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In late Summer 2014 I saw a fall in oil prices coming. Early 2014 I was signing supply orders for spot shipments of Bakken Crude (NDS) to refineries shipped via Burlington Northern. I kept trying for a longer term contract like 18 to 36 months at market plus logistics and the purchasing managers said to wait and see. By the time September 2014 came the purchasing managers were saying they were flooded with offers. Terminal storage had filled up, pipeline construction was being rushed and pipeline direction routing was being planned and rushed.

Canadian crude from Alberta was also available via the Trans Mountain Kinder Morgan operated pipeline to Vancouver and then by oil barge to the Pacific Northwest refineries. And the Canadian crude was heavily discounted from market. However, the Canadian dollar reached parity with the US dollar and their oil became less competitive.

Bottomline was there was oil coming from everywhere. What started 5 to 6 years ago as a group of hydraulic fracturing directional drilling companies bloomed into a swarm numbering tens of thousands of oil rigs dotting the countryside. Labor was needed and if someone one needed a job all they needed to do was show up and demonstrate they could see lightning and hear thunder and they got the job. Truck drivers with the right class commercial license could make $150,000 a year easy. Man camps were established where workers could eat steak and lobster everyday and all other kinds of expensive buffets. The region was not a pretty region to live in but the pay was awesome and construction was booming.

I also saw in early 2015 Saudi Prince Alwaleed go apoplectic over the US domestic oil production surge. He made statements on TV and in the press that the US oil production surge was the greatest threat to the Saudi Kingdom and to OPEC. So I saw a price war coming because the Saudis are committed to destroying the US domestic oil production.

And I had Arabs and Nigerians (Nigeria sells a lot of light crude) who were residing inside the US calling me asking to purchase Bakken crude to resell to US refineries where they had purchase orders. But I knew they were just fishing for information (spying).

It costs $5 to $6 to pump oil out of the ground in Saudi Arabia. It costs on average $35 to pump it in the US.

So I’ve advocated a ‘floor’ of protected oil pricing at around $35. It’s a conservative position because it protects American jobs and strengthens national security. I say ‘floor’ and not a tax. If the Saudi’s want to bring crude to US refineries as they do now, then they need to sell it at $35+, otherwise the contracts fall into the hands of domestic producers. We all benefit from $35 oil. Any lower and it destroys the golden goose we have working for us now.

The view that supports no government intervention at all is the libertarian view and it is retarded. It is what the Saudis want. It enables them to destroy American production companies and take back market share where they control pricing.

A ‘floor’ is preferable to a tax because taxes grow and are near impossible to get rid of. A floor tells foreign producers that US oil industry is based on $35 pricing to protect domestic production.

As technology improves, the floor can be lowered but in the meantime the Saudis can look at US Markets as a bygone era for them.

Ted Cruz is right. We should lift the ban on exporting domestic crude because there is plenty to go around without pressuring prices and we would keep a vital US industry growing that employs Americans with really good paying jobs.