President Obama goes to Alaska to put before the members of the Arctic Council, a pact that commits the member nations to fight global warming to save the Arctic. But China and India (holders of “permanent observer” status) wont sign it. They cite the need to expand their economies, wanting to approach the economic levels of the developed nations. Nothing new here. Indeed, Obama signed a pact with China to allow China to continue to increase their CO2 emission until 2030. In that same pact, he committed the USA to reducing its emissions by 26%-28% from 2005 levels by 2025. This pact signed last year, received high praise from the fawning mainstream media.
OPEC faces serious challenges. Bank of America is quoted as saying that OPEC is “effectively dissolved”. And the author of the Telegraph posting “Saudi Arabia may go broke before the US oil industry buckles” reports “The cartel might as well shut down its offices in Vienna to save money.”
Well, is the OPEC collapse imminent? Probably not, but the major nation in OPEC, Saudi Arabia, appears to be in trouble and quoting from the Telegraph posting:
” It is too late for OPEC to stop the shale revolution. The cartel faces the prospect of surging US output whenever oil prices rise. If the oil futures market is correct, Saudi Arabia will start running into trouble within two years. It will be in existential crisis by the end of the decade.
The contract price of US crude oil for delivery in December 2020 is currently $62.05, implying a drastic change in the economic landscape for the Middle East and the petro-rentier** states.
This site has written before (click here) about the crippling of the US petroleum producers by not permitting them to sell crude oil outside of the US. The posting warned of continuing loss of American jobs and resulting in higher crude oil prices. Now the chairman and CEO of Continental Resources (Harold Hamm) tells why the ban on US crude oil sales must be lifted. In a WSJ online posting, he says this:
” The situation is urgent, as OPEC’s recent predatory pricing tactics are also hurting America and prematurely ending the boom in U.S. oil production due to hydraulic fracturing, known as fracking, and horizontal drilling. The U.S. rig count has dropped by more than 50% since Thanksgiving, according to the oilfield services company Baker Hughes. More than 126,000 oil and gas workers have been laid off, and job losses are expected to double if the export ban is not lifted.”
OPEC meets 5 June in Geneva to discuss the cartel’s strategy for the coming years. Reuters News Agency has obtained the draft report of OPEC’s long-term strategy. This report’s content will be a key discussion at the meeting. The report suggests that the global oil glut could persist for the next two years. In general that seems like pretty good news for the world and specifically for U.S. if not for the OPEC cartel and Russia.
The drop in oil prices that began late last year did not shut down the fracking wells that were already producing as the wells continued to operate to cover their variable costs. It did cause drill rigs to be cut every week for 23 weeks. Reuters reports that only one rig was cut the week of 18 May. Experts seem to agree that fracking can be profitable at a West Texas Intermediate (WTI) price around $60/barrel. That price level should bring on more fracking operations. Today’s price is $59.89. (changes often.)
Some of the Texas and North Dakota fracking oil wells were thought to not be profitable at the low crude oil prices that Saudi Arabia had engineered. But most of them have weathered the storm. Drilling has slowed down however. World wide, except for the Middle East, rig count is down.
First the Keystone XL pipeline (KXL) was not authorized by President Obama because he and the Governor of Nebraska were worried about pipeline failure. I wonder if they considered how many pipelines are in operation today and how few problems they have caused. Over 2.4 millions of miles of underground pipelines in the U.S. carry natural gas and liquid petroleum. The majority of those miles are carrying natural gas; however, over 180,000 miles of pipeline move liquid petroleum. Below are two maps showing the major routes of these pipelines:
President Obama has made it nearly impossible to access off-shore and Federal Lands for oil and natural gas development. See here and here. He campaigned in 2012 (He always is campaigning— he is much better at that than governing) saying that “Drill Baby Drill” was an empty slogan which would have no effect on crude oil prices. See the following Fox News report:
Back when gas topped $4 a gallon, Republicans chanted “drill, baby, drill” at rallies across the country — arguing more domestic drilling would increase supplies, reduce dependence on foreign oil and boost the U.S. economy.