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Guest Post: Is The U.S. Oil Boom About To Bust?

Tyler Durden's picture




 

Submitted by Daniel J. Graber of OilPrice.com,

The United States is expected to lead the pack among non-OPEC members in terms of oil supply growth for 2013. That's the assessment from this month's market report from the Vienna-based cartel. OPEC said it projected U.S. oil supply growth of around 600,000 barrels per day in 2013, with most of that coming out of tight oil formations in the country.  For the U.S. Energy Department's Energy Information Administration, that means oil imports should fall to their lowest level since 1985. Republican leaders in the House of Representatives said more energy development is the key to a balanced budget, a sentiment enforced by EIA predictions of 7.9 million U.S. bpd by 2014. OPEC, however, said it may need to revise its figures because a possible slowdown in the U.S. oil boom.

House Budget Committee Chairman Paul Ryan, R-Wisc., unveiled a 91-page plan that he says would balance the budget in 10 years without raising taxes. The congressman said the Obama administration was over-subsidizing renewable energy programs to the detriment of the fossil fuels industry. With that policy, Ryan said the administration is standing in the way of the country's true energy potential.

"Our country has 163 billion barrels of recoverable oil and enough natural gas to meet the country’s demand for 90 years," his agenda states.

The EIA, in its latest report, said it estimates 2012 oil production averaged around 6.5 million barrels per day. The average for November and December, however, was 7 million bpd, the highest volume recorded in twenty years. By 2014, that level should reach 7.9 million bpd. For EIA Administrator Adam Sieminski, that means the United States is relying less on foreign markets to meet its energy needs. By next year, foreign imports should fall to 32 percent of consumption, putting the United States on the road to the energy independence envisioned by House Republicans.

OPEC finds that tight oil production, coupled with modest growth from the Gulf of Mexico, meant most of the supply growth from non-members would come from the United States. For Ryan, expanding that growth to potential on federal lands, now off-limits, could add another $14.4 trillion in cumulative economic activity during the next 30 years. House Natural Resources Committee Chairman Doc Hastings said that's reason enough to embrace fossil fuels over tax increases.

"(Ryan's budget) recognizes that expanded American energy production is one of the best ways to raise new revenue, bolster the economy, lower gasoline prices, and put Americans back to work at good-paying jobs," he said.

OPEC, in its forecast, said U.S. oil supply growth is projected at 600,000 bpd this year. That figure, however, is 40,000 bpd less than the previous year. The Vienna-based cartel said U.S. oil growth could go either way for 2013, but noted growth from tight oil developments in states like North Dakota is expected to slow down. While improved drilling technology may offset some of that decline, OPEC said that factors like price issues may dampen the oil boom in the United States. In 2009, the EIA found that opening more land could add another 500,000 bpd to the market, but once OPEC adjusts, the economic impact may be muted. OPEC is already adjusting, saying it expects the world will need about 29.7 million bpd of its oil in 2013, a decline from last year.

The White House said it believes Ryan is sincere in his effort to address ongoing budget issues. Apart from entitlement reforms and spending issues, however, its emphasis on domestic energy may be more of a platform issue. Though U.S. oil production is experiencing steady expansion, it's starting to slow down and with it potentially goes the revenue for which Ryan's plan depends.

 

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Thu, 03/14/2013 - 11:16 | 3329530 Dr. Richard Head
Dr. Richard Head's picture

Just like a Facebook stock tax winfall expected by California, the Federales will find their hopes and aspirations of more raping and pilaging to meet their dictatorial expenses fall flat. 

Thu, 03/14/2013 - 12:23 | 3329738 CrazyCooter
CrazyCooter's picture

Always remember, that new "tight" production is replacing declining conventional production.

http://www.oilposter.org/

And it is not nearly as cheap in terms of capital required to produce as the conventional stuff. These kinds of wells require constant re-drilling to keep production rates from collapsing.

Lots of liquidity these days, but one might ask, "what happens when money isn't free anymore?" Oil prices have to go up, permanently and in real dollars, to sustain the production. That is going to kill the economy (in real dollars).

Print some more oil Ben!

Regards,

Cooter

P.S. Here is some old "TV" for those who don't realize exactly how bad our energy outlook really is ...

http://www.abc.net.au/science/crude/

Thu, 03/14/2013 - 13:02 | 3329865 MSimon
Thu, 03/14/2013 - 11:16 | 3329533 Dr Paul Krugman
Dr Paul Krugman's picture

Oil prices are not sticky - they are transitory - because ever increases in technology will shrink input costs and raise output.

Thu, 03/14/2013 - 11:22 | 3329547 Dr. Engali
Dr. Engali's picture

The people betting on shale oil better hope prices are sticky. Good luck getting it out of the ground below $85.00 a barrel.

Thu, 03/14/2013 - 11:24 | 3329558 Dr Paul Krugman
Dr Paul Krugman's picture

Improvements in technology will change that.

Thu, 03/14/2013 - 11:28 | 3329572 Flakmeister
Flakmeister's picture

Any time you see "technology" in a puff piece on oil production replace it with "price" and it makes much more sense...

Thu, 03/14/2013 - 11:32 | 3329579 Dr Paul Krugman
Dr Paul Krugman's picture

You have no idea what you are writing about; economics dictates improvements in technology will reduce input costs and allow for greater output.

Thu, 03/14/2013 - 11:34 | 3329590 orangegeek
orangegeek's picture

Economics like Obama blocking Keystone?

Thu, 03/14/2013 - 11:40 | 3329611 Dr Paul Krugman
Dr Paul Krugman's picture

That's politics.

Thu, 03/14/2013 - 12:09 | 3329703 falak pema
falak pema's picture

if you say it twice that means PHd of economics is politics personified...read my lips is what they always say, again and again, and they never do what they say, just like the economists! 

Thu, 03/14/2013 - 11:40 | 3329612 Dr Paul Krugman
Dr Paul Krugman's picture

That's politics.

Thu, 03/14/2013 - 12:16 | 3329725 orangegeek
orangegeek's picture

You have an incredible grasp of the obvious.  That PhD you speak so highly of really does work. 

 

Thu, 03/14/2013 - 14:44 | 3330250 WillyGroper
WillyGroper's picture

Piled higher & deeper.

Thu, 03/14/2013 - 14:24 | 3330162 eclectic syncretist
eclectic syncretist's picture

Krugman, you brown-nosing liberal loving pussy.  Your Ph.D. stands for Pizza-Hut Delivering, Post-Hole Digging, Pussy Hating Dicksucker, with all due respect of course.  You pretend that you are an expert on economics, but your only solution is to COUNTERFEIT MONEY.  That sir, has no relation to economics of any kind whatsoever, because it is COUNTERFEITING MONEY, which is immoral, unjust, and criminal.  Of course you don't call it counterfeiting, and instead wrap it up in flowery rhetoric, smoke-and-mirrors, shell-game bullshit LIES, but if you would ever just read the constitution and get a fucking clue you might begin to understand what is really going on, but I doubt it sincerely.

Thu, 03/14/2013 - 19:08 | 3331100 steve from virginia
steve from virginia's picture

 

 

Funny, all the talk about 'technology' by Krugman 2.0 even as the government tries to figure out how to sacrifice the retirements of older workers to the giant banks.

 

Robbery from children and elderly is technology in action, folks!

 

Meanwhile from Energy Information Agency forecast:

 

  • U.S. crude oil production exceeded an average level of 7 million barrels per day (bbl/d) in November and December 2012, the highest volume since December 1992. EIA estimates that U.S. total crude oil production averaged 6.5 million barrels per day (bbl/d) in 2012, an increase of 0.8 million bbl/d from the previous year. Projected domestic crude oil production is expected to average 7.3 million bbl/d in 2013 and 7.9 million bbl/d in 2014.

 

  • Total U.S. liquid fuels consumption fell from 20.8 million bbl/d in 2005 to 18.6 million bbl/d in 2012. EIA expects total consumption to rise slightly over the next two years to an average of 18.7 million bbl/d in 2014,

 

Math can be tough but 18.6 - 7 = 11.6 million barrels per day that must be imported ... almost twice what is being extracted currently. The US is nowhere near being 'energy independent'.

 

It would be so if domestic consumption was less than 7 mbpd, however under that particular circumstance there would be much less than 7 mbpd production. Probably more like 3 mbpd which in turn would require domestic consumption to be less than 3 mbpd. Under that particular circumstance there would much less than 3 mbpd production ... you can see where this goes ... it's called 'Energy Deflation'.

 

What is in store for the future? Depletion never sleeps as Americans still drive mindlessly whether it is sensible to do so or not. Our conventional oil fields are being drained, meanwhile, credit depletion never sleeps. We've signed our lives away to the Giant Banks who are bleeding the country, credit is being extracted just like crude oil and diverted to the banksters. Despite the Fed, there is insufficient credit flowing to drillers, at some point fuel supplies are shut in.

 

BTW, Ryan is a complete moron, how he gets elected is mystery like the Higgs boson.

 

 

Thu, 03/14/2013 - 19:53 | 3331182 Flakmeister
Flakmeister's picture

The Higgs ain't that mysterious.... What would you like to know?

Thu, 03/14/2013 - 20:16 | 3331244 StychoKiller
StychoKiller's picture

Bell's Theorem is a mindfsck!

Thu, 03/14/2013 - 22:38 | 3331519 Flakmeister
Flakmeister's picture

Yes, it certainly is....

Thu, 03/14/2013 - 11:51 | 3329651 Bad Attitude
Bad Attitude's picture

I'm wondering if OPEC will lower their prices just enough to make these new US oil sources unecomical. They've done it before.

And, Dear Leader's energy policies/fantasies don't help The US energy outlook.

Thu, 03/14/2013 - 12:18 | 3329728 pods
pods's picture

Nah, they will just keep supporting hitpiece media about drilling in the US.  Better ROI for them.

pods

 

Thu, 03/14/2013 - 12:33 | 3329781 Coast Watcher
Coast Watcher's picture

Does OPEC have the extra capacity to drop prices that low? Tight oil needs $75-$85 oil to be profitable.

Thu, 03/14/2013 - 12:46 | 3329817 Flakmeister
Flakmeister's picture

I think we know the answer to your question....

Thu, 03/14/2013 - 18:11 | 3329735 Taint Boil
Taint Boil's picture

 

 

Too many sources to give credit:

 

There’s a lot of misinformation surrounding the Keystone Pipeline. In fact, the ongoing debate doesn’t even concern the pipeline. The first phase of the pipeline has been operational since 2010, running more than 2,000 miles through two Canadian provinces and six U.S. states. The debate is actually about the Keystone XL, an appropriately named addition that would add 700 miles to the original pipeline. 

“By diverting Canadian oil that would otherwise go to the Midwest, TransCanada has admitted the pipeline would increase the price Americans pay for Canadian oil by $3.9 billion. 

………Keystone XL would result in 2,500 to 4,650 temporary construction jobs, this impact will be reduced by higher oil prices in the Midwest 

TransCanada’s job claims are complete fabrications, and the Cornell report concludes that “KXL will not be a major source of US jobs, nor will it play any substantial role at all in putting Americans back to work.

The Keystone XL pipeline is designed for one thing—to send oil from Canada to the Texas Gulf coast and from there to overseas markets. 

According to its own secret documents submitted to the Canadian government, TransCanada expects the pipeline to increase gas prices in the Midwest by up to 15 cents per gallon. Currently, a surplus of gas in the region means that our prices stay stable. If the pipeline is built oil companies will be able to send their product to the Gulf coast for export, which will reduce this surplus and drive up costs for Midwestern consumers 

The real out-of-state special interests are TransCanada (a foreign oil company) and its lobbyists in Washington, who stand to make billions from this project…… 

Based upon the construction of the previous phases of the pipeline by TransCanada, it is very likely that half if not more of the steel pipes to be used in the Keystone XL will be imported from India, South Korea and Canada……… 

“What pipeline advocates . . . fail to mention is that much of the tar sands oil that would be refined on the Gulf Coast is destined for export. Six companies have already contracted for three-quarters of the oil. Five are foreign, and the business model of the one American company – Valero – is geared toward export.”……. 

Learn how to look things up.

Thu, 03/14/2013 - 13:48 | 3330039 Jack Sheet
Jack Sheet's picture

Economics - a mental abortion masquerading as an academic "disciplne"

Thu, 03/14/2013 - 11:39 | 3329608 Flakmeister
Flakmeister's picture

Oh my, we have a troll....

Remind me of the increase in API<45 "oil" compared to NGL and condensate? Or do you even understand the question?

Thu, 03/14/2013 - 11:41 | 3329617 Dr Paul Krugman
Dr Paul Krugman's picture

Remind me that I have a PhD in economics and you don't.

Thu, 03/14/2013 - 11:44 | 3329624 Flakmeister
Flakmeister's picture

and I happen to have a Ph.D. in physics....

And you don't....

Answer the question or STFU...

Thu, 03/14/2013 - 11:47 | 3329644 fonzannoon
fonzannoon's picture

crickets,

Excuse him while he wipes his ass with that Ph.D.

Thu, 03/14/2013 - 12:04 | 3329678 CrashisOptimistic
CrashisOptimistic's picture

Hey Flakdood, from the brief blurb yesterday, the evidence of shale oil being condensate and not crude derives from an EOG resources report.

It all evolves the norm of measurement.  Crude plus Condensate, which is a norm that was established because separating the two is a bother and original conventional fields were 86:14 crude.  In fact, 95:05 when the norm was put into place.  The overall avg is now 86:14.

The Eagleford is said to be reversed.  15:85.  Condensate from there is apparently low octane natural gasoline, which gets no transportation use and is sent to the gulf coast chemical plants.  And, of course, the overall mixture of condensate holds about 60% of crude's joules per barrel.

The study did not extend to the Bakken, but some academics note the geology forced this in the rock formations and there would be no reason to presume it is different in North Dakota.

So . . . no one is lying.  "What is your oil production?"  Our C+C output is XXXXXXX.  Perfectly truthful and no one dug deeper until EOG let the cat out of the bag. Condensate prices much lower and it's not a cat you want drilling investors to know about.

Thu, 03/14/2013 - 12:07 | 3329697 CrashisOptimistic
CrashisOptimistic's picture

Replying to myself for another comment.

There has been no significant technology improvement in North Dakota.  Horizontal drilling and fracking were used in the Barnett shale 20 years ago.

It stopped because it was not economical.

Access of this condensate from shale has happened because pricing changed, not because new techniques arrived.

Thu, 03/14/2013 - 12:13 | 3329715 Flakmeister
Flakmeister's picture

Yep... well said, the sleight of hand in the oil business is remarkable...

I love how the EIA has ~10% of US production arising from the volumetric gains in refining imported oil...

Thu, 03/14/2013 - 12:24 | 3329746 falak pema
falak pema's picture

Having said that; the presence of gas and condensate militates for bringing back down stream activities into US; petrochemicals and methanol/ammonia type plants seem like a given as does increased use of gas to replace coal in electrical production.

Its won't make USA energy independent, it will make USA make value added more, and hope that renewable price comes sliding down as in that area technology could drive price considerably down, for a huge EROEI ratio.

Thu, 03/14/2013 - 13:02 | 3329866 Flakmeister
Flakmeister's picture

Yes, for example, look at the charts for TNH, a producer of fertilizer using Nat gas feedstock....

Thu, 03/14/2013 - 13:05 | 3329881 CrashisOptimistic
CrashisOptimistic's picture

Well, there's no doubt that non crude hydrocarbons are feedstock for plastic plants, and they are a part of society as it is.

Personally, I focus only on transportation fuel, which takes that plastic to consumers.

Thu, 03/14/2013 - 13:05 | 3329877 Panafrican Funk...
Panafrican Funktron Robot's picture

Yeah, I think it's questionable that input prices are even "not going to go higher".  Capital and labor costs don't always have downward trajectories.  Though, the nominal price of oil will probably increase more sharply than either, ergo the drilling.

Thu, 03/14/2013 - 13:08 | 3329888 MSimon
Thu, 03/14/2013 - 12:09 | 3329705 cifo
cifo's picture

Prove it.

Thu, 03/14/2013 - 12:09 | 3329706 orangegeek
orangegeek's picture

Ted Kaczynski graduated from Harvard University in 1962, at age 20, subsequently enrolled at the University of Michigan, where he earned a PhD in mathematics.

 

Shall we talk about the intellectual superiority of PhD's some more?

 

Or shall we talk about what's going today?  Could you perhaps stop windbagging too?

 

 

Thu, 03/14/2013 - 14:55 | 3330297 Matt
Matt's picture

But Ted was an actual genius. Have you read his manifesto? It's pretty much the inspiration for "Fight Club", as far as I can tell. Too bad he somehow thought mailing pipe bombs would change the world (for the better; I'm sure it helped bring about more police state monitoring).

Thu, 03/14/2013 - 20:22 | 3331253 StychoKiller
StychoKiller's picture

Ted's "love letters" went to the wrong people.

Thu, 03/14/2013 - 12:23 | 3329741 Zolko
Zolko's picture

The science behind energy is "thermodynamics" not "economics", therefore your economics PhD has absolutely zero (0) relevance.

Thu, 03/14/2013 - 12:23 | 3329742 orangegeek
orangegeek's picture

When you are say economics, are you referring to examples such as the US Government's "investments" in companies like Solyndra?

 

If so, how's your home electrical bill doing these days?  It must have gotten cheaper, right?

Thu, 03/14/2013 - 12:25 | 3329754 Matt
Matt's picture

"economics dictates improvements in technology will reduce input costs"

I don't think oil companies are allowed to alter their accounting books using hedonic adjustments, unfortunately.

Thu, 03/14/2013 - 12:52 | 3329820 Kirk2NCC1701
Kirk2NCC1701's picture

"...economics dictates improvements in technology will reduce input costs and allow for greater output."

Sir, you either don't understand non-linear and stochastic systems, or you're sticking to simple linear equations and EC101 fundamental mantras.

ZERO new tech (out-of-pocket money!) would be spent by oil execs if they did not have to.  Why do they have to?  Because it's a non-linear system and it's increasingly difficult to keep pumping the "easy" oil at the old pumping rates.  If they want to keep up the pump rates (supply), they have to get at the deeper and less viscous (non-sweet) oil.  Think of EROEI (Energy Returned On Energy Invested).  And the EROEI curve is non-linear; over time the ER drops relative to EI.  So, no, tech alone does not solve your problems.  In part, because tech costs money, and these costs are passed on to the consumer.   In the case of frikkin fracking (that sounds good), the TCO (Total Cost of Ownership) includes the huge amounts of water that must be accessed and used, and the cost-impact of its effect on the ground water.  This is such a scary and frothy topic, that oil execs and politicians beholden to them would rather not open that can of worms.  Till they have to.

Note also I'm using real-world units of "energy", not fiction/fiat units of 'currency'.  But my technical arguments will be wasted on you, since you are not promoting so much a real science, but a 'religion'.

Thu, 03/14/2013 - 13:11 | 3329908 Panafrican Funk...
Panafrican Funktron Robot's picture

I'm glad you brought up water, that crisis is going to dwarf energy. 

http://www.zerohedge.com/news/2013-03-06/guest-post-30-facts-coming-wate...

Key point:

This sobering message emerges from the first U.S. Intelligence Community Assessment of Global Water Security. The document predicts that by 2030 humanity's "annual global water requirements" will exceed "current sustainable water supplies" by forty percent.

Thu, 03/14/2013 - 15:10 | 3330349 Matt
Matt's picture

Don't worry about it, there are researchers developing pulse lasers that can create clouds and make them precipitate on demand.

http://www.nature.com/ncomms/journal/v2/n8/full/ncomms1462.html 

Thu, 03/14/2013 - 18:14 | 3330949 Bunga Bunga
Bunga Bunga's picture

Improved efficiency has happened over the centuries, but will result in more consumption, more ressource usage, not less. Energy efficienency improved in average 1% per year over the last centuries, but comfortable economic growth is in the 3-4% range, resulting in 2-3% ressource usage growth or doubling every 23-35 years. It comes to my mind that Keynesians believe they can just print a new earth every time they exhausted the one before. Dr. Krugman, have you ever had the chance to play that chess game with rice grains in your institution? Or do the guards take it always away?

Thu, 03/14/2013 - 11:31 | 3329576 orangegeek
orangegeek's picture

Improvements in technology like transporting oil via a pipe (keystone) rather than Buffet rail?

 

What a techological revolution.

Thu, 03/14/2013 - 12:13 | 3329717 cifo
cifo's picture

Improvements in technology will make oil obsolete.

Thu, 03/14/2013 - 13:25 | 3329964 Flakmeister
Flakmeister's picture

Technology is not equivalent to energy.....

Thu, 03/14/2013 - 13:50 | 3330047 Kirk2NCC1701
Kirk2NCC1701's picture

LOL.  But it sounds so impressive and convincing when the Spin Doctors, marketing guys and other Talking Heads say it.  ;-)

Thu, 03/14/2013 - 17:03 | 3330725 Brit_Abroad
Brit_Abroad's picture

@Flak

Thanks +1

Why is it that so many people just don't get it ?

Thu, 03/14/2013 - 17:17 | 3330757 Flakmeister
Flakmeister's picture

You would be surprised, the key thing is that the alternative is much harder to grok......

Thu, 03/14/2013 - 11:22 | 3329551 fonzannoon
fonzannoon's picture

Schiff owns you. He haunts you in your sleep.

Thu, 03/14/2013 - 11:27 | 3329564 Dr Paul Krugman
Dr Paul Krugman's picture

By now one would think gold bugs would get it - the fear trade is over.

Thu, 03/14/2013 - 11:27 | 3329565 Dr Paul Krugman
Dr Paul Krugman's picture

By now one would think gold bugs would get it - the fear trade is over.

Thu, 03/14/2013 - 14:48 | 3330268 akak
akak's picture

By now one would think a Keynesian clown witchdoctor would get it - you only need to press the "Save" button once.

Thu, 03/14/2013 - 11:27 | 3329566 Dr Paul Krugman
Dr Paul Krugman's picture

By now one would think gold bugs would get it - the fear trade is over.

Thu, 03/14/2013 - 12:27 | 3329759 Matt
Matt's picture

Is this like saying "Candyman, Candyman, Candyman"? You sya it three times so it comes true?

Thu, 03/14/2013 - 14:31 | 3330195 eclectic syncretist
eclectic syncretist's picture

Don't worry, I'll save a box for you to sleep in a few years hence, if the populace hasn't stoned you to death by then.

Thu, 03/14/2013 - 13:11 | 3329890 Kirk2NCC1701
Kirk2NCC1701's picture

You'll be in a different 'Fear Trade', when the BRIC+ countries buy up ALL the available gold on the market, and precipitate a gold crisis that will turn into a fiscal crisis.  For you and your bosses. 

Unless they plan to deflect & divert (once again) by killing the Euro, and/or starting another big war.  Which is what I'd bet on:  Anything and Everything to keep the USD as the GRC!  Because only with the GRC status can the NWO agenda march forward.  And the NWO is the ultimate end-game, with the USD just another (powerful) weapon in its arsenal:  One Coin To Rule Them All!  The BRIC+ people are betting that it will be the gold-coin that rules, whereas the Fed and its bullied circle of CB's are betting it will be the fiat-coin.  The rest is just warfare by any and all means.

I got you guys figured out, and no Hollywood or Vegas-style Magician's Tricks are going to work on me.  My money (labor and promise of labor) is on Gold/PM and real assets, regardless of your price-manipulation trickery (with fiat coins)!

Thu, 03/14/2013 - 11:32 | 3329570 orangegeek
orangegeek's picture

Sure Krugman.  Here's some other transitory modeling for you.

 

Buffet's railroads are transporting oil that could be carried by pipeline from Alberta, Canada, ergo a blocked Keystone XL and blame to the eco-nimrods.

 

And Soros has paid off Obama nicely to support (US oil purchases) deep sea oil drilling off the coast of Brazil with Petrobas - you know, the same sea drilling that cannot be expanded in the gulf?  (never mind deep sea drilling).

 

Dow is up 9, soon to be 10 days in a row - with 48M Americans on food stamps.  Got a model for that?

 

Thu, 03/14/2013 - 11:33 | 3329584 smartstrike
smartstrike's picture

It's neo-feudal Capitalism working as expected: 600 years of progress all for nothing.

Thu, 03/14/2013 - 12:02 | 3329592 Flakmeister
Flakmeister's picture

The rails are carrying the Bakken oil, not the tar sands dilbit...

Oneok proposed a Bakken pipeline but could not get commitments to guarentee the flow over the next 10 years... That is a tell...

So do you think that the Gulf Coast refined products from Keystone XL dilbit will not be sold to the highest bidder? i.e. morw than what the Mid-continent is currently paying.....

Thu, 03/14/2013 - 12:45 | 3329815 tarsubil
tarsubil's picture

You said the exact same thing before and my question of what effects malinvestment had on input costs and real production went unanswered. You seem to have plenty of time on your hands yet many of my questions to you go unanswered.

Thu, 03/14/2013 - 11:20 | 3329544 ekm
ekm's picture

The author is quoting Opec.

 

I do not undestand, why does anybody believe anything opec says?

 

Opec data is data provided by Opec governments. Does anybody believ data from opec govs?

This post is rubbish.

Thu, 03/14/2013 - 11:24 | 3329554 Dr Paul Krugman
Dr Paul Krugman's picture

It's true; OPEC probably has a lot more oil than they say they do.

Thu, 03/14/2013 - 11:25 | 3329560 fonzannoon
fonzannoon's picture

It's false, OPEC probably has a lot less than they say they do.

 

Thu, 03/14/2013 - 11:29 | 3329574 Dr Paul Krugman
Dr Paul Krugman's picture

The world is awash with oil, and improved technology will bring it online.

Thu, 03/14/2013 - 11:32 | 3329581 fonzannoon
fonzannoon's picture

It's awash with oil and so oil is $92 a barrel?

Should I save this 3 times to get my point across?

Thu, 03/14/2013 - 11:48 | 3329647 Flakmeister
Flakmeister's picture

The real price is closer to $110....

Only a lucky few pay for refined products tied to the WTI price....

Why do you think HFC has been on a moonshot?

Thu, 03/14/2013 - 11:52 | 3329652 fonzannoon
fonzannoon's picture

I honestly don't know but apparently there is plenty of it so I crossed it off my worry list. Now excuse me while I put my fingers in my ears and yell loudly.

 - Paulie Ph.D

Thu, 03/14/2013 - 12:01 | 3329676 Bicycle Repairman
Bicycle Repairman's picture

Is it $92 a barrel, because that's what it costs to extract it?  Or is that the cost of placating the people whose land the oil is under?  Or the "energy" companies' owners?  Or speculators and bankers?

 

Thu, 03/14/2013 - 12:04 | 3329680 Flakmeister
Flakmeister's picture

It's $92 because if you could get it to the coast, it would be $110....

Thu, 03/14/2013 - 12:05 | 3329688 Bicycle Repairman
Bicycle Repairman's picture

You ignored all of my points.

Thu, 03/14/2013 - 12:09 | 3329701 Flakmeister
Flakmeister's picture

You misunderstood mine...

Marginal new barrel in the Bakken is ~$65-75 per barrel plus costs to get it to market....

Thu, 03/14/2013 - 12:11 | 3329713 Bicycle Repairman
Bicycle Repairman's picture

I question the $65 figure.  I know you'll want to reference some bought and paid for academics.

Don't bother.

Thu, 03/14/2013 - 12:15 | 3329720 Flakmeister
Flakmeister's picture

Go to the EIA, look up the time series for cost per foot drilled....

Thu, 03/14/2013 - 12:32 | 3329779 Matt
Matt's picture

If we compare the price of oil to the price of gold, silver, heck probably even iron, we can see that so far, most of the rise in oil price and production costs is due to inflation (currency devaluation). When the price of oil starts really outstripping the price of food, gold, arable land, etc then it will be clearly a matter of demand outstripping supply. So far, the "GFC" as the MSM is calling it, seems to have effectively curbed demand faster than supply.

Thu, 03/14/2013 - 13:40 | 3329952 Kirk2NCC1701
Kirk2NCC1701's picture

Yup, that's why people with real math skills and real integrity will price things (stocks, etc) relative to the money supply (inflation). 

I'm utterly amazed how many people fall for the USD 'yardstick' which is not a 'yardstick'.  The dollar is a "Bungee-string" unit of measure.  Ooh, I think I might copyright that.  Only when you've removed the dollar's Bungee Factor, do you get real prices.

Whenever you hear someone use the term "Dollars", get in the habit of thinking "Bungee Dollars".  That will inoculate your mind against the sleight-of-hand (sleight-of-word) tricks used by economists, bankers, stock brokers, investment advisers and politicians.

Thu, 03/14/2013 - 15:27 | 3330413 brundlefly
brundlefly's picture

Correlation is not causation. The rise in cost is caused by the biophysical constraint known as energy returned on energy invested EROI. It takes more energy (diesel fuel, natural gas) to extract non conventional oil. A full 1/3 of the cost of a new well in the Bakken is diesel fuel for the rig, fracking, and service equipment. That well only returns 5 barrels of oil for the one barrel of oil you invested to drill it. We will never get back to the EROI of West Texas crude of 100:1. And that return is getting worse exponentially. The wonderful failures of Neoclassical economics...

Thu, 03/14/2013 - 16:00 | 3330521 Flakmeister
Flakmeister's picture

While EROEI is a powerful concept and is definately a limiting factor, do not overestimate its current role in energy pricing. All BTUs are not created equal given the premium on liquids.....

Thu, 03/14/2013 - 13:12 | 3329909 Flakmeister
Flakmeister's picture

Hey BR, take a guess what a new well with a fracked 5000 ft lateral costs....

You can look up the number in any 10-Q of a US E&P company...

Now compute what kind of total production you need to pay for it....

Thu, 03/14/2013 - 20:36 | 3331287 Bicycle Repairman
Bicycle Repairman's picture

The 10Q is simply the reporting of costs from an accounting standpoint.  The costs contained within, but not clearly revealed, could include excess profits, excess taxes, labor feather bedding and so forth.  Legitimate costs or just paying off the regime as a mentioned in the first place?

Thu, 03/14/2013 - 22:46 | 3331538 Flakmeister
Flakmeister's picture

"Clearly revealed"..... ok, whatever....

A typical well of runs $7-10 million. Put that in a spread sheet and compute what you need to pay it off in 5 years...

Oh yeah, try googling "Decline Rate Average Bakken Oil Well" for additional info...

I mean, really, try doing some of the leg work for yourself...

Fri, 03/15/2013 - 06:39 | 3331862 Bicycle Repairman
Bicycle Repairman's picture

This kind of "leg work" leaves you running in circles.  You may be a PHD in Physics, but you know little of history, politics, or accounting.  You are just smart enough to run the machines.

Thu, 03/14/2013 - 11:33 | 3329586 ekm
ekm's picture

Technology has done nothing so far and it won't.

All gas mileage savings have come from lowering the weight of the cars, changing from steel to plastic or lower steel quality, which has made nowaday cars a lot more dangerous.

Simple law of physics: Heavy object clashes with light object, light object is screwed.

Thu, 03/14/2013 - 12:05 | 3329682 Bicycle Repairman
Bicycle Repairman's picture

So there will not be any new materials?  The current technology is the end? 

"Simple law of physics: Heavy object clashes with light object, light object is screwed."

The heavy objects could be removed from the road.

Thu, 03/14/2013 - 12:27 | 3329762 ekm
ekm's picture

The whole point of technology is to replace human energy, to do something humans can't do on their own.

 

However, technology is energy reliant. One can have a fully automated car factory, but the factory requires ongoing electricity.

Thu, 03/14/2013 - 20:29 | 3331278 Bicycle Repairman
Bicycle Repairman's picture

I'm not sure how replacing steel with carbon fiber fits into your paradigm.

Thu, 03/14/2013 - 22:12 | 3331483 ekm
ekm's picture

Have you seen a Ferrari made of carbon fiber split in half?

Fri, 03/15/2013 - 06:47 | 3331865 Bicycle Repairman
Bicycle Repairman's picture

Ferrari?  I was planning on leaving the speed limit signs up.

If not carbon fiber, then some other material.  Material science continues to advance.

There may be trade offs to be made.  Safety versus fuel efficiency, for one.  In 1980 there were lighter, less safe Hondas, but they got 50 mpg.The progress in 30+ years is dismal.  Is it a technological problem?

Also, trade offs imply choices.  The motoring public has been offered limited choices.

Thu, 03/14/2013 - 12:41 | 3329800 Matt
Matt's picture

"All gas mileage savings have come from lowering the weight of the cars, changing from steel to plastic or lower steel quality, which has made nowaday cars a lot more dangerous"

I'm fairly certain this is incorrect. While the car itself is more easily destroyed in a crash, newer cars have better crumple zones, airbags, and protection from things like side impact. This improvements mean the driver and passengers are more likely to survive a crash (of equal force) compared to older vehicles.

As well, cars are continuously becoming safer to operate, having higher tolerances that allow a driver to better avoid a crash then older cars.

Both of these two above advantages, however, are lost due to human nature. The safer you make cars, the more dangerously people will operate them, so the mortality rate from motor vehicle accidents remains fairly constant since probably the 1940s. Since the car stops faster, drive faster. Since the car handles better in snow, drive faster in snow. Since it corners better, take corners at higher speeds.

Thu, 03/14/2013 - 12:47 | 3329832 ekm
ekm's picture

Your choice.

With the disasters I've seen in crashes, for myself I'll buy only heary cars.

Thu, 03/14/2013 - 15:19 | 3330384 Matt
Matt's picture

When you say Heavy Cars, do you mean like a 1957 Chevy Belair, or do you mean a Hummer H2?

Thu, 03/14/2013 - 15:38 | 3330448 ekm
ekm's picture

Something like a midsize car like Buick vs a light car like Honda civic.

There was a horrific highway accident here in Toronto about 1 year ago. Honda Civic T bone, civic wal pulverized.

Thu, 03/14/2013 - 12:54 | 3329845 post turtle saver
post turtle saver's picture

mass is not strength... you get strength by designing to a _specification_, that doesn't mean the resulting product is required to be heavy

Thu, 03/14/2013 - 13:11 | 3329904 ekm
ekm's picture

Come on, you get my point.

I'm not talking about bad design.

Thu, 03/14/2013 - 13:42 | 3329971 Kirk2NCC1701
Kirk2NCC1701's picture

ekm does make good points on occasion, but clearly physics is not his forte (nor the forte of his 5 up-arrow pals) and should therefore be careful when citing laws of physics.  Point to PTS.

To his (ekm's) original point: Fuel economy is improved due to lighter mass.  F=ma and all that stuff...  Objects colliding (heavy or light, plastic or elastic) is a completely different argument, and irrelevant to the point of fuel economy.

Or so Mr Spock tells me.  Kirk out.  ;-)

Thu, 03/14/2013 - 14:08 | 3330111 ekm
ekm's picture

Fair point about physics. It's all I can remember from university.

 

Howver, about weight vs mileage, that is simply common sense, one doesn't need to know physics for that, IMO.

Thu, 03/14/2013 - 15:31 | 3330426 Matt
Matt's picture

Actually, for highway driving, aerodynamics is far more important than weight. Here is the same car, stock vs having 4 inches of clay aerodynamic upgrades added:

http://dsc.discovery.com/tv-shows/mythbusters/videos/dimpled-car-minimyt...

Thu, 03/14/2013 - 14:43 | 3329695 Canadian Dirtlump
Canadian Dirtlump's picture

With all due respect, Dr. Paul "rocking Robin" Krugman.

 

We definitely do have alot of oil, and the new drilling techiniqques and tight oil irrefutably are an example that indeed new technology (and a meandering migration to renewable energy) will help. So you're spot on.

 

As for the OPEC nations, specifically the brutal, feudal monarchies in the GULF, I'd say they have been lying about their reserves for sometime - and the sooner those lies come out the better. The transitory challenge there will be to mobilize the imperial military to the place with the most remaining oil. This of course to ensure the petrodollar does not become... transitory..

 

down voters regularly conduct panty raids on the underwear drawers of both of the goood dr's wives, and himself.

 

Thu, 03/14/2013 - 11:31 | 3329578 ekm
ekm's picture

Sir, nobody really knows.

However, if they do, the west needs a continuously expensive standing army staying there to get the crude oil by force.

 

You guys have been trying very hard to cut down on those expenses.

Thu, 03/14/2013 - 11:36 | 3329597 Flakmeister
Flakmeister's picture

It is not to get the oil, only to ensure that it is priced in USD....

Thu, 03/14/2013 - 13:52 | 3330059 epwpixieq-1
epwpixieq-1's picture

On contrary they DO NOT. Just go back in history, the 80s, and see how overnight, all of the OPEC countries, miraculous increased their reserves by 100%. And there was a simple reason for that, the selling quota for OPEC caw changed to be based on the members oil reserves. So more ( announced ) reserves, bigger quota, more revenues. Sounds like a bubble, the longer they propagate it the more they will gain.

The alternative is ... well, invest in alternative technologies, and they are plenty, but the sooner one start to invests the sooner results will come and than the oil revenues, OPECs countries major income, starts to decline.

But one has to have e reasonable thinking and know some facts in order to be able to deduct the truth.

Thu, 03/14/2013 - 15:27 | 3330411 Cathartes Aura
Cathartes Aura's picture

was hoping to find a post from you amidst the trollage call 'n' response. . .

The author is quoting Opec.

Opec data is data provided by Opec governments. Does anybody believ data from opec govs?

author's also quoting Paul Ryan.  lol paul ryan.

This post is rubbish.

 

all ya need to know.

Thu, 03/14/2013 - 11:28 | 3329569 smartstrike
smartstrike's picture

I though this article was about oil bust, not Paul Ryan--a typical Republican thinking white man. In his budget projections, Ryan estimates that by 2020, US GDP will exceed $20T all as a result of 'trickle down' economics.

Thu, 03/14/2013 - 12:46 | 3329821 Matt
Matt's picture

Well, since something obscene like 40% of GDP is from hedonic adjustments, it will not be hard for economists to revalue the GDP to $20 Trillion over the next 7 years, I am sure.

Thu, 03/14/2013 - 11:31 | 3329577 Flakmeister
Flakmeister's picture

All you need to know about shales and what not:

http://www.postcarbon.org/drill-baby-drill/

Read it...

I did...

Thu, 03/14/2013 - 11:33 | 3329585 Cursive
Cursive's picture

Slowdown?  My friend who works drilling rigs hasn't been called out in over 2 weeks.

Thu, 03/14/2013 - 11:37 | 3329598 Flakmeister
Flakmeister's picture

# of Rigs drilling for NG have declined substantially... might have something to do with being currently uneconomical...

Thu, 03/14/2013 - 11:56 | 3329657 KansasCrude
KansasCrude's picture

Ding Ding Ding we have a winner...The CHEAP STUFF is gone.  We may be able to continue production growth IF the price is higher.  Looking at the Bakken production in US and Canada its a loser at $92 WTI because the pipelines, rail transport and discounts by refiners due to it being held captive by pipeline bottlenecks. Means bendover and we aint't using Lube!  Result is continued reduction in drilling and production.  Take a look at the Natty inventories.....we may break below the 5 year average inventory in the next week or two.  Already well below last years.  BUT BUT how can that be when we have so much.  Natty Gas has been where money goes to DIE....now due to the manipulation of the WTI price (downside) we are seeing the same trends coming on oil.

http://ir.eia.gov/ngs/ngs.html

Natty is a a good blueprint for what we are starting to see in the oil drillers.....The realization that you are losing $ at these prices.  The infrastructure in the our big fields will never be duplicated in the Shale fields why?  You need 15-25 years to amortize the investments....No way the fields will last a fraction of that time with ample production.  So you are locked into high costs for transportation, power, water, the stuff you need to be economic.  Paul Ryan maybe trying but IMO he is a twit.  Perfect example of a kid that probably started running for Class President in grade school and never stopped.  Never had a real job and therefore doesn't have a clue.   We have the same problem in Kansas its a Brownback.

Thu, 03/14/2013 - 11:59 | 3329672 Flakmeister
Flakmeister's picture

He isn't a twit, he is only trying to sell the only story that wants to be heard vis a vis energy....

A disingenuous shill without a shred of empathy would be a better description.... 

Thu, 03/14/2013 - 15:31 | 3330430 Cathartes Aura
Cathartes Aura's picture

no, he's a pollytishun twit.  "A foolish or annoying person."

but yes, your alternative definition can be added. . .

Thu, 03/14/2013 - 11:44 | 3329621 medium giraffe
medium giraffe's picture

What a load of bullshit these figures are.  Peak oil has come and gone, if you'd been looking out of the window you could have waved as it went by. 

Why the hell are the Saudis drilling in the sea (expensive) if they still have enough oil to drill in the desert (cheap).  US energy independence? Psssht. From where? Tar sands, where it costs more than 2B to produce 1B?  Shale, which is only slightly cheaper and only in very small deposits?

As for the 'new' deposits in the mid east: "Don't, don't, don't.....don't believe the hype." :)

Thu, 03/14/2013 - 11:46 | 3329638 Flakmeister
Flakmeister's picture

The EROEI in the sands is better than that.... but point taken...

Thu, 03/14/2013 - 12:11 | 3329700 medium giraffe
medium giraffe's picture

Fair one, EROEI at about 3 maybe (if we ignore exploration, energy to produce on site equipment, installation, transportation, decomission), and the destruction of some of the worlds most beautiful habitat.  Hardly seems worth it.

Thu, 03/14/2013 - 11:43 | 3329628 shovelhead
shovelhead's picture

You expect more success from an Obama budget (oops, what budget?), a typical Democrat thinking black man and his trickle up economics?

Do tell.

Thu, 03/14/2013 - 11:48 | 3329646 TrustbutVerify
TrustbutVerify's picture

I'd like to see all the good news on US energy production matched with with various bully pulpit calls for increased efficiency.  Energy security will come from working both ends of the equation.  

Thu, 03/14/2013 - 13:13 | 3329911 Peachfuzz
Peachfuzz's picture

"If we're to have a statue of liberty on the East coast then we should have a statue of responsibility on the west coast." - V. Frankl

You're absolutely correct, without ethical responsible use of our resources, they will be squandered. Can't tell you how many suv's I see idling while people shop in big box stores just to keep fido warm/cool.

What I would like to see is an open energy market where we can see informed consumerism at work. If you take out all the lies, media spin, money printing, and on and on, you might just find that in a free market green energy would take on a whole new definition other than what's in Al Gore's wallet.

Thu, 03/14/2013 - 11:54 | 3329658 Flakmeister
Flakmeister's picture

A bit of insight to the Eagle Ford shale:

http://www.rbnenergy.com/dont-let-your-crude-oil-grow-up-to-be-condensate

Recommended to those who would like a deeper understanding of what is going on in the oil patch...

Thu, 03/14/2013 - 15:47 | 3330469 Matt
Matt's picture

Hey, this is a bit of a noob question, but what is that article talking about when it uses Mb/d? Normally, I think of Mb/d as million barrels per day; however, the article is talking about >500 Mb/d in condensates, and 137 Mb/d of crude from Eagle Ford, so there is no way they mean million, unless the author screwed up and meant Kb/d?

Thu, 03/14/2013 - 19:55 | 3330530 Flakmeister
Flakmeister's picture

M = thousand (think latin)  and MM = million

The oil patch is not SI compliant...

Edit: should have added that lower case is also used, e.g.  mCF for nat gas...

Thu, 03/14/2013 - 11:54 | 3329659 icanhasbailout
icanhasbailout's picture

Could be Obamacare shifting the profit threshold: marginally profitable venture + Obamacare = no venture.

Thu, 03/14/2013 - 12:47 | 3329663 falak pema
falak pema's picture

If I reasoned like Joyful I would say : ZH is antiamerican as it destroys the legend of western supremacy by posting this!

Civilization IS legend; we have to make it come true and damn the truth, 'cos that is legend of the vanquished; such be Thrasymaque's as Thucydide's conclusion! Justice belongs to the victors. 

Plato was clear as crystal on that as he had Socrates enlightened  in passion in his dialogues, staff of defiance upraised, singing victory and defeat : two faces of the same coin!

There is no difference between one and the other. Justice has same face for all or its not Justice! 

SO back to basics : are we for truth or are we for legend resuscitated?

Its in the nature of Man and what constitutes his ideal of virtue; natural laws (survival of strong) or lessons of life learned the hard way (survival of all or of none) !

PS / Two of the key characteristics of an empire in terminal decline are complacency and intellectual sclerosis, what we have termed a failure of imagination. 

Thu, 03/14/2013 - 12:07 | 3329698 firstdivision
firstdivision's picture

(Ryan's budget) recognizes that expanded American energy production is one of the best ways to raise new revenue, bolster the economy, lower gasoline prices, and put Americans back to work at good-paying jobs,"

 

Cause those people that live in the OPEC countries have it so great.....

Thu, 03/14/2013 - 13:12 | 3329913 Matt
Matt's picture

They actually had it pretty good. They simply chose to use all their wealth to increase their populations 10-fold over the last ~70 years, and have the same level of wealth per person, rather than to maintain a stable population and have more wealth per person.

Thu, 03/14/2013 - 12:09 | 3329704 Bicycle Repairman
Bicycle Repairman's picture

If the USA energy story is true, then it is the easy way out.  It might not be, but keep it in mind before going completely gloom and doom. 

Thu, 03/14/2013 - 13:23 | 3329958 Matt
Matt's picture

If by "way out" you mean "a chance to kick the can so the next generation can deal with it", then sure.

Thu, 03/14/2013 - 12:10 | 3329710 earnulf
earnulf's picture

I seem to recall something about fracking that indicated the initial "flow" from fracked wells was being used to bolster the claims for massive gains in production.   The "dirty secret" was that within the first year, that initial produciton figure would drop by 90%!     So in order to keep the ponzi going, more wells had to be drilled that "produced" the initial flow rates while the yearly production rates were quietly ignored.

Yeah, it's a major boom allright, suckers are born every minute.    What happens when all the underground water aquifers are contaminated with fracking chemicals and clean water suddenly is more precious than black gold?

 

Thu, 03/14/2013 - 12:15 | 3329723 Bicycle Repairman
Bicycle Repairman's picture

"What happens when all the underground water aquifers are contaminated with fracking chemicals and clean water suddenly is more precious than black gold?"

Why then we'll fight a war over water.  OK, buddy?

Thu, 03/14/2013 - 12:43 | 3329806 Toxicosis
Toxicosis's picture

Contaminated water?  Oh you mean the potable water that's left.  Perhaps we shouldn't contaminate the aquifers and water we have now, but as a bicycle repairman you would follow that logic.  Right??!!

Fri, 03/15/2013 - 06:50 | 3331870 Bicycle Repairman
Bicycle Repairman's picture

Yes, all the water is being fracked away.  It's almost gone now. Be very afraid. How is that war planning coming?  Do you mind if I intentionally put poisonous fluoride in your water?  Double plus good eco-citizen.

Thu, 03/14/2013 - 12:16 | 3329724 Flakmeister
Flakmeister's picture

Exponentially increase the number of wells until you run of out shales to drill....

Thu, 03/14/2013 - 15:45 | 3330463 Cathartes Aura
Cathartes Aura's picture

heh,

What happens when all the underground water aquifers are contaminated with fracking chemicals and clean water suddenly is more precious than black gold?

then suddenly they will have cornered the market on Blue Gold, and dubya's aquifer investment in paraguay (no extradition treaties)will pay off!

ka-ching!!

Thu, 03/14/2013 - 17:11 | 3330746 OldTrooper
OldTrooper's picture

Don't worry...the Round-Up we're spraying on the surface will kill us long before the fracking fluid can get into the aquifers.

Thu, 03/14/2013 - 12:17 | 3329727 RudeBoy
RudeBoy's picture

So, there's lots of oil sloshing around in the world and technology is already able to drill previously unreachable wells, yet the price of oil is still historically high.. this may sound nuts and even hope it does, but it seems to me oil has become a tool to screw America's biggest competitor for position of "top dog" because when former dog seems weaker to upcoming dog, dogs be fighting, till one of them is dead!

Thu, 03/14/2013 - 13:39 | 3330009 epwpixieq-1
epwpixieq-1's picture

"technology is already able to drill previously unreachable wells, yet the price of oil is still historically high" - it is wrong to equate extractable oil with cheap oil. Most of the technology for extraction has been available for the past 20 years. The thing that was missing for the profitable extraction though was high prices. So now, say buy buy to oil $1,$2 and even soon $3 per gallon, and say welcome to $4,$5 and $6.

Or if you think that is cheap to extract oil from deep within the Earth, go back to learn that there are natural limitations we are facing and more are coming, if we continue on this path.

So, the only way to resolve this natural resistance, being on this path, is by us spending more resource for the extraction, and this is why the oil will be expensive, and will become more expensive with the coming years.

Go and educate yourself before writing nonsense.

Fri, 03/15/2013 - 11:13 | 3332449 RudeBoy
RudeBoy's picture

I remember writing "this may sound nuts and even hope it does", so that people like you would grasp the fact my inferior knowledge about the business of oil extraction. I was merely quoting some people in this discussion, claiming that there is plentiful oil and some claim technology will be able to extract even more oil, yet no one thinks about a political reason why oil is this "expensive" compared to historical prices. What has changed in the last past decades is that China is becoming a world power to reckon with and this has got them guys in Washington squeezing their butt cheeks so hard it can crack a walnut.

A historical fact is that the one with the most wealth has the nicest weaponry and since China is still a closed economy e.g. foreign investors cannot wheel and deal on their exchanges like the Chinese can, as the rest of us do in the western world, this is creating a massive imbalance in the world, financially and politically. So, to avoid hostilities e.g. trade war or bloody war, I suspect that the Wall Street boys got the green light on manipulation of oil prices from the Washington boys. They have to choose between evils, one way or another. The Arabs gladly play along because its making them even more billions. Russia isn't unhappy either, since they have massive oil and gas reserves too. The only country threatening the whole operation is.. IRAN. It can, will and does deliver cheap energy to China and so feeding the imbalance even further. Logically Iran is number one on the list of US targets and are we in luck that Iran is led by idiots pursuing a nuclear weapon capability, making it easy for the populace to condone an attack and send their sons and daughters off to yet another war.

The price of oil is or better the supply of oil has always been a way to screw your adversaries. In war, attacking the energy resources is fist on the list because it is key to winning the war. And like I said before, the one that is the wealthiest has the best fighter jets, getting air domination quick and destroying energy delivery system just as quick.

If the people of China have to pay $0,05 more for their fuel they be rioting immediately. I know, because I've been to China loads of times and every time I heard about strikes and riots it was due to that the government contracted their subsidies on fuel. $0,05 less means millions can't do their jobs and not able to feed their families. China is very strong because of their 1.3 billion people yet because of it fragile as hell. One wrong move and 50-100 million start marching again, off to civil war.

Well, IMHO this big picture is the real reason behind today's oil prices.

Fri, 03/15/2013 - 11:48 | 3332584 Flakmeister
Flakmeister's picture

A neat little package but you fail to grasp the difference in Q and its derivative with respect to time, dQ/dt and the attendent implications....

A lot of oil does not mean squat if the rate at which you can extract has peaked while the number of consumers has simultaneously increased....

BTW, Iranian oil ain't going to be cheap as they have their own domestic needs to be paid for...

Thu, 03/14/2013 - 12:31 | 3329772 Proofreder
Proofreder's picture

Just a thought ...

Why drill and frack when we could (courtesy of the Federal Reserve System) simply buy all the oil we need through a few shell companies purchasing oil in the futures market and actually taking delivery?  Sure, the price may go up, but who cares - the money used to purchase is just fiat.  Legal Tender.  Free money.

Now to figure a way for the consumer to pay for $15 per gallon gasoline.  Hmmmmmmm

Oh well, just a thought.

fckd again

Thu, 03/14/2013 - 12:57 | 3329850 Flakmeister
Flakmeister's picture

Wow!

Weekly Nat Gas report

http://ir.eia.gov/ngs/ngs.html

146 bcf drawdown and YoY stocks down 20%!  This is what happens with shales when you back off the drilling!

Thu, 03/14/2013 - 13:47 | 3329956 Flakmeister
Flakmeister's picture

For the inquisitive

http://www.crudemonitor.ca/home.php

And for the really inquisitive, a top shelf article

http://www.rbnenergy.com/It-Aint-Heavy-Its-the-Bakken-light-heavy-crude

Thu, 03/14/2013 - 13:48 | 3330040 Mr. Hudson
Mr. Hudson's picture

For America to continue borrowing and creating FRNs out of thin air, while preventing hyper-inflation, we must make sure that OPEC is selling an ample amount of their oil for U.S. dollars on the world market. This creates the pseudo-demand for U.S. dollars, which gives our dollars "value". If our government allows U.S. production of oil to interfere with OPEC’s output, this could spell disaster for the dollar.

Thu, 03/14/2013 - 15:57 | 3330502 ekm
ekm's picture

Brutally honest, you are.

Fri, 03/15/2013 - 11:21 | 3332494 RudeBoy
RudeBoy's picture

I agree, it's all political. Supply and demand is a smoke screen and keeps the majority occupied. If the price of oil is allowed to drop, the dollar is toast and US world domination is over.

Fri, 03/15/2013 - 11:56 | 3332609 Flakmeister
Flakmeister's picture

Your understanding of the petro-dollar, is, shall we say, ass-backwards....

The US dollar retains its value because most international oil exports are priced and paid for in dollars....

The dollar craps out when either the House of Saud falls or the amount of oil on the export market is dwarfed by the amount of dollars chasing it.

I suggest you read on on the Export Land model and three classics cases, the UK, Indonesia and Egypt... All former exporters, now importers....

Do NOT follow this link or you will be banned from the site!