Saudi Arabia's Oil Strategy Is About More Than Destroying The US Shale Business

Business Insider ^ | DEC. 17, 2014 | SHANE FERRO

[thackney]

Saudi Arabia may not be aiming at the US in its hands-off policy toward falling oil prices. At a panel discussion Wednesday hosted by the Overseas Press Club and Control Risks (the latter a global risk consultancy), the speakers seemed skeptical of the idea that Saudi Arabia was refusing to prop up oil prices because it wanted to force American producers out of the market. (US shale basins are among the most expensive sources of oil to tap.)

There may be better political reasons for this move, with a reduction in American shale supply on the market just being the icing on the cake.

The more obvious losers in the current oil climate are Iran and Russia — the former of course being Saudi Arabia's archrival in the region, and the latter being no great friend of the Saudis' either.

The pinch to shale may just be "a wonderful byproduct to screwing the Iranians and the Russians," said Michael Moran, Control Risk's managing director for global risk analysis. Further, he said, doing nothing has actually been a really smart move by the Saudis. With every move further down in price, the actions of the Saudis become more closely watched, reinforcing the country's position as the world's oil superpower.

[thackney]

U.S. Field Production of Crude Oil
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus2&f=m

Average US oil production in thousand barrels per day:
2000 - 5,822
2001 - 5,801
2002 - 5,744
2003 - 5,649
2004 - 5,441
2005 - 5,181
2006 - 5,088
2007 - 5,077
2008 - 5,000
2009 - 5,350
2010 - 5,482
2011 - 5,645
2012 - 6,497
2013 - 7,442

[Democrat_media]

These are just some the taxes that cripple US oil industry. this is not counting the costly government regulations. If governmentS got out of the way of oil drillers then you and other Americans would have jobs. the same can be said for manufacturing other items.

IHS Global Insight reports that in 2010, independents operating onshore alone generated $38.4 billion in corporate taxes, severance taxes, and federal royalty payments.
The Tax Foundation finds that governments have collected $1.95 trillion in taxes from the oil and natural gas industry since 1981. The total amount of taxes collected is roughly 40% more than the industry’s combined profits. Tax collections exceeded company profits in 23 of the 27 years surveyed.
On top of direct industry taxes , consumers paid $1.1 trillion in excise and sales taxes on petroleum products from 1981 to 2008.
http://www.westernenergyalliance.org/knowledge-center/tax-royalty-revenue

[ChildOfThe60s]

With the new leadership in Congress, there will be pressure to open up development of more low cost production domestic oil fields whose development is currently blocked by the Obama Administration

New leadership? You mean Boner and McConnell? Yeah. Not gonna happen. This whole election was a farce and that will become more and more painfully evident in 2015. I'm going to change my registration to Independent next week. I'm done being associated with traitors and collaborators.

[bestintxas]

‘Domestic oil production has been the one positive thing keeping our economy alive and Americans are waking up to the fact that developing American oil resources is a key to good paying American jobs.’

there is a technical limit to the amount of oil resources that are potentially developable. Those darn rocks are just too tight to flow liquids save in a very few special circumstances(Bakken, Eagleford and isolated other places).

Now gas is another matter entirely. We lead the world in gas resources in place and can enjoy via fraccing many generations of bringing this abundant, God-given resource into our homes and for our power plants.

[rdcbn]

Your production numbers make a very good point.

Oil resources take around 5-10 years from the time the decision to develop is made until the oil starts flowing so there is time big lag involved

[rdcbn]

there is a technical limit to the amount of oil resources that are potentially developable. Those darn rocks are just too tight to flow liquids save in a very few special circumstances(Bakken, Eagleford and isolated other places).

Now gas is another matter entirely. We lead the world in gas resources in place and can enjoy via fraccing many generations of bringing this abundant, God-given resource into our homes and for our power plants.

---

Gas is definitely the future.

Lots of places across the country where keeping natural gas in the ground and out of drinking water has been a problem.

You are probably more knowledgeable than I am, but it was my impression that the fracking boom started in the natural gas sector and as producers improved the process, it began to be applied more and more to crude oil production.

Initial push of recent crude oil fracking was rejuvenation of existing well heads to increase out put and extend life, followed by new drilling in what were once marginal marginal areas. Field development expands as technology and know how improve enough to make the value proposition of continued development feasible

[woodbutcher1963]

It seems to me that we MAY be witnessing a bottom in crude oil futures right now in the $53-54/barrel range.

See chart pattern. We made a new low on Tuesday/Weds and then closed higher. We call this a key reversal.

http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html

I am not a crude oil futures expert, and I did not stay at a Holiday Inn Express last night.

[EQAndyBuzz]

“That’s what my crystal ball says. War in the Straits of Hormuz.”

Good thought, but won’t happen. Still have to consider China.

[thackney]

I am not a crude oil futures expert

- - - -

Me neither. I watched yesterdays impressive climb only to be wiped out at the end of the day.

Too many variables, and panic/hope drives too much short term movements, even on what seems unrelated news.

[woodbutcher1963]

Plus the open interest/volume traded has hit a high in the last couple days. There are some big players trading oil futures contracts the last few days. Covering shorts and potentially going long.

[woodbutcher1963]

I do not watch crude futures like you do. Is it normal to see volume trades out into December 2015, December 2016, and even a few trades out into December 2017, Dec 2019?

It seems like a pretty smart hedge at these levels. That is unless it goes to $40/barrel and stays there.

[SoothingDave]

Notice that no one is blaming those evil “speculators” for the price of oil falling.

[thackney]

I do not watch crude futures like you do. Is it normal to see volume trades out into December 2015, December 2016, and even a few trades out into December 2017, Dec 2019?

That is more detail than I try to follow. I gave up trying to trade futures a couple decades ago after doing okay in Natural Gas but realizing I was just lucky that year. Too many variables.

[Travis McGee]

Who has to consider China? Not an unknown mine layer.
That would be a perfect former KGB op.

[bestintxas]

“Gas is definitely the future.

Lots of places across the country where keeping natural gas in the ground and out of drinking water has been a problem.

You are probably more knowledgeable than I am, but it was my impression that the fracking boom started in the natural gas sector and as producers improved the process, it began to be applied more and more to crude oil production.

Initial push of recent crude oil fracking was rejuvenation of existing well heads to increase out put and extend life, followed by new drilling in what were once marginal marginal areas. Field development expands as technology and know how improve enough to make the value proposition of continued development feasible “

Natural gas or otherwise known as methane is prevalent in all underground water as it is soluble. So it is a natural phenomenon which we in the industry have always recognized.

Fraccing initiated in the 50’s when they used to lower nitroglycerin downhole in wells to stimulate formations. I for one would not wish to have been that poor soul who was dutied to lowering that into the wellbore.

The reason fraccing is accelerating is that the very best reservoirs for oil and gas have mostly been discovered and produced in this country. We are just very mature in our industry. Fortunately, God has provided an unbelievable amount of resources for us to tap. Unfortunately, most of this, A&M projects it as 10X as conventional, unconventional resources exists in poor quality rock that is insufficient to naturally flow at commercial rates unless stimulation enhances flow characteristics.

There is only so much enhancement that can be made in oil horizons, and the higher viscosity crude is much less capable of responding as well to stimulation as gas does.