Posted on 06/30/2012 6:08:53 PM PDT by neverdem
The tectonic plates of Middle East politics are shifting fast. Egypt’s Arab spring may have run into the sand of anti-democratic Islamism, but the days when oil-rich Arab sheikhs colluded to hold Western economies to ransom will soon end. Massive shale oil and gas discoveries across the West, Israel’s rising status as a Middle East energy powerhouse and a deepening internal rift over strategic policy are all colluding to hasten OPEC’s demise.
In June, Kuwaiti oil minister Hani Hussein’s commented, “Oil from the Middle East will always find a home. And we have to see more research to get a better idea about the impact of shale oil development.” It’s a remark that sums up OPEC’s complacency in the face of the sheer scale of the global shale gas, and increasingly, shale oil revolution. Take the impact of OPEC’s exports to the United States. In 2011 20 percent of all OPEC exports went to the U.S. But America’s shale oil developments, particularly the development of the vast resource in the Green River Formation, could well as ConocoPhilips CEO Ryan Lance told OPEC in June, make North America, “self-sufficient in oil (as well as gas) by 2025”. It’s easy to see why. According to the United States Geological Survey (USGS), the Green River Formation in Colorado and Utah contains around 3 trillion (3,000 billion) barrels of oil, at least half of which will be recoverable. Given that the US consumes around 7 billion barrels a year ... well, you can do the math. Based on current industry production plans, energy consultants IHS CERA estimate that US unconventional oil production could rise from its current half a million barrels per day to 3 million barrels per day by 2020. As Daniel Yergin, chairman of IHS CERA, points out, that amounts to adding “another Venezuela or Kuwait by 2020”.
In the meanwhile, the Bakken shale formation in North Dakota and Montana continues to hold the spotlight for its role in the revival in US oil production. Between 2010 and 2011 production from the Bakken field doubled from 260 thousand barrels per day (bpd) to 445 thousand bpd. But as world class as the Bakken Formation shale yield is proving it is estimated that Russia’s Bazhenov Formation in Western Siberia is around 80 times larger still. Indeed the huge shale wealth – oil and gas – of Russia and China generally, neither of which are OPEC members, needs to be factored into the changing geopolitics affecting the Middle East’s energy production and its significance.
Then there are the shale developments threatening to turn Israel, the regular whipping boy for OPEC’s Arab leaders, into a truly global energy superpower. Israel’s recent major offshore discoveries of gas – amounting to a huge 30 trillion cubic feet – could well be matched by the discovery of equally huge shale oil resources in the Valley of Elah’s Shefla Basin (where David slew Goliath). The Basin could hold what one commentator described as the “mother lode of fossil fuels”. According to Israel Energy Initiatives (IEI), just one of the fields currently being drilled is estimated to hold around 500 million barrels of oil. That’s enough for Israel’s domestic purposes for five years. But IEI geologists maintain that Israel’s total shale deposits could produce as much as 250 billion barrels of crude. And that would catapult Israel into third place behind the US and China – and on a par with Saudi Arabia. And with an Islamist-dominated government threatening potential gas supplies from Egypt, Israel is not hanging around to see if its southern gas supplies are affected. At the end of June, Israeli and Canadian oil ministers signed a new energy deal. It will see Israel, with its reputation for technical innovation, aiding Canada’s oilsands development. Canada will reciprocate by providing Israel with its expertise in shale extraction.
And OPEC’s problems don’t end there.
The traditional Saudi dominance of OPEC is under threat as an emerging alliance of oil price ‘hawks’, including Iran, (and the increasingly Tehran-influenced) Iraq and Algeria oppose Saudi policies. While the Saudis insist on maintaining production of around 10 million barrels per day, their highest level in decades, Tehran wants to slow production and boost prices as sanctions over its nuclear developments bite. But while the differing priorities of the two factions augur a new internal power struggle, the new global energy realities are already having their impact whether OPEC members like to admit it or not.
Writing in the Financial Times about the impact of shale oil and gas across the West, US Treasury Deputy Secretary, Roger Altman, recently noted, “These discoveries will reduce price and supply volatility. They will also reset and profoundly improve international relations.” Possibly. But just as satisfyingly, Altman continues, “The days of OPEC, the oil producers’ cartel, are numbered. Unstable oil states, from Iraq to Venezuela, will be marginalized.”
The shale gale is blowing the winds of change through the global energy market. But it is also fast-eroding the ability of cartel run by the world’s leading despots where power is regularly used to hold the West and Israel to ransom.
That’s OPEC, by the way, and not (on this occasion) the United Nations.
I live about 15 miles from Marcellus. Central NY and the southern tier sit atop trillions of cubic feet of NG. Yet the anti-frackers have a huge head start with local governments. Many locales have already passed fracking bans and they are agitating for more. It would be fair game to ask these folks if their intentions are to see us remain dependent on foreign energy supplies, no?
Oh no. I don’t (totally agree)
Saudi Arabia wants stability over philosophy and practices it quietly and with Billions of Dollars in their Treasury.
“We” have sites around the entire country even if they aren’t officially (Military), they are Military related.
I know. I worked those sites in the mid 80’s and I have googled them and they have not only become more such sites but also bigger (slightly) but also more independent.
Arial photos (space based via “google” and others) show such evidence if you know what you are looking at.
That was just one of my areas of operation in Saudi as well as in the USAF.
Probably what they will do is flood the market with cheap oil like they did in the 80’s and that will make drilling for the shale oil to expensive. I would like to see a tariff on imported oil if they do that to encourage US production
What - didn’t you hear that Obama negotiated with the Saudis to lower the price of crude. Of course he did it for selfish reasons (he wants to get reelected), but a month or so ago he got the crude flowing at considerably lower rates.
Of course the main stream media made little note of that fact.
The goal is to get gas just around $1.99 per gal. by October.
This way he can go on all the lamestream stations and claim HE and HE alone solved the gas “crisis”
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Thanks for the ping!
It would be fair game to ask them why they are trying to destroy American small business and the private sector, and why we shouldn't simply refer to them as communists.
I think at the right time we should release ALL the oil from the Strategic Petroleum Reserve. That would shock the markets big time. We won’t be needing it anymore and it did serve it’s purpose.
I love the shot at the UN in the close.
Thanks neverdem. If you thought the OPEC-financed war on US energy production / CO2 / industry was bad, just wait until Israel has enough hydrocarbon resources to tell everyone to go kiss its ass.
Other than Egypt the average American wouldn’t know what or where the ME was but for their aggressive exploitation of petroleum. Islam is incompatible with republican values or modernity and its rise in the ME means more poverty for the people there.
I disagree with the author’s conclusion that lower oil prices and broader resource allocation will bring peace. The ME will simply export the rage natural to radical Islam.
Like King Canute, the Islamists stand before the benefits of the modern world and wish them to turn back. Unlike Canute, they’re not engaging in a rhetorical act, they really mean it.
I suggested that to my Congressman in 1986, but Congress, in its usual wisdom decided a tax at the pump was better. I still think a tariff to support a base price to keep domestic production and exploration going until we are more self-sufficient is a good idea, phased out if the price of oil goes higher.
Why not use up their cheap oil first and then the US can use or sell her oil? Saudi Arabia has been a key player in the stability of the US dollar and its use as the world's reserve currency. If US casts off too many long time allies the world will turn darker for her.
Better to keep an ace in the hole...production facilities aren’t exactly hardened targets.
Precisely. He knows that the price of gas determines the prices and productivity of many if not ALL industries (to varying degrees but ALL positive).
Oil is dropping like a rock because the world economy is tanking. Baraq may have a Pyrrhic victory.
I want to know why the GOP or these Shale recovery CEOs are not on every day talking about this and the JOBS actually created. Unlike the President’s created or saved jobs,these actually lower the unemployment rate. This is almost irresponsible and absurd. It is no wonder we lose the messaging war.
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