Posted on 05/01/2018 12:51:15 PM PDT by Kaslin
I have argued many times on these pages and elsewhere that the shale oil and gas revolution is the story of the decade. Since 2007 U.S. oil and gas output has risen by about 75 percent, and the renaissance is still in its infancy stages.
This year the surge in domestic energy production has further accelerated, in part due to higher world prices for oil (approaching $70 a barrel) and to massive drilling operations in rich oil patches, such as the Permian Basin in Texas and the Bakken shale in North Dakota.
The Energy Information Administration reports that the U.S. could surpass Saudi Arabia in oil and gas by the end of the year. With massive oil and gas shale reserves, we could be No. 1 in the world before the end of the decade.
The Wall Street Journal confirms that U.S. oil production "is expected this year to surpass Saudi Arabia's" and that we will rival Russia for No. 1 in the world. American production will rise to almost 11 million barrels a day, the most ever in American history. Doesn't it seem like yesterday when the left was running around shrieking about "peak oil"? More like peak idiocy.
Last week Reuters argued that the American shale boom should be called "Donald Trump's Revenge." The story reported that U.S. oil "now floods Europe at the expense of OPEC and Russia." Couldn't have happened to a couple of nicer guys. America is now selling more than a half-million barrels a day, thanks in no small part to the end of the oil and gas export ban in 2016.
What all of this means is that we are getting very close to the day when America returns to becoming a net exporter of oil. This would reduce our trade deficit by more than $200 billion a year. Saudi Arabia is still a major player in the market that can move the world price by turning on and off their spigots. The recent spike in gas prices to more than $3 a gallon is due to Russia and Saudi Arabia's production cuts. But the OPEC nations can no longer hold the world hostage, as they did in the 1970s when we had gasoline lines and price controls and had to bow to the Saudi oil sheiks.
What a difference a president makes. Trump has been all in on encouraging fossil fuel production. He's freeing up federal lands in places such as Alaska for drilling, allowing permits for new pipelines and relaxing some of the anti-fracking regulations that were enacted in the Obama years. As Harold Hamm, the CEO of Continental Energy, which owns much of the Bakken shale in North Dakota, recently told me: "It makes a big difference when you have a president who actually likes your industry."
One idea that is floating around on Capitol Hill now is to use the royalties and lease payments from drilling on federal lands to reduce the trillion-dollar annual budget deficit. This is essentially free money to Uncle Sam, and by some estimates these payments could exceed $1 trillion over the next decade. Why not?
Only a few years ago, Barack Obama told the nation that we "consume 20 percent of the world's oil, (but) we only have 2 percent of the world's oil reserves." He was only off by well more than an order of magnitude on our nation's share of world supplies.
Trump has always had a much more optimistic and realistic worldview. He says he wants to "make America energy dominant," and after a little more than a year of his presidency, we are on our way.
We are in the process of switching over to the Summer blend. The additives, etc. are more expensive.
This is at least one cause.
Analysts are calling for higher prices going forward compared to past years.
“Moreover, what good does it do to export oil if it keeps the supply down and the prices up in the US?”
It doesn’t “keep the supply down”. Just the opposite.
The price of oil has little to do with supply/demand and much more to do with the supply/demand and value of the dollar...
... the dollar has been tanking vs. the Euro since late 2016.
THAT’S why oil prices are “up”.
(real oil prices don’t change that much, but the value of the dollar does.)
If tomorrow we went back on the gold standard, oil prices would tank.
“So with this surge of shale products, why are our gas prices surging?”
The dollar is sinking.
“Maybe the U.S. should now be chairman of OPEC.”
We should put tariffs on all OPEC oil.
What would a sinking dollar have to do with domestic gas prices. Imported oil, yes. But we’re in the grand scheme of things a net exporter.
“What would a sinking dollar have to do with domestic gas prices.”
Kind of a silly question. Gas comes from oil, oil prices are global.
“Imported oil, yes. But we’re in the grand scheme of things a net exporter.”
No. We are a net exporter of ‘petroleum products’ which includes NatGas, (which has little to do with US gasoline prices), not crude oil.
I thought so too, but (former) FReeper thackney (sp?) modified my thinking. It seems that Houston’s refineries are optimized for Saudi oil - hence, those refineries are of more economic utility processing Saudi oil than they are when processing shale oil. That makes discouraging import of Saudi oil somewhat of a foot-shooting exercise.It is perhaps more clear that we should drain the Strategic Petroleum Reserve (since it’s a lot less “strategic” now), selling it now at what we presume is a high price. In expectation of buying it back at a lower one as “Drill, Baby, Drill” works its magic. In fact, the government might do well to use the money to buy oil futures, guaranteeing US producers a profitable market for oil production at the start of the oil price crash we want them to induce by “over” production in reaction to the price spike.
“I thought so too, but (former) FReeper thackney (sp?) modified my thinking. It seems that Houston’s refineries are optimized for Saudi oil - hence, those refineries are of more economic utility processing Saudi oil than they are when processing shale oil. That makes discouraging import of Saudi oil somewhat of a foot-shooting exercise.”
Interesting, yes I think Saudi oil is very high quality/easy to refine, compared to shale.
In terms of putting tariffs on OPEC oil, for me, it’s more a political than economical issue. We’re sending our wealth “over there” and “over there” is a bad place with bad people who want to destroy us. So let’s build refineries (we need more) that can handle our domestic needs and keep the wealth here.
“It is perhaps more clear that we should drain the Strategic Petroleum Reserve (since it’s a lot less “strategic” now), selling it now at what we presume is a high price. In expectation of buying it back at a lower one as “Drill, Baby, Drill” works its magic. In fact, the government might do well to use the money to buy oil futures, guaranteeing US producers a profitable market for oil production at the start of the oil price crash we want them to induce by “over” production in reaction to the price spike. “
Good idea, I doubt the gov is smart enough to act on it. And I think you’re right, oil prices are destined to fall and stay low, so long as we’re producing and growing production.
Right now, I think Soros is doing everything he can to crash the dollar to make gas prices rise here in the US, to hurt Trump.
Although I admit, that’s pure speculation on my part.
I have the opposite impression - that shale oil is very light (has to be to squeeze thru small pores/cracks in the shale) and probably is easier to refine than the Saudi product. If I’m right in that assumption, Houston refineries could easily refine shale oil but it would not exploit the full capability of those refineries.If that’s the way of it, Houston can outbid other places for Saudi oil and still make a profit selling the refined product from that oil cheaper than it could sell product from shale oil because the shale oil would command a higher price.
Hence - again assuming that my impression is right - impeding the import of Saudi crude to Houston would put upward pressure on US refined product prices. It seems ironic that economic rationality could favor importing Saudi oil and exporting shale oil at the same time - but there it is. Under the assumed conditions, the worst thing to do would be to artificially inhibit export of US oil, because sending that oil to its highest use (in or out of the US) is our (only) lever to push down the world price for oil.
And any downward pressure on the world price of oil helps the US and its allies, and hurts Russia and OPEC.
America is on the way to energy dominance
https://www.washingtontimes.com/news/2018/apr/29/goodbye-opec/
Did you read the article?
Good luck.
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