saudi Arabia cutting back their own production, OPEC cannot enforce any "embargo".  If the Iranian regime has succeeded in expelling them from OPEC, they've just signed their own death warrant.  They'll be out of power within the next twelve months.  The NEW Iranian government will need beaucoup dollars and will ramp up production to the max.  The West, being grateful for the demise of the mullahs will rush in with production assistance. You can see where this is headed...oil at $50/bbl or less in the next few years.

Sun, 06/26/2011 - 14:12 | Link to Comment Urban Redneck
Urban Redneck's picture

OPEC Ministers aren't idiots.  The guys they work for, even if not the sharpest mental knives in the drawer, are smart enough to stay in office.  Given the Federal Reserve's debasement of the dollar, not even Saudi Arabia would be game for $50 oil, especially given this year's bread & circus bill.  The fact is $100 oil isn't a result a shortage ofsupply chain breakdown, world peace and a strong dollar, Pandora's box has already been opened. 

Sun, 06/26/2011 - 15:44 | Link to Comment Flakmeister
Flakmeister's picture

Oil at a steady $50 will only occur in a massive deflationary collapse....yes, that is very possible, I do not think it is likely though. It will only happen through collapse in demand of ~5-6%

Iran has yet to match its production from the 70's and will likely never.

We are now very firmly in the regime where the world oil production plateau is turning over and the political double-speak will a sight to behold...

Edit: Oil at $50 presupposes that exports do not curtail production. Would you rather have 1 mmbpd exports at $100 or 1.25 mmbpd at $80? Let's assume your cost is $15-20 per barrel. If it is my oil, the answer is obvious.

An Iran addendum:

Go to http://mazamascience.com/OilExport/   and select Iran....

Sun, 06/26/2011 - 15:35 | Link to Comment Marty Rothbard
Marty Rothbard's picture

You're assuming that the Saudis have any spare production.  I question whether they do or not.  I read that their largest field, Gahwar, is on it's last legs.  There are many reports that they overstate their capacity.

Sun, 06/26/2011 - 12:35 | Link to Comment Paladin en passant
Paladin en passant's picture

Stupid Javascript Captcha crap system = double posting.

Sun, 06/26/2011 - 14:14 | Link to Comment topcallingtroll
topcallingtroll's picture

Send in your donation to zero hedge. Even $20 is meaningful and appreciated. This is a server limit problem and it is getting worse.

Do you want alternative meda to exist? We must support it. ZH does not suck the public teat like NPR and PBS, nor does it have protected oligopoly status like the MSM.

Sun, 06/26/2011 - 11:59 | Link to Comment Black Swan
Black Swan's picture

Hi Tyler

I'm a westerner living in the United Arab Emirates, not quite sure if you heard about this but within the UAE over the last few months all emirates EXCEPT for "Dubai & Abu Dhabi" have been faced with a shortage of fuel at Enoc & EPPCO petrol stations. Apparently they are made to sell fuel at bellow cost, making it hard for station owners to turn a profit. As I said this has not been the case in Abu Dhabi and Dubai where there is plenty of fuel at the pumps. It has come to a point where the ruling families of these Emirates have demanded the owners of the stations open up and sell fuel at the specified price by a certain date. If the station owners fail to do so they will have their licence's revoked and be shut down for good, who would have thought a fuel shortage would occur in such a hierarchic society. Personally i can't understand why this is happening as most large business in the region see a part of their profits filter there way up to the top anyway, this is the way it has always been. So what is happening behind the scene's is any-one's guess, I'm just surprised to see it happening at all. If anyone out there has any insider info on this topic and why it is happening, I for one would love to know..................?

Cheers

Sun, 06/26/2011 - 12:12 | Link to Comment snowball777
snowball777's picture

...that guy in the middle with the beard and the bad breath...that's gotta be Willy Nelson.

As for your query, in-fighting.

Sun, 06/26/2011 - 12:01 | Link to Comment Kayman
Kayman's picture

America could easily wean itself off foreign oil, but American political traitors continue to be bought and sold like the cheap whores they are.

A viable third party. Is it possible ?

Sun, 06/26/2011 - 12:08 | Link to Comment Long-John-Silver
Long-John-Silver's picture

Only a Guillotine Party will eliminate the two party system in America.

Sun, 06/26/2011 - 12:13 | Link to Comment snowball777
snowball777's picture

You have to pull a weed out at the roots...unless you use those guillotines on the financial sector and multinational corporate power structure, you'll just have to spill more blood again later.

Sun, 06/26/2011 - 12:21 | Link to Comment Long-John-Silver
Long-John-Silver's picture

Party like it's 1789!

Sun, 06/26/2011 - 12:47 | Link to Comment Kayman
Kayman's picture

Sadly I have reached the same conclusion.

Sun, 06/26/2011 - 12:06 | Link to Comment JimRogers
JimRogers's picture

What sorta premium was the market charging for Chavez's existence?

Sun, 06/26/2011 - 12:11 | Link to Comment snowball777
snowball777's picture

No market for his assassination on InTrade...care to make a bid? ;)

Sun, 06/26/2011 - 12:13 | Link to Comment Cole Younger
Cole Younger's picture

LOL, if OPEC reduces output, Obama is toast as we will likely see even higher prices later this year and into next. Couple that with high unemployment, and Obama should just stay out of the race as he will not have a fat chance in hell to get re-elected. What's that old political saying..."it's the economy stupid"

Sun, 06/26/2011 - 12:19 | Link to Comment Long-John-Silver
Long-John-Silver's picture

This campaigns slogan should be "It's the Money stupid".

Sun, 06/26/2011 - 12:18 | Link to Comment Hannibal
Hannibal's picture

OH YEAH, ROCK AND ROLL.....SILVER $300

Sun, 06/26/2011 - 12:16 | Link to Comment Long-John-Silver
Long-John-Silver's picture

1oz Silver=1 tank of gas.

Sun, 06/26/2011 - 13:30 | Link to Comment HungrySeagull
HungrySeagull's picture

Not even. Make that three for one and two for the other.

300 silver? that will make a old bull like me alive again. Suppose I sell. I could raise thousands at 300 minus whatever tax. That should keep both of us in gasoline a very long time at the pump.

Just one little problem. Those who are still able to pay for a tank of gas are going to be first attacked. Got a gun on you or two?

Sun, 06/26/2011 - 16:08 | Link to Comment WakeUpPeeeeeople
WakeUpPeeeeeople's picture

Don't forget the ammo. Very bad things happen when you run out of ammo.

Sun, 06/26/2011 - 12:16 | Link to Comment MrPoopypants
MrPoopypants's picture

We can speculate about possible ramifications and/or Obama Admin motives, but if we're honest and epistemologically sound we have to admit we really don't know shit. As for me and my one hour commute, I'll take the lower gas prices thank you very much.

Sun, 06/26/2011 - 13:33 | Link to Comment HungrySeagull
HungrySeagull's picture

We ditched the one hour commute. Now it's inside the town or within a few minutes. Easily supported by supplies for at least a month.

Can you secure a vehicle against intruders using tools to punch gas out of it into a container lleaving you with a 3 week downtime and a 2 thousand dollar repair/replacement bill, provided a gas tank for your vehicle can even be located?

Especially when a nation is already experiencing this. I would buy a spare gas tank for each vehicle and secure it inside the house. Or use Racing type fuel cells in the trunk.

Sun, 06/26/2011 - 15:42 | Link to Comment Marty Rothbard
Marty Rothbard's picture

If I had an one hour commute, I would buy a Nissan Leaf, and ask my boss if I could plug it in at work.  Of course, if the commute is one hour because of stop and go traffic, you wouldn't need to plug it in.  I'd enjoy laughing at the SUV owners, while I silently glided past the gas stations.

Sun, 06/26/2011 - 16:01 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Ask yourself what happens when that 60 million has to be replaced in the SPR storage.

Sun, 06/26/2011 - 12:33 | Link to Comment Monedas
Monedas's picture

Monedas is doing his part to use less petroleum through Adventures in Bathroom Science ! I got rid of my stupid restricted flow shower head ! I had to buy a new one every year, almost, because the little holes would clog up with lime scale ! With a rag and a pair of Vise-Grip pliers I rotated the chromed shower neck 180 degrees ! Now, sans shower head, the water goes up and cascades down over my now slightly less than glorious naked body ! The advantages are many : 1. A more delicious feel and sound of real water !. 2. Better and faster rinsing ! 3. Less volume is needed ! 4. A more relaxing experience ! 5. Easier to balance temperature with the instant feedback of real water ! 6. Less fog produced ! (although my leaf blower keeps my mirrors virtually fog free) 7. $20 annual savings in shower head expense !.........Just when your wife was getting used to your leaf blower propped in the corner....spring this one her ! Blame it on the Monedas ! He knows who he is and he can take the heat ! Monedas 2011 Serving humanity by being eccentric !  http://trololololololololololo.com/

Sun, 06/26/2011 - 12:51 | Link to Comment the grateful un...
the grateful unemployed's picture

soak your showerhead in CLR every few months.

Sun, 06/26/2011 - 13:26 | Link to Comment Monedas
Monedas's picture

CLR ? Calcium Lime Remover ? Yeah, I could have two shower heads - one soaking, one on line ! I was using Balsamic vinegar ! Tres chic est il Monedas ! The next time you're soaking your shower head in CLR, try my experiment, you'll never go back ! I got the idea in part when I took "Gourd and bucket" showers in southern Sonora ! Monedas 2011 The cutting edge of bathroom science !

Sun, 06/26/2011 - 14:40 | Link to Comment theopco
theopco's picture

That was the most awesome video I've ever seen in my life. All web content should be replaced with that clip.

My humble gratitude.

Sun, 06/26/2011 - 12:48 | Link to Comment Downtoolong
Downtoolong's picture

Sorry, but I’m not buying this argument, which is suddenly starting to become lore in the MSM, that the IEA release was in any way aimed at or designed to punish OPEC. Are we really supposed to believe that OPEC and its biggest swing producer Saudi Arabia are going to freak out and somehow change their long term production strategy to retaliate over a release of oil which amounts to just slightly more than 2 days of total OPEC production?

I think it’s much more likely that this plethora of news is part of a Wall Street propaganda campaign, delivered through their MSM mouthpieces to create fear and volatility in the oil markets on an international scale and steer everyone’s attention away from the real targets of the oil release, THEM! I think there were two primary reasons that the release took place a) to temporarily drop the price of oil and briefly boost the economy b) show oil market speculators and manipulators at the TBTF banks how they are now playing a more dangerous game when an even bigger manipulator can suddenly enter the market without notice. I think both goals were achieved almost instantaneously by the announcement of the release, and the second one is far more important for stabilizing oil prices over the long haul. Furthermore, at least in this case the government appears to be dealing direct with end users, bypassing and therefore not further enriching the same intermediaries who are the source of the market manipulation problem. You can’t say that about all the Fed POMOs that have further enriched the same Wall Street banks which caused our financial crisis, and thus created the apparent need for POMO’s in the first place. But, I wonder how long it can go on before the government and Wall Street are in bed with each other on these oil market operations too, and Goldman Sachs, backed by an army of Facebook investors surprisingly outbids the Chinese for the next 30 million bbls? 

Sun, 06/26/2011 - 13:57 | Link to Comment topcallingtroll
topcallingtroll's picture

Excellent post.

Sun, 06/26/2011 - 12:52 | Link to Comment Pez
Pez's picture

STAGFLATION bitchez! Until people discover the Federal Reserve Note doesnt even meet the lowest TP standards then Anarchy!

Sun, 06/26/2011 - 12:57 | Link to Comment oldmanagain
oldmanagain's picture

It is amazing that "free marketeers" are against China exercising their free market perogative.

 

Sun, 06/26/2011 - 13:00 | Link to Comment williambanzai7
williambanzai7's picture

And they can't even defeat Gaddafi, is this a circus or a freakshow. I'm losing track.

Sun, 06/26/2011 - 13:00 | Link to Comment the grateful un...
the grateful unemployed's picture

they already have his body on ice. in five years some Navy Seals will capture him, they will bury him at sea, and declare victory. in the meantime the CIA is running the show.

Sun, 06/26/2011 - 13:32 | Link to Comment HungrySeagull
HungrySeagull's picture

Back in 80's when Europe banned overflights, Mildenhall England's F-111's did well enough to fly around and still hit the place along with Navy Air.

I think they are hovering over Facebook waiting for Crazy Kaddy to post a news feed "Your bombs missed by two miles nyah nyah nyah.

Sun, 06/26/2011 - 12:58 | Link to Comment the grateful un...
the grateful unemployed's picture

think you have it backwards, the IEA requested the release. Obama could have ordered it without their approval, and it may be that he did call them up and demand that they issue a request, to help his reelection campaign.

and its possible Bernanke called him and spoke the D word, and then hinted that selling oil at todays price and buying it back later at half the cost, made good sense, and that he the Bernanke understood what the D word meant. and that he actually had some control over that.

one of the side effect of the Jasmine revolution is the overthrow of some rich old despots, who didn't mind keeping their people poor, as long as they could control the levers of power, so they kept oil prices high, and sold as they pleased. However when the poor downtrodden masses take power they will sell oil at any price to pay for food. In a year or two there could be a flood of oil on the market.

 we're facing the opposite of the oil embargo, and the D word to accompany that. (oil and housing have been artificially inflated values, tied to the dollar, and once oil and housing decline then the D genie is out of the possible, and the world economy crashes.

selling this (and more oil) at these inflated prices helps keep the wolf from the door. (if they can find any buyers, and if they can't they will buy it back themselves just to keep the price supported, and with it the world economy)

Obama wants $100 oil, not $25 oil.

Sun, 06/26/2011 - 13:05 | Link to Comment walküre
walküre's picture

The US is already preparing.

Chavez is "critical" in a Cuban hospital.

Nice twist.

Sun, 06/26/2011 - 13:13 | Link to Comment DosZap
DosZap's picture

Critical is almost meaningless,unless he's ICU, critical is a word that means less than it really insinuates.

It's the next word up the chain from stable.

Chavez is a tough not too old SOB.

Depending on what he has, is the issue........if it's Tequlilla and hookers, that's serious..........anything else, he's too damn mean.

Sun, 06/26/2011 - 13:26 | Link to Comment FrankIvy
FrankIvy's picture

DosZap wrote: "Critical is almost meaningless,unless he's ICU, critical is a word that means less than it really insinuates. It's the next word up the chain from stable."

Yeah but.  The next word up from "critical" is "dead."

Sun, 06/26/2011 - 13:40 | Link to Comment infinity8
infinity8's picture

I was going to post about that - no real info on what's up with him - nice timing. Wonder if he's incommunicado?

Sun, 06/26/2011 - 13:03 | Link to Comment oldmanagain
oldmanagain's picture

Sun, 06/26/2011 - 13:09 | Link to Comment DosZap
DosZap's picture

And whatever happens, WE will get the pointed stick.

And WE deserve it.

Rather the idiots we call our Representatives, and POTUS.

After the last two major cutbacks, a FOOL would have learned that you seek OTHER supplies, and not be held hostage by Raghead Islamonazi's.

We have many suppliues, untapped, underdevelopd, not allowed to be developed...................the first people the Americans will scream at is OPEC, and it should be a geneal lyncning in D.C.

Those pricks will NEVER do without, or have to pay for the inflated prices as WE the people will.

Sun, 06/26/2011 - 13:25 | Link to Comment buzzsaw99
buzzsaw99's picture

If the Libyan rebels win in short order this will all go away for awhile. The republicans, the rusi=sians, opec, etc., don't want that. Lower oil prices is bad for all the aforementioned groups.

Sun, 06/26/2011 - 13:28 | Link to Comment ebworthen
ebworthen's picture

Last chart - look at the spike 1971-1972, isn't that when Nixon drove the final nail in the coffin of the gold standard?  Hmmm...

The voting Amerikan populace do not have a long enough memory or attention span for this to matter by election time; it would have to happen two weeks before a vote.

Sun, 06/26/2011 - 13:25 | Link to Comment tamboo
Sun, 06/26/2011 - 15:59 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

More unvetted crap.  Where are the power output measurements, and the power input measurements?  

Right.  There are none.  Nor will there be.

Sun, 06/26/2011 - 13:38 | Link to Comment Version 7
Version 7's picture

Interestingly, this release from the IEA of its strategic petroleum reserves actually mean there's no spare capacity available from OPEC countries. Got the message..

Sun, 06/26/2011 - 14:10 | Link to Comment buzzsaw99
buzzsaw99's picture

there's no spare capacity available from willing OPEC countries...

 

fixed it for you.

Sun, 06/26/2011 - 15:55 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

No, you didn't.  He had it right the first time.

That looks like bad news, too, but it's nothing.

The real news is . . . that's forever.

Sun, 06/26/2011 - 17:09 | Link to Comment buzzsaw99
buzzsaw99's picture

I could name countries that are producing below capacity but it would be wasted on you.

Sun, 06/26/2011 - 17:34 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

No it wouldn't.  But you'd have to begin and end with Venezuela, and they are certainly willing to pump more and cannot.  They could probably solve the geology problem and get some more out (a few hundred K bpd, not big numbers like 10 million), but they can't politically.

So, you're wrong.

Sun, 06/26/2011 - 17:55 | Link to Comment buzzsaw99
buzzsaw99's picture

Venezuela

Iran

Libya

Iraq

for starters

Sun, 06/26/2011 - 18:27 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

What are you thinking?

Libya is perfectly willing to export more.  Iran is decades post peak and maxed out.

The infrastructure in Iraq defines their maximum and they are pumping all they possibly can.  There is no lack of willingness.

I think we have an interpretation problem.  There is no lack of willingness from these countries.

Looking at Iraq, and the whole world hopes they are the salvation of all, the odds are pretty high their maximum production will be about 5-6 mbpd, which is about half what their insane oil minister has quoted.  It will, btw, take them 10-20 years to get there, while the rest of the world is eroding far faster.

Libya will restore pumping eventually, with Gadaffi still in charge and shipping only to countries he wants to ship to, aka Africa, who supported him.  Maybe 400-500K bpd, which will pay him nicely.  If Europe wants his oil, after backstabbing him, who has been a reliable supplier for years, he'll sell to them -- at $400/barrel.

Iran is doing about 4 mbpd, which is 2 mbpd below their 6 mbpd peak of 1970ish.  They are perfectly willing to do more, but geologically cannot.  Don't know why they are on the list at all.

Venezuela is also perfectly willing to pump more, but cannot because they drove out oil companies.  Venezuela's all time peak was 4 mbpd in 1970 and they are doing less than 2 mbpd now, but they certainly could do better, maybe 300K or 400K from these 50 yr old fields.  By the time they change politically and re-establish contracts, the down escalator of the rest of the world will have reduced under what they can add.

These countries are not unwilling to pump more.  They are maxed out with the constraints being political and geology/engineering both.

 

 

Sun, 06/26/2011 - 20:39 | Link to Comment buzzsaw99
buzzsaw99's picture

disagree with your rationale, your terminology, and your (circular) (il)logic. Your kung fu is weak.

Mon, 06/27/2011 - 01:23 | Link to Comment RockyRacoon
RockyRacoon's picture

A tad short on your rebuttal there, Scooter.

Sun, 06/26/2011 - 13:59 | Link to Comment agrotera
agrotera's picture

TYLER FOR PRESIDENT!!!2012!!!!!

Sun, 06/26/2011 - 15:35 | Link to Comment SRV - ES339
SRV - ES339's picture

OK... but which one?

Sun, 06/26/2011 - 18:04 | Link to Comment agrotera
agrotera's picture

The only real Tyler, the person who started ZH.

Sun, 06/26/2011 - 14:08 | Link to Comment reachsb
reachsb's picture

Let's not forget that there is a bigger battle brewing to displace the USD as the reserve currency of the world. The USD has been able to maintain its reserve currency status because it is the medium of exchange for crude oil transactions. Remember petro-dollar? Any OPEC country that threatened to abandon the USD for transactions has been dealt with (Iraq, Libya, etc.). This may be the beginning of the underlying battle by OPEC to move away from transacting in USDs. Priced in gold, crude oil has a long way to go to catch up with gold since the depths of 2008.

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