Posted on 01/16/2018 11:46:58 AM PST by BeauBo
“INVESTIGATE Cuomo/Murphy Russian COLLUSION!!!”
I heard that some anti-fracking activists were recently required to register as foreign agents, when their Russian funding was revealed.
Hopefully the technology will continue to improve. It is a pity that Mexico doesn’t have the rule of law; they could benefit so much from this boom.
It won’t be long until the Democrats start demonizing “big oil” and call for windfall profit taxes. They will not let any US business be successful and they won’t allow gas prices to decline in any significant way. They are also a bunch of eco-Nazis who want us to use solar, ethanol, and wind, no matter how inefficient they are (and bad for the environment).
All the while, oil prices continue to climb...yeah, go figure.
“All the while, oil prices continue to climb...yeah, go figure.”
Globally, supply has been restrained in a big deal between Russia and OPEC, designed to raise prices. Additionally, major producer Venezuela has been having a collapse in production.
Also, global demand has improved pretty strongly, as all 45 of the world’s largest economies are expanding at the same time.
The growth in US production is the biggest long term game changer in the oil and gas markets. We are adding more capacity than the rest of the world combined. OPEC’s relative market share (and power to control the market) has been dropping.
The US “Shale Band” for oil prices ($45-65) is likely the new norm in the mid-term for global prices. Something big might drive prices $20 outside the band for a few months, but its unlikely that anything could keep it outside that band for years.
Finally, some good news.
New wells can be drilled in as little as a week, he said. A few years ago, it could take up to a month.
The next phase of shale output growth depends on techniques to squeeze more oil from each well. Companies are now putting sensors on drill bits to more precisely access oil deposits, using artificial intelligence and remote operators to get the most out of equipment and trained engineers.
As expanded investments push more producers to add wells in less productive regions, technology will help make those plays more profitable, said Kate Richard, chief executive of Warwick Energy Group, which owns interests in more than 5,000 US wells.
In an interview, she estimated about a third of the money from private equity investments in shale will be used to wring more oil from overlooked regions.
Higher prices – up about $10 a barrel in the last two months – also may encourage the industry to work through a backlog of some 7,300 drilled-but-uncompleted shale wells that have built up because of crew and equipment shortages.
Companies are now offering signing bonuses to attract workers to West Texas. One oil company flies workers to Midland from Houston weekly to fill a local labour void, he said. “It was an employer’s market,” he said. “Now it’s more of a job seeker’s market.”
The question may be: How long can the Saudis, Russkis, etc., hold out while limiting their production, as they have been?
Oil prices are up quite a bit since early 2016, and higher than (basically) 1986-2003. Here’s a good, inflation adjusted chart:
http://www.macrotrends.net/1369/crude-oil-price-history-chart
The questions are: Can US (and friends) increases more than make up for OPEC and friends’ production cuts and global demand increases? And, is overall INCOME to the OPEC and friends nations sufficient for them to hold out with production cuts? I’d sure like to see 50 year petro revenue charts for Saudi, Iran, Russia, etc.
There's been a recent renewal of suspicion that the Saudis have been overstating their proven reserves. I don't the suspicions are true, but as the former Oil Minister (Honorary) Sheikh Yamani stated years ago in interview, "the stone age didn't end because they ran out of stones." That NEOM city proposal relies virtually entirely on photovoltaic energy, and all labor in the Kingdom will be performed by robots. They suddenly love robots, probably due to their population-wide hatred of work.
Yet we still pay $2.25/gallon. Why?
“How long can the Saudis, Russkis, etc., hold out while limiting their production”
The rise in price more than made up for the lost volume since they agreed to cut - but - total revenue is still below what it was before the US shale production started driving global prices. So while the Saudi and Russian budgets are better off than a year or two ago, both are still below their peaks, and under serious pressure (as are other producers).
The total revenue that they can manipulate by throttling their production (and increase prices), is still less than they need to thrive. They can still tighten their belts and juggle their requirements, but their ambitions are constrained. They could hold out indefinitely, but it will hurt them. Historically, producers break ranks and produce based on their own interests on a frequent basis, so the whole coalition is inherently unstable.
“Can US (and friends) increases more than make up for OPEC and friends’ production cuts and global demand increases?”
At these rates, yes, but not definitely. US production increases like the ones we have have been seeing (over a million b/d, per year) are, and will likely, swamp the ability of the Saudis and Russians (and eight other non-OPEC countries also currently agreeing to restrain their production) to cut back production enough, without choking themselves (or having cheaters break ranks, and smuggle extra oil).
In total, OPEC produces around 33 million b/d, and Russia just under 11. OPEC agreed to cut 1.2 million b/d, and the total cut was 1.8, with Russia and the others (4-5% cut, but magnified by producers like Venezuela, who couldn’t pump their quotas). So a tough to swallow cut by most of the world’s other producers, was filled in 1-2 years by the growth in the USA.
If US growth continues at such rates (likely, as long as prices stay within the shale band or higher), it will constantly strain the margin for restraint of the rest of the world’s producers (i.e. their ability to control the market). So roughly speaking, the USA ate about 5% of the Global market in under two years. Most of that comes straight out of Saudi Arabia and Russia though, so it is more than 5% of their markets. Ten years like that would inflict serious adjustments on the Saudis and Russians who are both basically one-crop economies, overwhelmingly dependent on oil revenue. The argument that the collapse of oil prices is what brought down the Soviet Union is a strong one.
The main wildcard is global demand. It is possible for the Global economy to boom enough to drive prices above the “Shale Band” ($45-65), and allow everyone to pump full throttle for a while (possibly a few years). It looks like demand is on a strong trend now, and the Russians have told OPEC that they will start increasing production this year, if prices get hot.
The net of all factors, is that US production increases are on track to absorb much of the growth during rises in demand, and to keep prices gravitating back to a natural market price in the shale band (based on real supply), and effectively deny OPEC (even with Russian complicity) the ability to artificially drive prices higher (based on artificially constrained supply). So $45-65 per barrel is the new normal, a bit more when the global economy is hot.
“Yet we still pay $2.25/gallon. Why?”
It’s not $4/gal anymore. Current prices at the pump are about the new baseline, based on the “Shale Band” for oil prices ($45-65).
The big changes globally are a lot more oil revenue and jobs in the USA, rather than Saudi Arabia or Russia, and the loss of OPEC’s ability to control oil prices, or use it as a weapon against the USA.
“Yet we still pay $2.25/gallon. Why?”
It’s not $4/gal anymore. Current prices at the pump are about the new baseline, based on the “Shale Band” for oil prices ($45-65).
The big changes globally are a lot more oil revenue and jobs in the USA, rather than Saudi Arabia or Russia, and the loss of OPEC’s ability to control oil prices, or use it as a weapon against the USA.
Most of the price of gasoline is taxes.
Gas prices also reflect the increased economic activity as the economy gets stronger.
18% is Federal tax and Virginia tax is 16 cents per gallon. That is not MOST, comes out to about 25%.
Shows how much the Rats have to do to increase Virginia taxes. There are also City and County taxes in many areas. The state tax rate for Pennsylvania is 58.2 cents per gallon plus just the federal excise tax of 18.4 is 76.6 cpg.
Without petroleum imports, of course the price would be far higher.
Shows how much the Rats have to do to increase Virginia taxes. There are also City and County taxes in many areas. The state tax rate for Pennsylvania is 58.2 cents per gallon plus just the federal excise tax of 18.4 is 76.6 cpg.
Without petroleum imports, of course the price would be far higher.
With a tariff on imported oil the domestic search for and production of oil would be on steroids.
Taxes including tariffs slow the economy so the economy would not have grown as large and would have slowed exploration or it would have been offset against any tariff gains.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.