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"I Know Of No One Who Predicted This": Russian Oil Production Hits Record As Saudi Gambit Fails

Tyler Durden's picture




 

In late October, we noted that for the second time this year, Russia overtook Saudi Arabia as the biggest exporter of crude to China.

Russia also took the top spot in May, marking the first time in history that Moscow beat out Riyadh when it comes to crude exports to Beijing. “Moscow is wrestling with crippling Western economic sanctions and building closer ties with Beijing is key to mitigating the pain,” we said in October, on the way to explaining that closer ties between Russia and China as it relates to energy are part and parcel of a burgeoning relationship between the two countries who have voted together on the Security Council on matters of geopolitical significance. Here's a look at the longer-term trend:

You may also recall that Gazprom Neft (which is the number three oil producer in Russia) began settling all sales to China in yuan starting in January. This, we said, is yet another sign of the petrodollar’s imminent demise. 

On Monday, we learn that for the third time in 2015, Russia has once again bested the Saudis for the top spot on China’s crude suppliers list. “Russia overtook Saudi Arabia for the third time this year in November as China's largest crude oil supplier,” Reuters writes, adding that “China brought in about 949,925 barrels per day (bpd) of Russian crude in November, compared with 886,950 bpd from Saudi Arabia.”

This is an annoyance for Riyadh. China was the world's second-largest oil consumer in 2014 and closer ties between Moscow and Beijing not only represent a threat in terms of crude revenue, but also in terms of geopolitics as the last thing the Saudis need is for Xi to begin poking around militarily in the Arabian Peninsula on behalf of Moscow and Tehran. 

As we documented in "Saudis Poke The Russian Bear, Start Oil War In Eastern Europe," Riyadh has begun to encroach on Moscow's markets in Poland. Here's what Bloomberg wrote back in October:

Poland has long been a client of Russian oil companies. Last year, about three-quarters of its fuel imports came from Russia, with the rest from Kazakhstan and European countries. Poland, however, is at the center of efforts to reduce the European Union's dependence on Russian energy. 

 

A new and reliable supplier is a godsend. As for the Saudis, they need to expand outside Asia where demand is falling. 

 

This could turn into a more active shoving match between the world's two biggest oil exporters, which already are at odds over the Syrian conflict. 

Indeed, one could plausibly argue that one of the reasons the Saudis moved to artificially suppress prices last year was to sqeeze Putin and ultimately force The Kremlin to give up its support for Assad. As The New York Times put it, a dramatic decline in crude prices has certain "ancillary diplomatic benefits."

Unfortunately for Riyadh, the strategy hasn't worked. In fact, it's backfired in more ways than one.

First, Saudi Arabia is facing a fiscal crisis as Riyadh's budget deficit balloons to 20% of GDP, forcing the kingdom to tap the debt market in order to offset the SAMA burn. 

Second, Putin not only refused to give up his support for the government in Damascus, he actually doubled down by sending the Russian air force to Latakia. Meanwhile, Russia continued to pump even more oil, and as Bloomberg reports, Moscow is now producing at "the fastest pace since the collapse of the Soviet Union." 

"Russia’s unexpected oil bounty this year is the result not of a new Kremlin campaign but of dozens of modest productivity improvements across the sprawling sector. Even pressured by plunging prices, as well as U.S. and European Union sanctions that cut access to much foreign financing and technology, Russian companies have managed to squeeze more crude out of some of the country’s oldest fields," Bloomberg writes, before noting that "Bashneft and other Russian companies working fields in the Volga River basin -- some of the first to be discovered in Russia early in the last century -- are benefiting from Soviet inefficiency as [the old motto was]: 'whatever we don’t produce will be left for our children.'"

For analysts, Russia's resiliency has come as a surprise. “I know of no one who had predicted that Russian production would rise in 2015, let alone to new record levels,” Edward Morse, Citigroup’s global head of commodities research said.

As for what it would take to curtail production, Mikhail Stavskiy, head of upstream at Bashneft PJSC which has been "the biggest single contributor to increased crude output this year," says he doesn't know. “I don’t know what the oil price would have to fall to for things to change dramatically. We’ve been through $9 a barrel and production continued, so if something like that happens, we know what to do.”

Indeed, thanks to the low cost of extracting crude from Russia's oil fields in West Siberia and the devaluation of the ruble, production costs are rock bottom:

But not everyone agrees that this is sustainable. Some say efforts to improve efficiency have run their course and with financing for exploration scarce, further gains may be hard to come by. Interestingly, Bloomberg also notes that because Moscow takes "nearly everything above $30-$40 a barrel" on exports, producers won't feel the impact of low prices until crude falls substantially below those levels. 

“Russia will maintain its current oil production levels within the bandwidth of 525 million to 533 million tons next year, as the federal government’s budget is set on such production levels,” Stratfor's Lauren Goodrich says, presaging more of the same in 2016.

The takeaway here is that the Saudi gambit failed to wrench market share away from the Russians and between the conflict in Syria, Moscow's closer ties with Beijing, and Riyadh's move to antagonize The Kremlin by encroaching on Russia's eastern European market share, one shouldn't expect Putin to back down any time soon. In short, if John Kerry and Riyadh did in fact plan to bankrupt the Russians by tanking crude prices, the effort was a miserable failure that resulted not only in a 20% fiscal deficit for the Saudis, but also in the destruction of American jobs in the oil patch.

We close with a bit of humor from Deputy Energy Minister Kirill Molodtsov:

 “I will tell you when Russian companies are for sure going to decrease production -- when oil costs $0." 

 

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Mon, 12/21/2015 - 13:39 | 6949514 Looney
Looney's picture

Shouldn’t OPEC invite ISIS to become a member of the cartel?  ;-)

Looney

Mon, 12/21/2015 - 13:43 | 6949538 troubledasset
troubledasset's picture

They already are proxy members. Saudi votes on their behalf.

Mon, 12/21/2015 - 13:47 | 6949561 researchfix
researchfix's picture

The Saudis don´t have that oil anymore. That´s why they want Iraq and Syria.

Mon, 12/21/2015 - 14:02 | 6949634 NoDebt
NoDebt's picture

"You may also recall that Gazprom Neft (which is the number three oil producer in Russia)began settling all sales to China in yuan starting in January. This, we said, is yet another sign of the petrodollar’s imminent demise."

So.... settling sales in a devaluing currency.  Got it.

I gotta tell ya, folks, I ain't buying 100% of this "death of the petro-dollar" stuff.  Sorry.  Down-vote as you see fit, but I think we already have a single world currency.  It's called the US Dollar.

 

Mon, 12/21/2015 - 14:06 | 6949658 Winston Churchill
Winston Churchill's picture

Was.

Looking at international trade data it appears no-one wants to swap real things for it anymore.

Not with a bang,but with a whimper.

Mon, 12/21/2015 - 14:18 | 6949716 tarabel
tarabel's picture

 

 

Watching various world currencies tumble against the old USD, I have to question that assertion.

I would suggest that lack of demand is driving trade down, no matter what form of funny money is used to settle accounts, but I don't see a significant non-politically-engineered shift away from the dollar. That China may be twisting arms to use the yuan if you want them to invest in your infrastructure projects is not an economic decision. And it will fade as China itself fades.

All bets in an increasingly despairing world will eventually be placed on Uncle Sam and he will disappoint them-- but he will do so last, not first.

Mon, 12/21/2015 - 14:36 | 6949785 wizteknet
wizteknet's picture

LOL

Mon, 12/21/2015 - 16:03 | 6950140 Motasaurus
Motasaurus's picture

London forced the USA and Saudi Arabia to be inexplicably linked. As one goes down, the other is taken with it. They have no choice but to hold each other tight as the world moves once again.

The low oil price: What if it was not aimed at Russia, but at the Saudi/US conglomerate? 

Mon, 12/21/2015 - 16:31 | 6950284 Occident Mortal
Occident Mortal's picture

Erm... NEWSFLASH>>

 

The West has crashed the Rouble with sanctions, therefore Russian oil production costs are now the lowest in the world.

Meanwhile Saudi Arabia is pegged to the USD and the tightening federal reserve, their costs are rising as the dollar strengthens.

 

What has happened in Moscow is this.

 

Back in the late 1980's when the political party Solidarity seized the Gdansk shipyard, it revealled that the leadership in Moscow at the time were corrupt and feckless.

They didn't control the uprising and within months the Berlin wall fell. A year later the USSR collapsed.

 

All the active KGB agents in Berlin went back to Moscow and they found rot, the KGB had been out advancing the frontline whilst the generals back in Moscow were drunk and asleep.

When all the KGB agents returned to Moscow they formed a secret society (led by Putin), and within a decade they had once again seized control of the entire country.

 

Now the same KGB society makes up all the Russian oligarchs and the Kremlins political elite, Putin leads this group but he does not have totalitarian control of it. There are political grandfathers who are more than capable of hatching plots and swaying power.

 

But now "the Kremlin" is ascending, Putin won his latest election with the promise to form a Eurasian Economic Zone, a bit like a Super EU. As soon as he announced this Hilary Clinton et al denounced it as USSR 2.0 and swore the USA would do everything in its power to block Putins ambition (the Wolfowitz doctrine).

 

 

So far the Kremlin is winning and this time the most astute Russians wont be rushing out to the front line, they will be sitting in the Palace under their missile shield.

Mon, 12/21/2015 - 17:00 | 6950410 ---------
---------'s picture

kremlin is not winning

 

russia takes serious economic damage from usa's oil policies

lowering oil price to 30$ forces russia to reconstruct and rethink their way of economic wars

in first place this takes time - exactly what usa want

reserve is still the dollar. dont for get that

Mon, 12/21/2015 - 17:09 | 6950441 The Pope
The Pope's picture

 "reserve is still the dollar. dont for get that"

 

reserve is still the counterfeitted joobuck, don't forget that (there, fixed it).

 

Now we can finally, correctly, talk about all other things & what they mean in the right context as to 'currencies', & resource & war zones, (&/or, get 'banned' from ZH for saying so).

 

Merry Festivus bitchez!

Mon, 12/21/2015 - 17:35 | 6950536 ---------
---------'s picture

counterfeitted is written with one t

Mon, 12/21/2015 - 17:51 | 6950583 The Pope
The Pope's picture

who fucking cares?! except for those whose main line of defense is to redirect the point of the argument at hand.

Mon, 12/21/2015 - 18:16 | 6950634 ---------
---------'s picture

what argument? you are absolutely right with your statement

 

all i did is pointing out the grammatical mistake.

and you should not say joo but jew

 

have you seen the harry potter move with the young alcohol addict half jew daniel radcliff?

in this movie they are scared to call voldemort with his name, instead they call him "you-know-who"

its similar to many people here on zh are scard to say jew

Mon, 12/21/2015 - 18:32 | 6950681 The Pope
The Pope's picture

I don't watch (or read) any Harry Potter BS... As for what people 'say' (or 'type', as the case may be)... It's fucking Russian Roulette... Unless, of course, you're talking about dirty wops, stinking Mexicans, lowlife Albanians, crazed Muslims, or any other ethnic subset that the 'media class' would prefer you to hate at any given moment.

Mon, 12/21/2015 - 19:18 | 6950837 ---------
---------'s picture

i liked the first two harry potter movies   (didnt watched the other parts)

Mon, 12/21/2015 - 20:06 | 6950963 johngaltfla
johngaltfla's picture

I call bullshit on this story based on Blowmeburg.

The Russians produce oil based on Roubles. That's a piece of crap fantasy fiat currency and thus gives them pricing power when selling to dumbfucks like Europe and China.

The Saudis continue to elect to be camel fuckers who enjoy Obama's and Goldman Sach's asstaste and decide to keep their camel dung pegged to the USD.

Which is more cost efficient?

Not the camel dung.

Mon, 12/21/2015 - 22:53 | 6951508 philipat
philipat's picture

So now that Russia is pricing ALL its exports of energy to Europe in Rubles, what do you suppose might happen to the value of the Ruble (Which will have to be bought for EUR and USD in the market)?

This is yet another nail in the coffin of the USD. With oil at $35 (Down from $100+) the demand for petrodollars has already dropped by 70% even without factoring in that the BRIC nations also dump UST's. And Saudi Arabia will shortly agree to China (Its largest customer) paying for oil in CNY. So what do you suppose might happen to the value of the Dollar? All those unwanted Dollars will sooner or later come home and will cause massive inflation, at a time when nobody else wants dollars to fund the US trade defecit.

You can ignore reality but.........

Tue, 12/22/2015 - 00:52 | 6951842 Stainless Steel Rat
Stainless Steel Rat's picture

This is one opec fail!

Tue, 12/22/2015 - 19:38 | 6954553 nofluer
nofluer's picture

"All those unwanted Dollars will sooner or later come home and will cause massive inflation,"...

You mean the FED will have to get out the "dollars" book and subtract a few trillion from the bottom line total of "dollars in existence"?

Back in The Day when they actually PRINTED dollars in circulation, they'd have dollars "coming home" and causing inflation. Dollars with no real-world presence cannot cause inflation... they evaporate too fast. IN the "modern world" the FED doesn't even have to acknowledge that they exist on the books. Where do you think they got those trillions to buy up the MBS' they "bought" from the banks? (If you dn't know, they waved their magic mouse and "created" the zeroes to put at the end of a number and "Lo, USDs magically appeared and were put in sealed money cages and credited to the bank's accounts at the FED." (Abt $2 Tn worth, IIRC.)

Wed, 12/23/2015 - 07:54 | 6955794 koperniuk666
koperniuk666's picture

And it was a spelling error, not a grammatical mistake

Mon, 12/21/2015 - 19:07 | 6950779 Still Losing Money
Still Losing Money's picture

wow, who would have thought that the store across the street would run a sale when I lowered my prices....

Russia HAS TO run at full prodution to keep the cash flowing. Walmart lowers its prices until kmart can no longer compete and goes out of business. Sme here. Drop the price until Russian production reaches peak and they can't generate enough cash flow due to low prices, you can't make up for it with volume.

Russia raising production totlals is a sng they ARE LOSING not winning. just like new lower prices at kmart was proof walmart was driving them out of business. but ZHers can't see that because they are  too busy hating the USA and kissing putey pute's azz.

Mon, 12/21/2015 - 21:37 | 6951257 Dame Ednas Possum
Dame Ednas Possum's picture

Your stated belief is a combination of flaccid nonsense, puerile ignorance and naive ad hominem attack that doesn't merit engagement.

The fact is that a race is on to pull as much oil out of the ground at virtually any price before the inevitable onset of renewables as an inevitable technological shift. (Note: in the case of oil this evolution can't come soon enough for the planet as the human power structure built around oil become superfluous).

Mon, 12/21/2015 - 23:39 | 6951690 Still Losing Money
Still Losing Money's picture

wow what a load of horseshit. just cause you wrap it in fancy words doesn't mean you cover the smell. Fancy words usually equals poor argument.

Tue, 12/22/2015 - 09:45 | 6952360 FrankDrakman
FrankDrakman's picture

Nope, the Dame is spot on. New electric car technologies will make the ICE a niche product by 2050, if not before. Electric motors are hugely more efficient than gas motors - the latter are limited to about 40% right off the bat by the Carnot cycle, and then much of that is lost in the transmission, cooling, and other functions. Electric motors just drive the wheels, period. 

Currently (sic), ICE motors have two big advantages - first, gas is much more energy dense than the best battery, so it takes less weight in gas than it does in battery to power the car. Second, refilling is much faster than recharging. Those drawbacks are being overcome with bigger and better batteries, and more (and more available) charging stations. 

Already, just by improving the fuel economy of current ICE's, there has been a permanent drop in gasoline demand in the US. Pile on 'carbon taxes' from revenue-thirsty gov't, and the economics of switching to an electric or hybrid for at least one of the average American family's 3 cars gets even better, again reducing gasoline demand. 

Saudi is sitting on the world's largest pool of potential buggy-whips. Cutting prices was part of their plan to stall the electric car revolution. Like Canute, they will fail. 

Tue, 12/22/2015 - 19:53 | 6954606 nofluer
nofluer's picture

Well... by 2050 I doubt they'll let me drive anyway. BUT - At present tech (which will not last forever - it WILL be improved) says the ICE will be around for a long time. Like I can carry extra gas without worrying about overheating batteries and fires. (ie for real world living, battery tech has GOT to be RADICALLY improved.)

Another aspect of the power industry is that whatever tech is developed, they will HAVE to make allowances for sparcely inhabited areas - like farms. Farms use a lot of energy to grow and harvest (etc) food. Without more efficient batteries, spending half the day changing out batteries and putting the spent ones on the charger will waste huge amounts of time. The time spent charging will be a non-issue as most people will have enough bateries to keep an extra set or two on the charger while using a set and carrying a set. So snap-in snap-out tech will eliminate the whole issue.

I'm finding it highly amusing to see that so many supposedly intelligent people seem to think that all you can do with oil and its derivatives and by-products is to burn it. Oil is one fo the key components of a huge part of the stuff that we use every day. (Plastics, etc. etc)

Wed, 12/23/2015 - 07:42 | 6955782 koperniuk666
koperniuk666's picture

Saudis are probably the only non- western group to realise that 'resources' have no intrinsic value . they only have a value to a group `( the west~) ' that has an economy and technology to use and value them. The non west , largely does not have this economy. The west can - as it has on many occasions before- simply go away and invent a new way of doing things with new stuff that now becomes a 'resource' if necessary. The saudis have immense amounts of this valueless stuff (oil) and if they overprice it the west will go away and invent something else ( eg fracking, nuclear, renewables, saving). The oil will then become completely valueless..... just sticky muck in the ground.....

Tue, 12/22/2015 - 14:12 | 6953380 Still Losing Money
Still Losing Money's picture

For proof I know exactly what I'm talking about - the headline from today

 

http://www.bloomberg.com/news/articles/2015-12-22/oil-collapse-sees-vene...

Mon, 12/21/2015 - 22:49 | 6951522 philipat
philipat's picture

In part correct but Western Europe is hurting far more than Russia because of the sanctions. Russia had become the largest consumer market in Europe. It could be worse. At least Russia has energy to export, which is a lot more dependable than paper derivatives?

Tue, 12/22/2015 - 00:21 | 6951789 Krumnoltzwitsky
Krumnoltzwitsky's picture

Russia has to run at full production otherwise their wells freeze over and are unable to be restarted. The price of oil has nothing to do with it.

Tue, 12/22/2015 - 13:16 | 6953145 Fod
Fod's picture

Since this is an important piece of information, can you provide a source that this is a real issue?

Wed, 12/23/2015 - 06:45 | 6955743 koperniuk666
koperniuk666's picture

Bollocks. I was there yesterday and Russia is doing just fine. They can produce all the way down to 10 dollars if not lower. Saudi is already in very very severe pain. its not just the cost of extraction but the cost of running the country. Saudi have a hugely expensive socialist paradise to run. They are bleeding cash. add in the transport costs ( Russia to China) and the political incentive of China to want to fuck up USA and the above is NO SURPRISE TO ME AT ALL. Dont fuck with Russia - we will NOT win against them. They have resources , space, a lot of people , great leadership,industry, technology and gorgeous women. We have a porch monkey in charge, huge debt, urbanisation(concentration) , and industry outsourced to China. Even the military is not what it once was ( I was in it for 25 years- H&S, PC , paperwork, mindless complexity that no-one can operate and a suicidal dependence on the network).

Mon, 12/21/2015 - 20:23 | 6950798 Blankone
Blankone's picture

Re Occident:  "The West has crashed the Rouble with sanctions, therefore Russian oil production costs are now the lowest in the world."

By that flawed logic if the west causes the rouble to go to zero then Russian oil production will be free and cost nothing. 

The truth is that since the rouble has been crushed the amount of rouble to get the work done goes up since the true value of the rouble is less and buys less. 

Mon, 12/21/2015 - 20:55 | 6951096 HenryHall
HenryHall's picture

Russia's indisputable low production costs are due to a policy of no significant debt. Not due to currency manipulation or weakness. Production is financed by retained past profit, not by debt as in the West.

No debt to service, no relevance of interest rates.

As to maximized production, this is done so as not to have to dip (materially) into savings (foreign reserves etc).

For every debt owed there is a creditor due collection. In Russia the big creditor is the state. In the West the big creditors are a handful of "faceless men" for whom no amount of wealth will ever be enough.

Mon, 12/21/2015 - 22:11 | 6951407 East Indian
East Indian's picture

Russia does not have to import many things necessary for survival - it in fact has almost everything needed for an austere living - not comfortable but survival. This was not the first time the "free world" tried to crush it through isolation. In 1920s - 30s the same thing was tried; it resulted in Russia developing an isolated economy. This concept then spread to China and to a large extent to India; this was called, 'self- sufficiency". Even today, China and India can live, except importing petroleum, on their own for many years.

Russian economy is still in this mode. In this mode, prices of everything are determined in the local currency. It does not matter if it rises or falls in the "open" market vis-a-vis dollar or yen. As everything is produced and sold in rubles, a falling ruble does not cause any price rise. On the other hand it will make Russian exports cheaper and attractive. "Crush by isolation" wont work for territorial giants or population giants.

Mon, 12/21/2015 - 22:47 | 6951518 Freddie
Freddie's picture

I like Putin but if he is selling out Hezbollah and will not back Syria taking back the Golan then he is just another cog in the ZWO. 

The hit on Hezbollah leaders who are fighting against ISIS and head choppers of evil in Syria is not a good sign that Russia and Putin are the good guys.

Mon, 12/21/2015 - 23:15 | 6951613 Blankone
Blankone's picture

Putin lured Hezbollah out into the open for Israel.

Russia has the same jewish mafia issues as the US.

Russia has betrayed every allie it has had in the ME.  Including Iran.

If Hezbollah does not move quickly back to their home base they deserve what Putin will help be done to them. 

Mon, 12/21/2015 - 23:33 | 6951671 Still Losing Money
Still Losing Money's picture

The West has crashed the Rouble with sanctions, therefore Russian oil production costs are now the lowest in the world.

and thanks to the devaluation, food prices ars some of the highest.and shortages are starting.

Tue, 12/22/2015 - 00:43 | 6951827 Motasaurus
Motasaurus's picture

 food prices ars some of the highest.and shortages are starting.citation needed

Mon, 12/21/2015 - 17:41 | 6950562 Romanoff
Romanoff's picture

And what if Russia, having one of the lowest costs of oil production, decided to give both the USA and Saudi Arabia a bit of nudge towards economic ruin by increasing production?

Russian scientists pioneered research into abiotic (naturally replenishing) oil reserves. It seems that the world's oil reserves are a mixture of biotic (biological origin) and abiotic reserves. Russia seems to have a fair proportion of abiotic oil reserves.

So if you happen to be a country like Saudi Arabia with biotic reserves they will eventually run out. You are limited by land mass in your chances of finding more reserves. Similarly the USA while having a very much larger land mass has severely depleted its biotic reserves and has now resorted to expensive shale oil to make up the difference.

So if Russia can produce unlimited quantities of ever replenishing oil at world's lowest cost why wouldn't it do what it is doing?

And how stupid is USA and Saudi Arabia to piss their diminishing oil resource up against the wall to try to pressure Russia?

US oil sector debt bubble about to burst. Saudi Arabia about to go bankrupt.

What's not to like about that?

Mon, 12/21/2015 - 18:55 | 6950745 Still Losing Money
Still Losing Money's picture

what's not to like? how about another great depresion you moron.What is it with you ZHers who keep championing for a new depresion. most of you wouldn't last a day and a hlaf if you lost power, water, internet and I don't care hw much gold you have buried in your backyard. it is WORTHLESS if there are no goods on the shelf to buy. So yeah,let's destroy the world economycause nothing will happen when we do.

Tue, 12/22/2015 - 13:21 | 6953158 Fod
Fod's picture

Still, capitalism supposedly is a cycle, and we are artificially not allowing the economy to deflate to avoid the inevitable depression. And we are not at the end of history, major wars will keep happening when resources are finite. 

Mon, 12/21/2015 - 14:38 | 6949795 Miles Ahead
Miles Ahead's picture

@NoDebt.  YOU may have a single world currency.  Speak for yourself.  Not to hard to guess which state that world is though.  No doubt can hear riverboats on the Mississippi...

Selling oil in an insolvent soon to collapse currency... genius.

Mon, 12/21/2015 - 14:39 | 6949803 MalteseFalcon
MalteseFalcon's picture

"For analysts, Russia's resiliency has come as a surprise. “I know of no one who had predicted that Russian production would rise in 2015, let alone to new record levels,” Edward Morse, Citigroup’s global head of commodities research said."

LOL.  Even the "analysts" were surprised.

Oil reserves and the actual cost of oil are state (or in the case of the West, corporate) secrets.

Academics who analyze these things "for the people" are fed whatever information that will profit those who control the secrets.  Such academic studies are syllogisms and nothing more than myth making.

Peak oil was bullshit, but the people of the West bought it for 40+ years and paid through the nose for it.

Mon, 12/21/2015 - 14:51 | 6949854 agent default
agent default's picture

I don't know what the global picture for oil is, but for SA peak oil looks very real. 

Mon, 12/21/2015 - 15:11 | 6949932 MalteseFalcon
MalteseFalcon's picture

Peak oil is sometimes qualified as peak cheap oil.

If the Saudi's are at peak oil it's because the Saudi "cost structure" is too high and includes generous welfare to keep their over-procreating rabble from revolting, expense accounts for over 100 "princes", funding for extreme Islamic radicals all over the globe, a war in Syria and a war in Yemen.

In a word: bullshit.

Mon, 12/21/2015 - 16:10 | 6950170 secretargentman
secretargentman's picture

I don't know how they can sell oil for less than $40 a barrel. I can't even get a decent *empty* barrel for less than $30.

Mon, 12/21/2015 - 16:41 | 6950330 Liquid Courage
Liquid Courage's picture

*BADDA-BOOM*

Thanks, folks. I'll be here all week. Try the veal.

*MIKE DROP*

Tue, 12/22/2015 - 20:09 | 6954647 nofluer
nofluer's picture

If you don't mind having the top cut out, you should be able to get an empty barrel for about $10, and you get about a quart or two of whatever oil/etc was in them too.

And as to "peak oil"... Is my rememberer remembering correctly when it tells me that during the Iraq War (the first one) they kept mentioning oil fields that hadn't eve been tapped yet? Or is that another ME country?

And didn't Israel just "find" a new undeveloped field...

Mon, 12/21/2015 - 15:32 | 6950012 ThanksChump
ThanksChump's picture

I suspect SA, who can still ship vast quantities, is playing a game of chicken with Russia: see whose production abilities falter first, winner take all.

Stupid game. SA ran out years ago if you use their stated reserves data, but that doesn't mean SA has an unlimited RESERVE reserve. Yes, they can damage their wells trying to overextract, and may already be doing so. They're not a common-sense oriented people.

SA will lose this game if they're lucky, or get roasted by Russia if they don't. Either way, it's good.

Maybe Russia will push for regime change in SA to end the beheadings and stuff. Install a shiite puppet.

Spice must flow.

Mon, 12/21/2015 - 23:15 | 6951614 DaveyJones
DaveyJones's picture

We'll said. The fact that the Saudis spend lots to drill out in the ocean should tell us something about supply. We can't expect the murderous Saudi royals or their US murder/war allies to say anything true about crude or terrorism

Tue, 12/22/2015 - 08:54 | 6952201 Tall Tom
Tall Tom's picture

Yeah. The Shits, oh...excuseme...the Shities just like hanging people. That is just a beheading with a dull blade as it breaks the neck and shreds the tissue inside of it. And when they get the drop wrong...pop goes the weasel.

 

They are fond of public floggings.

 

Yeah they are so much better than the Sunnis...LMAO.

 

At least getting decapitated makes it certain that I will have no more than 15 seconds of suffering. Hell if I were dangling on the end of a rope, strangling for 30 minutes, due to a botched hanging, well that would not be that pleasant.

 

So you are fond of hangings?

Mon, 12/21/2015 - 15:32 | 6950007 snowlywhite
snowlywhite's picture

the article is beyond ridiculous. It's below par propaganda.

 

the crux of the article is how Russia increased it's production by a whooping 3-4%. Ok, remarkable given their crap technology, but still...

Mon, 12/21/2015 - 17:02 | 6950421 Gregory Poonsores
Gregory Poonsores's picture

Found it a bit weird myself.

Most of the increases by Russia would have been baked in before the price fell, so I don't understand the song a dance about it.

I mean the Saudis were already on a massive infill drilling program which boosted their output this year.

Of course this presupposes the Russians are actually increasing production or just trying to spook the Saudis whose production is dropping again anyway. Besides, all OPEC increases seem to be coming from Iraq now.

Mon, 12/21/2015 - 21:37 | 6951260 Seer
Seer's picture

When everyone is backpedaling/contracting I'd think that any increase, even a "paltry" 3-4%, is fairly significant.  Think Caterpillar wouldn't want that? (hell, they' probably love to be able to maintain, rather than DROP, production).

Again, for those that don't have a clue about the business world, when things are really tight ANY gains are HUGE.  Seeing as most of the West's bankers are force-feeding inflation at 2% (figure it as faked "growth") that 3-4% could be seen as 5-6%,  For the mathematically-challenged, this exponentially pencils out to a DOUBLING of production in only 11 1/2 to 14 years.

The point isn't to show off how much you can produce, it's about out-lasting your competition.

Mon, 12/21/2015 - 22:36 | 6951463 snowlywhite
snowlywhite's picture

listen, before blabbering about compounding, of which I'm afraid I know more than a fair bit, try to watch the chart in the article.

 

you have 3 lines there: Russia, SA, US. Which is the one growing the slowest?

 

and "The point isn't to show off how much you can produce, it's about out-lasting your competition." is patently nil. All 3 are sovereigns. Sure, on paper production is in private hands; but this is oil, not hamburgers. Each of them can pump till there's no drop left.

 

Let's go with the scenario where Saud is ousted. Do you think SA would pump less afterwards? And don't tell me about Lybia. It's SA; all the armies in the world will be present there to ensure that oil keeps flowing...

 

Why do you think noone wants nukes in Iran? Obviously it's not because of Israel, as they'd have no chance in hell to deliver something even remotely close to Israel. It's because they'd actually have a decent chance of threatning to iradiate a big chunck of the world's oil fieds. And those are close enough for them to actually be able to deliever a nuke. So the threat would be real and with that comes a big leverage.

Mon, 12/21/2015 - 17:01 | 6950415 kiwidor
kiwidor's picture

As much as I loathe agreeing with you, Tarabel, the USD has to fall last because pretty much everything is derived from it.

or put another way; The Streets!!! They're full of them!!!

Mon, 12/21/2015 - 22:55 | 6951548 Fullthrottle
Fullthrottle's picture

Anyone that thinks the Yuan is soon to overtake the USD is dilusional or smoking sum medical magic. The Chicoms are sinking and theyve been manipulating their currency for as long as i can remember. It sure as Fk wont be the Ruble. You thought the Lies out of Govt were bad here, its even worse there. Those assholes were riding bicycles to work 25 yers ago in a 2000+ society. Get real. 

Mon, 12/21/2015 - 23:03 | 6951574 Crush the cube
Crush the cube's picture

Look for the significant political shift again.

http://www.nakedcapitalism.com/2015/12/michael-hudson-the-imf-changes-it...

Cause it just happened, the IMF changed the rules deliberately to stiff them over the Ukraine.  It works both ways when you change the game rules.

Mon, 12/21/2015 - 23:22 | 6951631 Hugh_Jass
Hugh_Jass's picture

The dollar is the cleanest dirty shirt in the laundry basket of fiat currencies...

Mon, 12/21/2015 - 14:20 | 6949724 BorisTheBlade
BorisTheBlade's picture

It will take time, when everyone expects for USD to go in one day, i.e. momentary collapse overnight and next reserve currency next morning. Doesn't work that way, consider what it took USD to dethrone British pound - two world wars and a host old European Empires going the way of dodo. This time it won't be peaceful either.

 

Mon, 12/21/2015 - 14:42 | 6949820 Miles Ahead
Miles Ahead's picture

The best made plans of mice and men often go awry.  It's started already, but when it starts to accelerate it will be sudden, and thereafter very swift and yes, not peaceful.  But nothing we do is peaceful.

Mon, 12/21/2015 - 23:21 | 6951630 DaveyJones
DaveyJones's picture

Maybe. But everything's faster these days. And more connected

Mon, 12/21/2015 - 14:28 | 6949731 Joe Sichs Pach
Joe Sichs Pach's picture

Confucius Say:  Cleanest Dirty Shirt Stay Less Dirty Longer Than Dirty Shirt Stay Dirty

 

He was truly a wise man

Mon, 12/21/2015 - 15:22 | 6949976 Arnold
Arnold's picture

u r n idiot.

Mon, 12/21/2015 - 14:12 | 6949690 tarabel
tarabel's picture

 

 

Yes.

Up until recently, China kept an effective peg to the dollar so currency denomination didn't matter in these instances.

As it begins to devalue, we'll see who wants what in payment.

Mon, 12/21/2015 - 14:21 | 6949727 monk27
monk27's picture

No ! Anything can be used as a medium of exchange. If the yuan proves to be more convenient (read cheaper) to use than the USD, others will use it. Apart from sticking it to the US, the Chinese (who actually have real stuff to sell, as opposed to us) might encourage this trend as part of their deals...

Mon, 12/21/2015 - 16:49 | 6950364 Sanity Bear
Sanity Bear's picture

I'll believe that when I see Greece pay for oil with prostitutes.

Mon, 12/21/2015 - 17:04 | 6950418 ---------
---------'s picture

a 17 years old prostitute in greece costs 5 euro the hour

 

they do not have enouth prostitutes to pay for 10% of the product

Mon, 12/21/2015 - 18:10 | 6950641 bamawatson
bamawatson's picture

put me down for fifteen minutes worth. i have cash

Mon, 12/21/2015 - 17:38 | 6950552 monk27
monk27's picture

Believe what you want. Besides, I had no idea that Greek prostitutes are in such high demand... You realize that most oil producers have access to much more interesting "options" in that field, don't you ?

Mon, 12/21/2015 - 14:38 | 6949799 wizteknet
wizteknet's picture

Yaun is toasted

Mon, 12/21/2015 - 14:41 | 6949791 tmosley
tmosley's picture

Selling a declining commodity in a declining currency makes perfect sense, actually. It's just a straight up trade of oil for manufactured goods, and those goods aren't particularly dependent on the value of the dollar at the moment (ie they have a glut of raw materials to supply their factories).

This is a symptom of the end game.  The dollar will go up and up until it breaks. This is called a crack up boom, and has plenty of historical precedent.

EDIT: And what may be the surest sign of a bubble is when major institutions and entire nations start speculating in currencies rather than participating in trade. When they stop, it is a sign that the bubble is about to burst, or at least I suspect that is the case.

Mon, 12/21/2015 - 15:11 | 6949931 gbcirino
gbcirino's picture

If you add that the USA Oil Patch has the highest cost of production... KABOOM!

Mon, 12/21/2015 - 16:32 | 6950290 NoDebt
NoDebt's picture

OK, that argument I can see merit in.

 

Mon, 12/21/2015 - 16:19 | 6950218 Jimmy Twinkle
Jimmy Twinkle's picture

Sock puppet?

Mon, 12/21/2015 - 22:27 | 6951458 Seer
Seer's picture

Wasn't there an article here the other day that has one of Russia's top dogs (energy?) stating that they didn't see oil prices increasing for at least 7 years?  And what is then not stated is what would change that (either now or farther out than 7 years).

ALL signs point to a compounding contraction.  Those last standing won't have things easy, for when we get to that point it's highly unlikely that there's going to be enough volume to produce any profits: as I've been saying for many years: "Economies of scale in reverse."

Mon, 12/21/2015 - 18:40 | 6950704 Sparkey
Sparkey's picture

I sincerely hope you are right NoDebt, The collaspe of the USD isn't something that will help me or mine! It is Christmas borrow some money and go shopping, A hearty Seasons Greetings to all!

Mon, 12/21/2015 - 23:53 | 6951732 Reichstag Fire Dept.
Reichstag Fire Dept.'s picture

No, because gold.

Tue, 12/22/2015 - 00:06 | 6951760 cornflakesdisease
cornflakesdisease's picture

The dollar will collapse as soon as we run out of zeros.

Reagan leaves office:  51% of all world trade denominated in Dollars.

Currenty: 89% / 93% depending on whoes figures you use.

 

China?

3.2%

Mon, 12/21/2015 - 14:23 | 6949737 Mr.Sono
Mr.Sono's picture

 

 “I will tell you when Russian companies are for sure going to decrease production -- when oil costs $0." 

 

Now thats hilarious if you ask me. 

Mon, 12/21/2015 - 13:46 | 6949550 Canadian Dirtlump
Canadian Dirtlump's picture

Looks great on the bronze age assholes in Saudi Arabia. Let's see how the Saudis hold up after a few years of paying their massive welfare bill, their massive bill supporting spolied royal brats, flushing billions in Syria, now most recently getting the ever loving shit kicked out of themselved in Yemen ( They've now lost 10 naval vessels to an enemy with no navy.

 

Meanwhile Russia soldiers on, with a weaker ruble to help their exports, and a self reliance that the saudis are even too dumb to dream about.

Mon, 12/21/2015 - 13:48 | 6949559 813kml
813kml's picture

Vlad:  "I drink your market share!"

https://www.youtube.com/watch?v=a5d9BrLN5K4

Mon, 12/21/2015 - 13:57 | 6949606 yudd
yudd's picture

i know it was 2 didnt know about 10 , what kind of ships, personally i think the qatari's are probably even more incompetent than the saudis with regards to warfare

Mon, 12/21/2015 - 14:04 | 6949646 813kml
813kml's picture

Their lifeboats got sunk too.

Mon, 12/21/2015 - 15:07 | 6949914 Rock On Roger
Rock On Roger's picture

Fars News has counted ten sunken Saudi warships.

 

http://en.farsnews.com/newstext.aspx?nn=13940923001367

 

Mon, 12/21/2015 - 15:58 | 6950107 Socratic Dog
Socratic Dog's picture

Totally unsurprising to anyone who has ever encountered elements of the Saudi military, and I don't mean in battle.  They are fat, soft, pampered clowns, almost to the man.  That said, 100 years ago they weren't.  They were hard-assed Bedouins with a proclivity for rape (on male captives, just ask Lawrence of Arabia).  They can return to that, if things get tough enough for them and they get battle-hardened.  Just like American soldiers could return to their long-ago competence, if things got harder for them.  Luxury is a two-edged sword.

Mon, 12/21/2015 - 16:27 | 6950269 Canadian Dirtlump
Canadian Dirtlump's picture

DIVE DIVE DIVE! OH SHIT, this isn't a SUB!

It's funny, I keep my co-workers (fast asleep) and brother (awake) on the goings on in Yemen, and they are always flabbergasted. From losing ships, to losing mercenaries, to losing planes, to losing armor, to losing losers who get blown sky high in the morning doing jumping jacks during warm up, they are getting annihilated.

My brother apparently was out with some friends for dinner and mentioned the Saudis losing a good part of their royal navy in Yemen. He then rendezvoused with the same people for drinks after, and 1 guy admitted he was so disquieted by the (what he thought ) lie about the navy thing, he actually was compelled to do research in between dinner and drinks. LOL.

Mon, 12/21/2015 - 18:17 | 6950653 Blankone
Blankone's picture

Does not look like a reliable source at all.  Could you link an RT story about 10 ships being sunk

This reeks of a source as unreliable as Debka was about China having a warship in a Syrian port.

 

Mon, 12/21/2015 - 14:16 | 6949707 Blankone
Blankone's picture

Re: Canadian

So having the ruble devalue in recent history to surprising lows against the dollar is a good thing.  Then if the ruble devalues more to just 10% of it's current value is a good thing?  I thought fiat curreny that becomes almost worthless was a bad thing for the citizens.

Russia pumps more because they have no choice.  It is a major part of their economy and exports thus they cannot stop and must take even lower returns.  That does not change the damage the low price of oil is doing to Russia's internal economy.

Russia sells oil in China's currency?  Not the ruble.  Seems China is calling the shots and is able to give some support to their currency not Putin.  So much for the claims that Putin only sells oil and gas in ruble.

Could you link to any RT article about SA losing 10 ships.  Seems all those article are from places like What Really Happened and such.

 

Mon, 12/21/2015 - 14:46 | 6949833 Miles Ahead
Miles Ahead's picture

Stop talking bad about Russia and Sir. Vladimir Putin.  Here... me and my four mates are going to downvote you.

Mon, 12/21/2015 - 15:00 | 6949884 Reggie Dunlop
Reggie Dunlop's picture

You just summarized zero hedge in 2 sentences. Well done.

Mon, 12/21/2015 - 15:49 | 6950065 Miles Ahead
Miles Ahead's picture

My pleasure.

Mon, 12/21/2015 - 15:54 | 6950091 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

I am pro Russian and I agree with you, also Russia shoud have not entered war in Syria just keep doing business in Crimea and Ukraine, Putin is becoming too much greedy.

Mon, 12/21/2015 - 16:20 | 6950221 Lumberjack
Lumberjack's picture
https://en.wikipedia.org/wiki/Royal_Saudi_Navy Future[edit]

Saudi Arabia wants to buy five German submarines for around €2.5 billion ($3.4 billion) and more than two dozen more in the future.[11]

In December 2014, the U.S. awarded Lockheed Martin a contract for a Foreign Military Sale of the Mk 41 Vertical Launching System to Saudi Arabia. With no surface ships compatible with the Mk 41 and no plans to acquire a land-based missile defense system, this indicates the country is close to purchasing a VLS-equipped surface combatant. Saudi Arabia has evaluated the Arleigh Burke-class destroyer and the Multi-mission Combat Ship version of the Freedom-class littoral combat shipable to carry a VLS.[12] In October 2015, the truth came as the US informed Congress of a possible sale of Multi-Mission Surface Combatant (MMSC) Ships, a variant of the LCS.[13]

Bases[edit]
  • Jeddah – Red Sea base home to the navy's Western fleet for frigates and 2 missile boats, 1 replenishing ship and 1 patrol minesweeper; located north of the King Faisal Naval Base air station and south of the container port area
  • Jubail – Persian Gulf base is home to the navy's Eastern fleet; smaller base home to corvettes, replenishing ship remaining missile boats and minesweepers
  • Dammam – Persian Gulf home port for the Saudi Royal family's two Royal Yachts
Mon, 12/21/2015 - 18:09 | 6950243 Blankone
Blankone's picture

Like I said, I cannot find any confirmations on a reliable source such as RT.

Just read the article you linked.  It clearly is not reliable.  "The footage initially aired by Al-Masirah TV, a Yemeni channel that supports Ansar"  So the sources of these ship sinkings are that Ansar does a PR video, has it aired on the local TV channel and we suddenly have a ship sunk out of thin air.  Now we are up to 10 such claims, with no verification on any one of them.  I do remember what seemed like a reliable story that a ship was once hit by a rocket but not sunk.  Otherwise, it seems they simple fire off something wildly that never hits and then make warning of what they could do.

 

Mon, 12/21/2015 - 19:34 | 6950873 Lumberjack
Lumberjack's picture

Israeli media also reported the same. Not to say they are that reliable, but I also looked at China media too. I cannot find 10 myself but the 3 are solid. I would be inclined to believe that it may be possible that others have been sunk but 'media' may not report it for various reasons, or, the rest never happened. Saudi Arabia needs to be dealt with for numerous violations and starting with harboring Idi Amin among many other things.

On that note Angola is a huge seller to China. Interesting to see how things are playing out. 

Mon, 12/21/2015 - 19:36 | 6950891 Blankone
Blankone's picture

RT has been good about reporting the big stuff.  Can you find a single story about SA having a ship sunk.  I may be using the wrong search terms but cannot find one.

The story of 10 ships sunk and the story that Yemen fired balistic missiles into SA and killed 150 ? including 40 plus blackwater mercs has been pushed very strongly lately.  I doubt RT would miss that.

Mon, 12/21/2015 - 22:19 | 6951436 Lumberjack
Lumberjack's picture

Google has in the last year revised their search terms making it more difficult using word play. I like archive material but that has also gone to hell.

Mon, 12/21/2015 - 22:21 | 6951440 Johnny Horscaulk
Johnny Horscaulk's picture

Arent you the guy that had trouble finding articles supporting s300 delivery to Assad even after being provided several reliable, msm links, including one quoting Assad himself?

And kept repeating the same disinfo?

Yep.

So while the Houthis may not have sunk a single Arabian ship, apparently your inability to find a reliable source simply is of little import.

 

Tue, 12/22/2015 - 00:27 | 6951623 Blankone
Blankone's picture

johnny, each time I have responded with information from a RT story in which Russia says that Assad does not have the system but only MAY have some part of it.  (Such as a truck or training manual.)  This was in response (by RT) to the claims (lies) by Assad that he had been delivered the S300 system.

Did you not notice recently that the US flew a mission into Syria and repeatedly bombed a Syrian base?  Or that just yesterday Israel flew into Syria and bombed Damascus. 

The false claims that Syria has the S300 have been debunked throughly.

 

Mon, 12/21/2015 - 16:39 | 6950324 Canadian Dirtlump
Canadian Dirtlump's picture

Next time you put on your webinar let me know I'll sign up. Regardless of what you're trying to get to there, the facts are Russia is proving more resilient than anyone had thought, or hoped.  See the title of this post. Regarding the Ruble, I'll use the example of the Canadian dollar. I could give a fuck that it's low. It encourages canadians to spend in canada and makes our exports cheaper to countries.

"I Know Of No One Who Predicted This": Russian Oil Production Hits Record As Saudi Gambit Fails

That is pretty much all you need to know. I'll keep cheerleading Russia as long as they continue to be the voice of reason in geopolitical affairs. For every blind Putin cheerleader here, there's a baker's dozen whiny WANGS who can't modify their paradigm to reflect the truth.

China talk is a bullshit Canard because china is now just dumpster diving for goods and services wherever they want to because world demand is in the shit hopper.

Mon, 12/21/2015 - 22:32 | 6951476 Seer
Seer's picture

Saudis were pretty much pushed into this situation by the US.  Translation of "US ally:" "Bitch"

It's the Saudi rulers who are the shitheads.  And per usual/history, it'll be the little guy that gets crushed as the top dogs manage to escape.  And, let's be clear here, this will result in a lot of children dying- I'm not as insensitive as Madeline Albright when it comes down to US policy being responsible for killing children...

Mon, 12/21/2015 - 13:46 | 6949556 Volkodav
Volkodav's picture

is subsidary already...

Mon, 12/21/2015 - 14:30 | 6949759 Demdere
Demdere's picture

Extrapolating, the sneaky Russians have adopted free enterprise !!

We are truly lost.

Mon, 12/21/2015 - 13:43 | 6949529 monk27
monk27's picture

In other news, the US "fracking revolution" was confirmed dead this Monday ! Another collateral (but fully deserving) victim has been the tar sands industry up there in Canada...

Mon, 12/21/2015 - 13:46 | 6949548 nevertheless
nevertheless's picture

Another example of the filth that runs this once great nation. We were tops in every category, but in 2015 we will trade our fresh water for a few jobs...disgraceful. 

Mon, 12/21/2015 - 18:21 | 6950666 Kirk2NCC1701
Kirk2NCC1701's picture

Isn't it time they changed careers and location?

E.g. Become Explosive Experts.  In KSA.  As Free Agents. 

I call their next play (wink, wink):  "Blue 38!  Blue 38!  Hut! Hut!"

Mon, 12/21/2015 - 13:43 | 6949536 KnuckleDragger-X
KnuckleDragger-X's picture

Russia is not impressed by the Saudi's and have a lot more experience with knife fights in dark alleys. This is going to increase the entertainment value......

Mon, 12/21/2015 - 13:45 | 6949544 Bill of Rights
Bill of Rights's picture

This is what I call a " Bitch slap " ha ha ha

Mon, 12/21/2015 - 13:46 | 6949549 Pliskin
Pliskin's picture

How much will a barrel of oil cost if Saudi is turned to glass?

 

Mon, 12/21/2015 - 13:54 | 6949589 Bill of Rights
Bill of Rights's picture

I'd pay good money to see that...

Mon, 12/21/2015 - 14:32 | 6949766 Demdere
Demdere's picture

Please stop this?  We don't fucking need it.

You dirty the political positions you apparetly think you support, or hasbara.

Stupid, or hasbara?  You can check both boxes.

Mon, 12/21/2015 - 14:42 | 6949814 Bill of Rights
Bill of Rights's picture

Since your thinking for me please feel free to tell me what I am thinking now? Ill help you along the letters F and Y are the clue.

Mon, 12/21/2015 - 16:13 | 6950185 ali_baba
ali_baba's picture

Don't be stupid. Nobody will be nuking future Israeli territory. I hardly think it'll take Israel more than 20 mins to invade ALL of Saudi when the time comes.

Mon, 12/21/2015 - 22:35 | 6951483 Seer
Seer's picture

WTF would Isreal invade Saudi Arabia?  Sure as hell ain't going to be able to hold it: they can't even hold Palestine!

Mon, 12/21/2015 - 22:39 | 6951494 Seer
Seer's picture

And let me remind readers that Hitler was supposed to have cake-walked Russia.  Yes, Germany was crushing the Russian, until, that is, they weren't.  "Bogged down."  It's a euphemism for FAILED/LOST.  Now, Saudi Arabia is no Russia, but Israel is no Germany either.

Mon, 12/21/2015 - 13:56 | 6949598 cougar_w
cougar_w's picture

You wouldn't have to glass SA to explore that scenario, just take out a few terminals on the Gulf. Could be totally conventional strike -- maybe a torpedo would do it. Things would fall apart overnight.

Mon, 12/21/2015 - 14:34 | 6949775 Demdere
Demdere's picture

So quickly you adopt negative-sum strategies.

Problem with negative-sum games is you can lose.  Why put yourself into a position where you can lose?

Indeed, the cost is thinking, but that has been shown to beat the bloody routes to a future every time.

Mon, 12/21/2015 - 14:50 | 6949844 Miles Ahead
Miles Ahead's picture

I'm dyin' here...  rotf

Mon, 12/21/2015 - 17:35 | 6950538 cougar_w
cougar_w's picture

Okay, I'll bite:

A couple cruise missiles hitting Saudi terminals would hardly be a zero-sum game for any of Russia, Iran or China. A mysterious calamity erupting on the Saudi side of the Gulf (or even in the Gulf proper, if you prefer) would destroy the global oil market in less than 10 minutes. The price of oil could rocket back to $120/bbl in 72 hours, and SA wouldn't even be able to profit from it.

It would be like some kind of tectonic shift, like the poles of the planet suddenly rotating 90 degrees off the axes.

Putin would probably laugh himself right off his feet.

Mon, 12/21/2015 - 19:03 | 6950764 Demdere
Demdere's picture

Yes, and that is just the first-order effects.

By the time we get to 10-th order effects, we would have some idea of whether it 'net worked' or not, and the businesses lost, the futures foreclosed. 

But just some idea.  Do you understand the concept of 'opportunity costs'?  How do you measure those?

Our presents are dominated by the side-effects of the last great ideas some idiot world leader had, and you continue the strategy.  Right, couple of guys over beers straighten the world out every time.

Pretty much how we got here, I think.  So let's stop.  Plans claim to produce a future.  Sometimes, but damn often they make things worse, and military plans are especially prone to going wrong, as our 14-year war with no wins shows us.

Mon, 12/21/2015 - 19:19 | 6950840 vincent
vincent's picture

Yep. I've been thinking the same way and can foresee a couple likely scenarios. I can come up with three suspects. No love loss for SA currently.

All of the sudden THEY become someone's Bitch, and it's a win/win for a few others. We can easily envision some whacked out gaming happening behind the curtains. No invasion will be tolerated, but plenty more remaining up for discussion.

U.S can self sustain for a bit  while "others" pick up the slack. One problem, however, is Saudi being forced to dump US Debt? Or U.S rides to the rescue in some fashion. Problem, Reaction, Solution.

Mon, 12/21/2015 - 20:12 | 6950979 cougar_w
cougar_w's picture

The complex under attack here (if we're reading it close to the mark) is the US+Saudi quid pro quo petrodollar scheme. Notice that just about anything that happens to SA nukes the petrodollar, which quickly spills over into US markets as a tsunami of deleveraging and debt deflation. All in dollars! If The Fed were serious about draining liquidity they would at that point be looking at a black hole well suited to the task.

The size of that Tsunami greatly depends on the weight of SA in the market. If there are others on the buying side as SA runs for the exits, then the petrodollar might survive. So who is still accumulating US$?

Lot of "ifs" floating around right now.

Mon, 12/21/2015 - 23:19 | 6951622 Seer
Seer's picture

It's all nothing but a Monopoly Money game, so it really doesn't matter what paper is held when the game is "called."  For MANY years (even when all the arm-chair quarterbacks were bragging on Germany [and even those totally clueless idiots claiming India and Brazil as being meaningful, belonging to the top strata]) I have said that there are THREE survivors: 1) Canada; 2) Russia; 3) US.  Reason has to do with LAND and national resources for internal consumption.  Yes, not like one can hold out eating one's seed corn, but these three countries have a LOT more seed corn to consume and are more capable of carrying on SOME semblance of what we currently call "civilization."  In the  long-run, however, it'll rewind a lot more: and here too it'll be LAND and resources, though more along the lines of that providing for subsistence living.

The trigger event might not be bombs, but more like the movie Margin Call: our systems control everything, and when ledgers start to hemorrhage and take out those  systems it'll be just as damaging as bombs.  I suspect that this is pretty well known and since Lehman days TPTB have been frantically buying time as they try to figure out how to firewall against this: one clue is all the talk about electronic/Internet terrorism- TPTB have to get total control over it all in order to keep bits from being flipped (or to re-flip as quickly as possible).  I can truly understand the panic, though it'll ultimately be pissing in the wind (nature will trump).

Mon, 12/21/2015 - 13:46 | 6949551 TuPhat
TuPhat's picture

$1.65 for regular at the pump today.  It's all good.  So very good.  Merry Christmas.

Mon, 12/21/2015 - 14:19 | 6949655 tarabel
tarabel's picture

 

 

I got two 300 gallon tanks behind the barn. Very good indeed.

Merry Christmas and a Happy New Year for consumers worldwide. Thanks, all you petro-kleptocracies. It's about time we got some of our money back.

Mon, 12/21/2015 - 18:10 | 6950642 bid the soldier...
bid the soldiers shoot's picture

So did John Denver and the state made him get rid of it.

Mon, 12/21/2015 - 19:18 | 6950835 Blankone
Blankone's picture

Is that what happened?  I thought he got rid of them because his fans were critical of him stockpiling gas as a hedge against a large price increase.  Others  say it was not really about hedging but he got them so those who worked there could fill up without having to drive off to get gas (saving gas).

I was under the impression he did so voluntarily to keep ignorant enviromentalist nuts happy (who thought owning gas was evil).

Mon, 12/21/2015 - 20:26 | 6951029 bid the soldier...
bid the soldiers shoot's picture

It was quite a while ago and my memory stinks.

I'm quite sure the State of Colorado did not want its residents to be storing hundreds of gallons of a flamable liquid in tanks or tanker trucks not far from the Rocky Mountain pine trees.

as i recall Denver owned a plane and liked to fly.  This meant that his plans were to fuel his plane from his back yard reservoir rather than his car.

It was more a hedge against no gas for sale, not a price increase.

 

Mon, 12/21/2015 - 21:10 | 6951152 tarabel
tarabel's picture

 

 

Not concerned enough to dig the story out, but I seem to recall that the uproar was over the elitist idea of hoarding gas while eveyone else sat in lines at the local petroleum dispensary. 

Aspen (and Boulder and Denver too, for that matter) hardly count as Colorado. In a crowded ski town filled with cigarette (and now pot) smoking drunks, I might even reluctantly agree with them from a public safety standpoint.

For agricultural uses, however, it's the only way to fly.

Mon, 12/21/2015 - 22:42 | 6951502 bid the soldier...
bid the soldiers shoot's picture

yes, that sounds familiar.

Denver probably didn't see the difference between a tank of diesel fuel for the tractor and a tank of gasoline for the plane.

Mon, 12/21/2015 - 23:22 | 6951633 Seer
Seer's picture

"For agricultural uses, however, it's the only way to fly."

Hopefully no one is talking about gasoline here...

Mon, 12/21/2015 - 14:41 | 6949812 wizteknet
wizteknet's picture

1.64 hear

Mon, 12/21/2015 - 15:37 | 6950026 tenpanhandle
tenpanhandle's picture

Where did you here that?

Mon, 12/21/2015 - 23:23 | 6951638 Seer
Seer's picture

Over their, dammit!

Mon, 12/21/2015 - 13:46 | 6949552 kaa1016
kaa1016's picture

More Russia love from ZeroHedge. Who gives a shit about the Russians or the Saudi's? Slow news day I guess.

Mon, 12/21/2015 - 13:53 | 6949584 monk27
monk27's picture

Riding the small bus to school, lately ? Well, enjoy the view then...

Mon, 12/21/2015 - 13:56 | 6949599 Bill of Rights
Bill of Rights's picture

Oh look a free seat at the library just became available.

Mon, 12/21/2015 - 13:58 | 6949612 sun tzu
sun tzu's picture

Because global events have no effect on the US economy

Mon, 12/21/2015 - 14:00 | 6949620 Dr. Engali
Dr. Engali's picture

Much anger in this one I sense. The dark side captured him I fear.

Mon, 12/21/2015 - 14:03 | 6949643 tarabel
tarabel's picture

 

 

We know where you spent your weekend, doc.

Mon, 12/21/2015 - 14:27 | 6949747 Dr. Engali
Dr. Engali's picture

Much truth do you speak. Strong is this one with the force.

Mon, 12/21/2015 - 14:43 | 6949822 wizteknet
wizteknet's picture

so friggen funny

Mon, 12/21/2015 - 23:25 | 6951647 Seer
Seer's picture

"Stupid Pits" are deep.  I'm afraid there's no getting this one out...

Mon, 12/21/2015 - 13:46 | 6949553 DonFromWyoming
DonFromWyoming's picture

Hah!  The law of Unintended Consequences reasserts its primacy in international relations.  Karma's a beeatch.

Mon, 12/21/2015 - 19:59 | 6950948 57-71
57-71's picture

Well, here is what interesting about production.

It all comes at a cost. The cost is maintenance.

In this case, the reason Russia can produce record production is by foregoing maintenance.

Production at the expense of maintenance has one consequence: drastically reduced production in the not too distant future usually from plant explosions which are very costly to repair.

Many plants around the world are running flat out right now to get a return through volume.

However it will backfire on those who don't have the cash to maintain their assets. And then watch the price  rebound, even if it is fleeting.

Mon, 12/21/2015 - 23:32 | 6951670 Seer
Seer's picture

I suspect that $$ for maintenance will come/is coming from cuts in staffing/workforce and R&D: watch the numbers on thes last two to see who is really hurting the most.  But as you note, this can't go on forever: but then again, who are we even trying to kid here?, perpetual growth on a finite planet isn't possible in the first place!

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