Mr. Yergin almost sounds giddy at the prospect of a world awash in oil. May we not all drown in it and its short sighted vision.
7
To discuss oil and not discuss its Impact on the planet hides it's real cost. If any evidence were needed that economics is bogus science the refusal of most economists to understand that economic activity always has an environmental impact. Taking the tar sands as an example the cost of repairing the land will be monumental - a costso high that if actually added to the cost of extraction would make the entire enterprise unprofitable. The cost of climate change to the planet is incalculable. It is a costthatwill be paid not only in dollars but in lives.
14
The reality is this: The Saudis became panicked with our shale exploration, fracking, solar and wind endeavors, deep ocean drilling, the Keystone, all of which were economically viable when oil was over $100 a barrel. We were on our way to being able to fulfill local demand and being independent of their oil. What to do?
Simple. Flood the market with cheap oil, drive prices down to below $50 a barrel, and all the work mentioned will, for the most part, cease because it's not worthwhile economically.
Like every other supply-demand scenario, this has nothing whatsoever to do with "free markets". There is no such thing as a free market. All markets are rigged by the monopolists and big players to their advantage, including the oil market. The Saudis have an almost endless supply of oil, and they will keep flooding the market with it to prevent us from becoming independent of them.
Simple. Flood the market with cheap oil, drive prices down to below $50 a barrel, and all the work mentioned will, for the most part, cease because it's not worthwhile economically.
Like every other supply-demand scenario, this has nothing whatsoever to do with "free markets". There is no such thing as a free market. All markets are rigged by the monopolists and big players to their advantage, including the oil market. The Saudis have an almost endless supply of oil, and they will keep flooding the market with it to prevent us from becoming independent of them.
10
The Saudis know exactly what they are doing and they just took the world’s investment markets for a ride. What kind of investments would you make if you knew in advance that you could reduce the price for Brent crude oil by 50%? What if you knew how long you could keep those new prices in effect? If you had, say, $700 billion in reserves, how would you invest it before you lowered the price?
3
These OPEC now need to give back exorbitant amount of money like $100+/ barrel they have taking last few years. Here in USA we need to drill more oil. Because after few years/ decades fossil fuel will be obsolete when with advanced science and technology alternative to petroleum will emerge. This will result all the gas stations becoming Blockbuster Video stores as we see it now. Closing one after another. What will happen to OPEC?
Maybe the frackers will use their oil wealth to buy up and privatize water resources, which will probably dramatically increase in value, as fracking reduces the supply of water.
11
There's not much to argue with in the broad narrative Yergin puts forward, but I do feel as if his suggestion that America is "the world's new swing producer" is an unfortunate conflation of that term. Saudi Arabia, the historical "swing producer," has for decades served in that role through executive action that has been voluntary, decisive, deliberative and, at least within the context of OPEC, collaborative. That is quite a contrast with the present-day American juggernaut, whose 'swing' capacity is effect, not cause, and who operates involuntarily and without executive or collective agency.
5
"Environmentalists" would do well to read everything Daniel Yergin writes about energy form hydrocarbons. Its economics, and not regulation, that drives how much oil is produced. Instead of fighting its extraction, which is going to occur solace in the world so long as there is a buyer, regulate drilling, transportation and use so it is efficient, safe, and clean. The example of the pipeline in Nebraska is just the latest example of losing the battle and the war— that oil is going to be extracted and burned, pipeline or no pipeline. By leveraging opposition to the pipeline to make everything associated with that project as safe and clean as possible, there can be a good result. The all or nothing attitude though is a dead end. I have been involved in such battles in my area, and we learned that the hard way.
3
Stuart Wilder: This pipeline shouldn't get a single cent of taxpayer money. No investment tax credit, no accelerated depreciation, and no domestic manufacturing allowance. If the investors want to waste their own money on a boondoggle, let them foot the bill. Taxpayers shouldn't fund any part of it.
Also read my comments below: US customers have been overcharged $2 trillion since 2005 when oil prices climbed well over average global production cost of $30-35 in the last decade. Taxpayers have subsidized oil producers at the same time. At this point in time, both customers and taxpayers should get a refund.
Taxpayers should get back all the tax subsidies I just listed for any oil production projects since 2005, as well as the tax subsidies provided by the depletion allowance. Congress and Obama should instruct the IRS to have producers retroactively redo the tax returns eliminating these tax breaks. Producers didn't need taxpayer funds to build these projects; they already overcharged the customers.
Use the money to ramp oil substitutes and green energy sources, shifting the investment into vehicle manufacturers, biofuel producers, energy efficiency systems, and transportation infrastructure. Permanently reduce and shrink demand over time to cap oil prices, and save customers money.
"Drill, Baby, Drill!" turned out to be "Shill, Baby, Shill!".
Also read my comments below: US customers have been overcharged $2 trillion since 2005 when oil prices climbed well over average global production cost of $30-35 in the last decade. Taxpayers have subsidized oil producers at the same time. At this point in time, both customers and taxpayers should get a refund.
Taxpayers should get back all the tax subsidies I just listed for any oil production projects since 2005, as well as the tax subsidies provided by the depletion allowance. Congress and Obama should instruct the IRS to have producers retroactively redo the tax returns eliminating these tax breaks. Producers didn't need taxpayer funds to build these projects; they already overcharged the customers.
Use the money to ramp oil substitutes and green energy sources, shifting the investment into vehicle manufacturers, biofuel producers, energy efficiency systems, and transportation infrastructure. Permanently reduce and shrink demand over time to cap oil prices, and save customers money.
"Drill, Baby, Drill!" turned out to be "Shill, Baby, Shill!".
8
It is not a given that the oil in the tar sands will be extracted and burned. If even half of it is burned there may not be a civilization left to use the remaining half. If we continue down the path we are on we are in for a planetary upheaval that will make WWII look like a picnic in the park.
Many people seem to think that the only consequence of climate change will be no snow tires in winter. In fact the consequences are in large part unknowable. The death of th ocean may very well mean the end of life on land. We are rolling the dice in a game that's stacked against us.
Many people seem to think that the only consequence of climate change will be no snow tires in winter. In fact the consequences are in large part unknowable. The death of th ocean may very well mean the end of life on land. We are rolling the dice in a game that's stacked against us.
7
Missing the connection between reduced oil demand (due to substitution and efficiency improvement) and lower crude oil prices is the largest engineering economics mistake I have ever encountered. (And I have decades of experience in the oil and energy industry.)
In August 2013, I submitted this suggestion for an OpEd to the NYTimes:
https://drive.google.com/file/d/0B6HOZyGCkCB9bTNOWmNpSno3aTQ/view?usp=sh...
The draft OpEd included a link to one of these Global Oil Market Supply/Demand Curves:
https://docs.google.com/presentation/d/1hCOxiHT14IartG6tbjsI2VGfO5vp9MQG...
The latest price collapse on less than a two percent change in supply-demand balance, again demonstrates the shape of the hockey stick supply curve; and the incredibly high rationing premium (over $1000 per barrel of incremental demand).
Reducing demand tby 4-5 million BPD below global production capability, would effectively move the demand curve out of the "Red Zone" where producers can control oil prices.
In August 2013, I submitted this suggestion for an OpEd to the NYTimes:
https://drive.google.com/file/d/0B6HOZyGCkCB9bTNOWmNpSno3aTQ/view?usp=sh...
The draft OpEd included a link to one of these Global Oil Market Supply/Demand Curves:
https://docs.google.com/presentation/d/1hCOxiHT14IartG6tbjsI2VGfO5vp9MQG...
The latest price collapse on less than a two percent change in supply-demand balance, again demonstrates the shape of the hockey stick supply curve; and the incredibly high rationing premium (over $1000 per barrel of incremental demand).
Reducing demand tby 4-5 million BPD below global production capability, would effectively move the demand curve out of the "Red Zone" where producers can control oil prices.
8
Thanks for your comments and links. Interesting reading.
For this very reason we find ourselves at the whim of a foreign energy producer. Today there are more people working in the solar industry then the coal industry and there are far more jobs available by turning toward renewable energy and efficiency then tapping all the oil and gas in every shale play. But most germane to this article is the fact that the sooner we move to Renewable Energy, (wind water and sunlight) which can be harvested here in the USA in plentitude, the less control these foreign fossil fuel nations will have on our markets and international geopolitics. You want to stop terror? Stop propping up oil.
We are in the throes of an energy revolution. One that will not toast the planet. Yergin leaves out the specter of Climate Change. The inconvenient truth that he so blithely leaves out of this discussion. He leaves out what pollution created by fossil fuels cost us and the enormous health care costs. He leaves out the remediation and degradation for water and air.
You want energy independence ? True independence that does not have huge corporations both foreign and domestic dictating on geopolitics and global economies? Then start today in shifting to Renewable Energy. We are all playing out our parts in a play that was written long ago by a handful of people in control of our energy resources. Whoever controls your energy controls your future. Why not make it all of us at this point instead of a few of them?
We are in the throes of an energy revolution. One that will not toast the planet. Yergin leaves out the specter of Climate Change. The inconvenient truth that he so blithely leaves out of this discussion. He leaves out what pollution created by fossil fuels cost us and the enormous health care costs. He leaves out the remediation and degradation for water and air.
You want energy independence ? True independence that does not have huge corporations both foreign and domestic dictating on geopolitics and global economies? Then start today in shifting to Renewable Energy. We are all playing out our parts in a play that was written long ago by a handful of people in control of our energy resources. Whoever controls your energy controls your future. Why not make it all of us at this point instead of a few of them?
32
The cost of Jet fuel is down to its lowest level in 5 years. The adjustment for fuel that very many airlines instituted is still on my fares to anywhere in the world.
How come we do not see any reduction in the cost of transportation of any articles at all?
When would we see the market effect you talk about; it is a monopoly and is run by the oligarchs that you call business people. These are not market forces as they do not exist in any monopolistic market.
Almost all so called capitalist societies are conducting their business in an oligarchic fashion. Leaving no free market initiatives except the choice of purchasing and not purchasing a product. The only problem is that one may not have a choice as no other options are available.
In the US we have seen the consolidation of various industries as if it is to reduce the cost to the consumer but ended up as a monopoly resulting in the absence of any meaningful choice for the consumers.
This has happened in administrations both Democratic and Republicans as the start of the demise of Glass-Steagall bill started in Clinton era and this Republican majority of the House and Senate would decimate all the protections for the consumers.
People power is the only thing that may help stop this slide as the Oligarchs are in Davos planning for the next move to strangle the consumer further and own the remaining governments.
How come we do not see any reduction in the cost of transportation of any articles at all?
When would we see the market effect you talk about; it is a monopoly and is run by the oligarchs that you call business people. These are not market forces as they do not exist in any monopolistic market.
Almost all so called capitalist societies are conducting their business in an oligarchic fashion. Leaving no free market initiatives except the choice of purchasing and not purchasing a product. The only problem is that one may not have a choice as no other options are available.
In the US we have seen the consolidation of various industries as if it is to reduce the cost to the consumer but ended up as a monopoly resulting in the absence of any meaningful choice for the consumers.
This has happened in administrations both Democratic and Republicans as the start of the demise of Glass-Steagall bill started in Clinton era and this Republican majority of the House and Senate would decimate all the protections for the consumers.
People power is the only thing that may help stop this slide as the Oligarchs are in Davos planning for the next move to strangle the consumer further and own the remaining governments.
9
Well, prices have gone down at the gas station. What may be happening with airfares is that many airlines entered into long term fuel contracts to provide a stable price. In return for avoiding the risk of higher prices they gave up the benefit of lower prices,
2
Much pain to come, especially in countries that try to control prices. A free market to those countries will lead to instability and perhaps government changes. All politicians do not like what they cannot control.
No mention of the transition to energy efficiency and renewables?
4
We have never had an energy problem, we've had a cost and reliable supply problem. When costs escalated, alternative fuels and supply like fracking became economically realistic. The rebirth of US energy production is a testament to demand, innovation, capitalism and efficient access to capital.
We've never properly priced the risk to supply in our energy cost stack. If the cost of our military adventures were priced as an import tax on Opec oil, we would continue to drive US investment. Quick math, we import 3.7M barrels from Opec per day or the equivalent of 70M gallons of gasoline per day or 25B gallons of gas equivalent per year. Instead of our income taxes being used to fund the military, let's assume that just $100B per year or just 20% of the BASE military budget would be paid for by a tax on OPEC oil. This would add $4 per gallon to gasoline from the region or about $76 per barrel of import taxes on oil sourced from OPEC. This would drive US production and make really think about whether we want to invest our military in securing supply from this ridiculous region of the world
We've never properly priced the risk to supply in our energy cost stack. If the cost of our military adventures were priced as an import tax on Opec oil, we would continue to drive US investment. Quick math, we import 3.7M barrels from Opec per day or the equivalent of 70M gallons of gasoline per day or 25B gallons of gas equivalent per year. Instead of our income taxes being used to fund the military, let's assume that just $100B per year or just 20% of the BASE military budget would be paid for by a tax on OPEC oil. This would add $4 per gallon to gasoline from the region or about $76 per barrel of import taxes on oil sourced from OPEC. This would drive US production and make really think about whether we want to invest our military in securing supply from this ridiculous region of the world
4
"Even at prices well below $100, American shale oil producers will find ways to drive down costs and output will start rising again. And the world’s new swing producer will find itself back in the swing of things." What is scary about this final sentence is what will the shale fossil fuel producers cut, environmental compliance, dumping frack waste, inattention to well construction, disregard to the important resources of life, soil and water. Certainly the costs will be lower if there is disregard to quality monitoring and putting production above the main ingredients of life, good water, soil and air.
Exploration and production in the shales is expensive . It is a simple as that. Why not work with nature rather than against it and change to renewable sources of energy like sun and wind.
Exploration and production in the shales is expensive . It is a simple as that. Why not work with nature rather than against it and change to renewable sources of energy like sun and wind.
3
How one can devote a lengthy article to this subject and omit the obvious is truly amazing. What we are witnessing is a form of economic warfare rare since the 19th century, with lower oil prices aimed directly at the top three on the U.S.'s enemies list. Any possible damage to our own economic well-being is simply viewed as collateral damage. The focus is instead put on the boon lower prices at the pump represents for American consumers. And, as war clouds once again gather in the eastern Ukraine, the danger of leaving nations with no other recourse to resort to a military option.
6
Say What? What's that your smokin in that photo. Are you suggesting we should prop up oil prices to prop up the soviets? That's like giving criminals an annuity of money if they just stop robbing you and behave. Folks like this for years have argued that the oil market is rigged by demons like Exxon, etc. Looks like its a free market afterall.
Here is a thought experiment. Why is it that computers were very expensive and now are cheap like commodities, data storage was expensive and now is cheap, cell phones were expensive and now are cheap, cars were expensive and now are increasingly cheaper, clothing was expensive and now is relatively cheap, food was expensive and now is relative cheap, and on and on. It because of the "S" curve; new products are initially costly, many firms jump in, innovations drive costs down, weak ones die and you end up with a small numbre of highly efficient producers, and the consumers capture the consumer surplus. Same goes for oil, as demonstrated by Mr. Yergin.
The more intersting question is why, in the face of these indisputable examples of market forces, do we have just the reverse for healthcare and education...a burgeoning increase in suppliers and prices stubbornly rising at breakneck pace? Government involvement. Subsidies, opaque markets, lack of accurate information so that consumers can figure out what they aregetting, whether it is worth it or now, backroom deals. Put that in your pipe and smoke it and check back.
Here is a thought experiment. Why is it that computers were very expensive and now are cheap like commodities, data storage was expensive and now is cheap, cell phones were expensive and now are cheap, cars were expensive and now are increasingly cheaper, clothing was expensive and now is relatively cheap, food was expensive and now is relative cheap, and on and on. It because of the "S" curve; new products are initially costly, many firms jump in, innovations drive costs down, weak ones die and you end up with a small numbre of highly efficient producers, and the consumers capture the consumer surplus. Same goes for oil, as demonstrated by Mr. Yergin.
The more intersting question is why, in the face of these indisputable examples of market forces, do we have just the reverse for healthcare and education...a burgeoning increase in suppliers and prices stubbornly rising at breakneck pace? Government involvement. Subsidies, opaque markets, lack of accurate information so that consumers can figure out what they aregetting, whether it is worth it or now, backroom deals. Put that in your pipe and smoke it and check back.
1
The Texas Railroad Commission's “allowable” levels of production for Texas targeted reservoir-energy conservation so as to not strand reserves when the field wound down. It had nothing to do with Texas being the world's swing producer, or manipulating a global market.
3
Your paragraphs from the one starting "It was assumed OPEC would step in .." through "Saudi Arabia is hoping that lower oil prices will stimulate ..." certainly read like Saudi Arabia is in control of a strategy that may drive much of the new US and Canadian production out of the market and will prevent Iraq and Iran from selling much
3
But, at whatever price and from whatever economy, petrocash will continue to flow into the world's anarchic hinterlands, arming "insurgencies," "militias" and "security contractors." Driving displacement, disenfranchisement and destabilization. While lower prices become an expectation, even an entitlement, driving enmity and paranoia which can be manipulated to divert us from the real exploiters.
Resource CURSE indeed.
Resource CURSE indeed.
4
Every new building should be mandated to have solar panels on the roof. States should encourage business owners with flat roofs to install solar, and give tax breaks to businesses and homeowners who install solar. More rebates for plug-in cars! Community solar farms, a wind turbine on every hilltop. It's 2015 for Pete's sake. What are we waiting for?
14
That's fine in climates that receive little or no snow. More than increased solar is availability of a battery system by which the energy may be stored. That would eliminate the need for Edison Electric in southern climates.
Plug in cars use electricity which is mostly powered by coal at the present time.
Plug in cars use electricity which is mostly powered by coal at the present time.
1
Fortunately, for our planet, that incredibly damaging fossil fuel, oil, will exhaust itself, albeit not for a long time in the future.
It's demise as a fuel may come well before that, perhaps within the next twenty or thirty years, when hydrogen and solar technology will become cheap to implement and use.
The enemy we face as we try to end our oil dependency, is our weak government, Congress, the Supreme Court, the EPA and others, who are now wholly owned by the oil barons, and all the major corporations, whose focus is on the bottom line and profit.
The people in this equation, are viewed as the market driver, a commodity the same as any other, to be used, abused, and manipulated, and fed into the maw of this corporate machine, in an eternal effort to sate its insatiable avarice.
Rather simple, really, when one decides to accept it.
It's demise as a fuel may come well before that, perhaps within the next twenty or thirty years, when hydrogen and solar technology will become cheap to implement and use.
The enemy we face as we try to end our oil dependency, is our weak government, Congress, the Supreme Court, the EPA and others, who are now wholly owned by the oil barons, and all the major corporations, whose focus is on the bottom line and profit.
The people in this equation, are viewed as the market driver, a commodity the same as any other, to be used, abused, and manipulated, and fed into the maw of this corporate machine, in an eternal effort to sate its insatiable avarice.
Rather simple, really, when one decides to accept it.
4
In '14 produced a little less oil than in '13, a little over 8 million barrels a day. We are consuming 19 million barrels a day. We are nowhere near self sufficiency, and never will. It is a mirage that oil companies are dangling as carrots to gain political support. This "great revolution" changed nothing of the basics. Oil is finite resource of which the world is running out, in decades not in centuries.
6
Daniel Yergin is the chief public relations officer for the oil industry. His company, Cambridge Energy Research Associates, his notorious for spreading happy-talk stories about America's oil destiny. He should be regarded as a mendacious shill In fact, the crash of oil prices will destroy the shale oil industry because it is crushing the bond financing structure behind it. The companies now tracking and drilling will default on their bond. They will never again be able to issue the same kind of debt paper. And shale oil production will never exceed it's current high. This dishionest article omits and overlooks this dynamic.
20
Oil and gas are as obsolete as cronuts will be one day soon. Time to create alternative energy, to harness the sun's or wind's energy for all our needs here on this diminishing, failing earth. It will not matter who will rule the oil market as in our lifetimes it won't exist. And maybe whales and other mammals will face extinction along with other fossil fuels.
3
It's really shameful that the Times does not offer an editorial disclaimer at the start of this exercise in propaganda and disinformation. Daniel Yergin is not primarily an author, he is basically a military-oil industrial complex operative. His rhetoric is disingenuous and his arguments are full of hand-picked facts and opinions delivered as if they were scientific truths.
I'm not going to pick the disinformation apart line by line, but I will only point out that there is nothing stopping American oil companies from reducing the explosive increase in production that caused the glut, other than their own recklessly greedy hunger for primary market share. There is also nothing stopping American legislators from reversing the abilities of non-producers and end-users from massively speculating in futures markets and manipulating the direction of the price of commodities, including oil, other than their own corruption.
We read the Times for news, not propaganda.
I'm not going to pick the disinformation apart line by line, but I will only point out that there is nothing stopping American oil companies from reducing the explosive increase in production that caused the glut, other than their own recklessly greedy hunger for primary market share. There is also nothing stopping American legislators from reversing the abilities of non-producers and end-users from massively speculating in futures markets and manipulating the direction of the price of commodities, including oil, other than their own corruption.
We read the Times for news, not propaganda.
33
It seems that every commodity that is traded in futures has supply-demand-price elasticity characteristics similar to oil. It would be interesting to see the effects of a speculation tax on commodity futures that are not taken for delivery.
1
"And the world’s new swing producer will find itself back in the swing of things."
Yes, swinging away, as swing producer, my very own USA, commits itself to doing all in its fossil-fuel power to ensure that global-warming processes are not slowed down.
Not my problem.
Is it yours?
Only-NeverInSweden.blogspot.com
FYI-American writing from a country that actually reduced its use of fossil fuels for national space heating.
Yes, swinging away, as swing producer, my very own USA, commits itself to doing all in its fossil-fuel power to ensure that global-warming processes are not slowed down.
Not my problem.
Is it yours?
Only-NeverInSweden.blogspot.com
FYI-American writing from a country that actually reduced its use of fossil fuels for national space heating.
4
Go Larry
The author has a severe case of tunnel vision, did he ever hear of global warming? Pieces like this give me stomach ache.
We know for some time that:
“No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2 °C goal”
http://thinkprogress.org/climate/2012/11/13/1179251/iea-report-fossil-fu...
If an economist or oil specialist disregards this fact they are worthless.
We know for some time that:
“No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2 °C goal”
http://thinkprogress.org/climate/2012/11/13/1179251/iea-report-fossil-fu...
If an economist or oil specialist disregards this fact they are worthless.
4
No reason not to tax oil. Why would the GOP want to skip a new and regressive tax measure when presented with an opportunity like this? They're already cutting state income tax revenues (which are deductible on federal returns) and substituting increases in sales and other use taxes (which aren't deductible in most cases). Just take a look at what's happening in Sam Brownback's Kansas. Yes, income taxes are down, and they're killing the state budget, particularly in education and pensions for state workers. But they keep increasing sales, cigarette, alcohol and other taxes which only hurt the average citizen, and the Koch brothers and their ilk get off scot-free as a percentage of their incredible earnings.
2
The hidden message that Mr. Yergin makes is that with "Oil ... now below $50 a barrel, [the] price [is] too low for a good deal of the new shale oil development to make economic sense." What this means is that our so-called friends in Saudi Arabia are not only interested in undermining Shiite Iraq and Iran, but also the U.S. hydraulic fracking industry as well. While this may kill Canadian tar sands development and the Keystone XL pipeline and benefit the environment, it coupled with the soaring dollar may stall our emerging economic recovery. Commodity dumping is an example of how a "free market" works against fair trade and world economic stability. Hopefully, President Obama will point this out to newly installed Saudi monarch, King Salman, when he visits there.
1
It would not matter who ruled the oil market if only we supported our industry to explore and produce oil and gas. That occurred regardless and the Obama administration seems to smugly take credit for increased production that is widely occurring in the US. But that's not the case as the President will not approve the Keystone pipeline and ignore all the issues of fracking that is contributing to this increase and perhaps harming our water supplies. Addressing these issues with policies that take into account good environmental practices and viewing building pipelines as neccessary infrastructure to provide inexpensive fuel for homes and business as a vital national security policy to be free of every being held hostage to those cartel countries who manipulate supply and demand for their own gain. Our Independence today is assured by having enough fuel domestically - it's good policy and it should be seized as an issue of vital national importance - not an afterthought.
1
This entire economic argument might be viewed through the lens of two factors: the notion of peak oil and the looming catastrophe of global climate change.
Does anyone believe the Saudi’s easily accessed oil is without limit? I’d be surprised if the Saudis don’t have a strategic plan based on an estimate of how long their oil will last, and a plan for what they'll do afterwards (they’re already investing heavily in solar). Let’s say at current rates they have 15-20 years of easily pumped reserves. By flooding the market with cheaper oil, they will not only maintain market dominance, they will potentially slow down the world’s movement towards alternative energies, while maintaining or boosting the world’s carbon footprint.
On the other hand, by making more costly oil extraction unprofitable, it’s possible that temporary cheap oil could be a boon for minimizing climate change, giving wind and solar energy technologies time to prove they are lower cost and higher profit than expensive oil. Every indication is that this economic condition is closer than most people think. In 3-5 years, when cheap gas starts to climb again, energy companies may realize they’ll do better investing in massive new solar production than starting up fracking again or digging up more tar sands.
Does anyone believe the Saudi’s easily accessed oil is without limit? I’d be surprised if the Saudis don’t have a strategic plan based on an estimate of how long their oil will last, and a plan for what they'll do afterwards (they’re already investing heavily in solar). Let’s say at current rates they have 15-20 years of easily pumped reserves. By flooding the market with cheaper oil, they will not only maintain market dominance, they will potentially slow down the world’s movement towards alternative energies, while maintaining or boosting the world’s carbon footprint.
On the other hand, by making more costly oil extraction unprofitable, it’s possible that temporary cheap oil could be a boon for minimizing climate change, giving wind and solar energy technologies time to prove they are lower cost and higher profit than expensive oil. Every indication is that this economic condition is closer than most people think. In 3-5 years, when cheap gas starts to climb again, energy companies may realize they’ll do better investing in massive new solar production than starting up fracking again or digging up more tar sands.
3
I wonder how long the free "Market" will be tolerated by Congress?
2
It's all Obama's fault!
1
Same group as always will rule the market: the major oil corps via SA (Aramco).
Why else would we lower flags and have our President travel to SA to bow to the new king. A2
Why else would we lower flags and have our President travel to SA to bow to the new king. A2
2
Until we get a TV situation comedy about back woods North Dakotans who discover shale and move to Beverly Hills, I remain unconvinced that fracking makes us a world class oil producer.
1
Will US producers now ask the gubmint to intervene to guarantee a minimum price for oil produced in the US so the fracking can resume?
Stay tuned.
Stay tuned.
2
I already submitted a comment listing factual mistakes in this Opinion regarding price history (demand peaked in 1979, fuel efficient vehicles deployed, demand didn't significantly exceed 79 levels until 93-94. Declining demand caused the last price crash.
Since 2005, oil price soared far above average global production costs leading to huge annual wealth transfers from consumers to oil producers and negative economic impacts (source: Dr. Paul Leiby at ORNL, speech in 2011).
My estimate of monopsony oil premium (rationing premium) on the last increment of demand is $1000-$1500 per barrel ($25-$35 per gallon); about ten times the cost of biofuels from algae or cellulosic ethanol. Or deploy BEVs or PHEVs: each BEV deployed saves the buyer about $10,000 in direct oil costs over the vehicle lifetime; and saves oil products customers $90,000 in indirect oil cost savings due to lower oil prices. (My estimate of this premium is consistent with IMF estimates of price elasticity.)
I submitted comments to the DOE recently discussing this.
https://drive.google.com/folderview?id=0B6HOZyGCkCB9YTVLYWZST1ZKTm8&...
Part 2 discusses pricing problems in the oil market, and the FAQs discusses the impact of substitution. A rapid deployment ramp of substitutes substantially reduces customer energy costs, and addresses external costs.
This oil field "revolution" was paid 10x over, by consumers overcharged for oil products. Taxpayers and customers should demand a refund.
Since 2005, oil price soared far above average global production costs leading to huge annual wealth transfers from consumers to oil producers and negative economic impacts (source: Dr. Paul Leiby at ORNL, speech in 2011).
My estimate of monopsony oil premium (rationing premium) on the last increment of demand is $1000-$1500 per barrel ($25-$35 per gallon); about ten times the cost of biofuels from algae or cellulosic ethanol. Or deploy BEVs or PHEVs: each BEV deployed saves the buyer about $10,000 in direct oil costs over the vehicle lifetime; and saves oil products customers $90,000 in indirect oil cost savings due to lower oil prices. (My estimate of this premium is consistent with IMF estimates of price elasticity.)
I submitted comments to the DOE recently discussing this.
https://drive.google.com/folderview?id=0B6HOZyGCkCB9YTVLYWZST1ZKTm8&...
Part 2 discusses pricing problems in the oil market, and the FAQs discusses the impact of substitution. A rapid deployment ramp of substitutes substantially reduces customer energy costs, and addresses external costs.
This oil field "revolution" was paid 10x over, by consumers overcharged for oil products. Taxpayers and customers should demand a refund.
4
Quote (page 13):
... The dysfunctional oil market operates far short of meeting every critically important customer need, and dumps huge costs on customers and some stakeholders. ...
A program of rapid substitution for oil products would save customers several hundred billion dollars annually. Half of the cost savings would fund enough incentives to reduce carbon emissions in the US by 80%. And a effective substitution program would end the misallocation of about $400B of capital investments annually ...
Industry corporate executives have opposed and stymied change by attempting to block government actions and policies intended to drive substitution, reduce crude oil demand, and reduce customer long-term costs. These policies would increase substitution causing lower oil prices, and reduce the incentives to invest in frontier and unconventional oil resources, oil refining, high cost oil products technology, and instead shift huge capital investment flows to vehicle manufacturing, biofuel, and general manufacturing sectors. ... sabotaging actions includes funding political disinformation campaigns to mislead customers and the American public. Corporate managers in both the oil industry and vehicle manufacturing have failed to develop a comprehensive plan to ramp deployment of green vehicles and biofuels, expand use of alternative transportation options, and failed to provide the leadership needed to drive change in this important economic sector.
... The dysfunctional oil market operates far short of meeting every critically important customer need, and dumps huge costs on customers and some stakeholders. ...
A program of rapid substitution for oil products would save customers several hundred billion dollars annually. Half of the cost savings would fund enough incentives to reduce carbon emissions in the US by 80%. And a effective substitution program would end the misallocation of about $400B of capital investments annually ...
Industry corporate executives have opposed and stymied change by attempting to block government actions and policies intended to drive substitution, reduce crude oil demand, and reduce customer long-term costs. These policies would increase substitution causing lower oil prices, and reduce the incentives to invest in frontier and unconventional oil resources, oil refining, high cost oil products technology, and instead shift huge capital investment flows to vehicle manufacturing, biofuel, and general manufacturing sectors. ... sabotaging actions includes funding political disinformation campaigns to mislead customers and the American public. Corporate managers in both the oil industry and vehicle manufacturing have failed to develop a comprehensive plan to ramp deployment of green vehicles and biofuels, expand use of alternative transportation options, and failed to provide the leadership needed to drive change in this important economic sector.
1
If Oil Barons get their presidential candidate in 2016, they still rule the American world. If Mormon Leveraged Buyout Barons get theirs, then they and their Communist Chinese partners are on top.
1
Saudi Arabia is waging an oil war against the US fracking industry. Fracking needs oil at high prices ($ 80a barrel) to finance the costly process. This was the case for the last five years which prompted US oil production increase.
This would make US independent of the oil market controlled by the Saudi's and threatens Saudi protection from the US and US toleration of the brutal theocratic dictatorships of the Saudi's.
So Saudi's are waging an oil war to kill US producers and to keep US dependent. This suits powerful interests in the US, US military bureaucracy and US arms producers.
GOP/TeaParty is the creation of the oil industry, Koch Bros et al, and its anti-American policy of keeping US dependent on Saudi oil and keep up the $1.3T a year of wasteful military spending to try and control the Middle East oil.
This would make US independent of the oil market controlled by the Saudi's and threatens Saudi protection from the US and US toleration of the brutal theocratic dictatorships of the Saudi's.
So Saudi's are waging an oil war to kill US producers and to keep US dependent. This suits powerful interests in the US, US military bureaucracy and US arms producers.
GOP/TeaParty is the creation of the oil industry, Koch Bros et al, and its anti-American policy of keeping US dependent on Saudi oil and keep up the $1.3T a year of wasteful military spending to try and control the Middle East oil.
4
I don't buy that oil prices can't be manipulated by a few, well positioned players. Not for a second. Maybe OPEC can't run the show like thy did in the seventies, but I have a very hard believing that a completely free market sees prices for something as plentiful as crude oil halve or double in the course of a couple of months.
1
The "drill-baby-drill" crowd would never admit this, but the use of "hydraulic fracturing" in shale plays was the result of a FEDERAL research project that never would have occurred otherwise. " In 1976, the United States government started the Eastern Gas Shales Project, a set of dozens of public-private hydraulic fracturing demonstration projects," Wikipedia explains. Get it? The FEDERAL GOVERNMENT that they want to destroy gave them the means to develop the techniques that made them rich. With absolutely no restraints, they plundered the land and burned up billions of dollars worth of gas in the Bakken Shale and other shale plays through "flaring" because they wanted the more lucrative liquid. That gas is gone forever. A complete waste of a valuable resource that could have served future generations.
3
Don't forget all the government funded research into geological exploration methods that are crucial to horizontal drilling.
1
To the Despot and Dictator, Nicolas Maduro of Venezuela.
Please find some that would translate this excellent article about the new reality of the oil market!
Please find some that would translate this excellent article about the new reality of the oil market!
An interesting other perspective is that Saudi Arabia keeps the taps flowing because they want to sell as much of the oil as they can before the world switches away from fossil fuels.
http://theenergycollective.com/eliashinckley/2181166/oil-prices-saudi-ar...
"But in a world where a producer sees the end of its market on the horizon, then every barrel sold at a profit is more valuable than a barrel that will never be sold. Current Saudi oil minister Ali al-Naimi had this to say about production cuts in late December: “it is not in the interest of OPEC to cut their production whatever the price is,” adding that even if prices fell to $20 “it is irrelevant.” Implied, if not explicitly stated, is that Saudi Arabia wants its oil out of the ground, regardless of how thin its profit margin per barrel becomes."
http://theenergycollective.com/eliashinckley/2181166/oil-prices-saudi-ar...
"But in a world where a producer sees the end of its market on the horizon, then every barrel sold at a profit is more valuable than a barrel that will never be sold. Current Saudi oil minister Ali al-Naimi had this to say about production cuts in late December: “it is not in the interest of OPEC to cut their production whatever the price is,” adding that even if prices fell to $20 “it is irrelevant.” Implied, if not explicitly stated, is that Saudi Arabia wants its oil out of the ground, regardless of how thin its profit margin per barrel becomes."
2
AND WHAT ABOUT GLOBAL WARMING ? NO MENTION OF THE IMPACT OF OIL ON OUR PLANET….JUST SUPPLY AND DEMAND.
3
NO! Mr. Yergin incorrectly analyzed the oil market over the last ten years, and mistakenly recalls the history since OPEC was formed.
Errors:
1. "... rarely has the oil market seen production increases on this scale this fast. The last time was in the early 1980s, when new supplies ... created an oil surplus that led to a price crash."
World petroleum consumption peaked in 1979, then demand declined due to fuel efficiency improvements. Demand didn't break 1979 levels significantly until 1993-1994. The price crash in 1986 was due to prolonged reduced demand.
2. "This revolution also turned out to be a big boost for the American economy, creating jobs, improving the country’s competitive position ..."
The average production cost of global oil supply is about $30-35 over the period since 2007. The difference between average cost of production and market price = wealth transfer.
Recently “Wealth Transfer” costs $150B-$200B annually, with the Macroeconomic Adjustment and Potential GDP Loss kicking in another $150B cost to our economy. These estimates only include foreign oil imports. Another “Wealth Transfer” to domestic producers would also cost in the range of $150B-200B.
I don’t think a Wealth Transfer of $300B-400B annually from consumers to oil producers, along a hit to economy of at least $150B, should make customers happy. Additionally there are environmental costs and risks, and national/global security concerns cause by a world awash with petrodollars.
Errors:
1. "... rarely has the oil market seen production increases on this scale this fast. The last time was in the early 1980s, when new supplies ... created an oil surplus that led to a price crash."
World petroleum consumption peaked in 1979, then demand declined due to fuel efficiency improvements. Demand didn't break 1979 levels significantly until 1993-1994. The price crash in 1986 was due to prolonged reduced demand.
2. "This revolution also turned out to be a big boost for the American economy, creating jobs, improving the country’s competitive position ..."
The average production cost of global oil supply is about $30-35 over the period since 2007. The difference between average cost of production and market price = wealth transfer.
Recently “Wealth Transfer” costs $150B-$200B annually, with the Macroeconomic Adjustment and Potential GDP Loss kicking in another $150B cost to our economy. These estimates only include foreign oil imports. Another “Wealth Transfer” to domestic producers would also cost in the range of $150B-200B.
I don’t think a Wealth Transfer of $300B-400B annually from consumers to oil producers, along a hit to economy of at least $150B, should make customers happy. Additionally there are environmental costs and risks, and national/global security concerns cause by a world awash with petrodollars.
7
It's still a good idea to diversify energy sources away from oil and gas. America needs that security. The people of the world need it. The industry has no morality. Thus we have glut. And a mad dash to compete with rising markets of renewables. Energy cartels have ruled the world for too long causing wars famines and environmental destruction increasingly. Nearly every conflict on the world stage today is related to oil. Throw the bums out! There is technology now available to run our transportation and powering of homes and businesses. Smart phones computers etc would then also be cheaper as the demand for oil and gas would be severely curtailed. A new Industrial Age would dawn with clean and virtually free energy after a build out estimated to take about 25 years. What are we waiting for?
21
What Yergin ignores is the most important, maybe the only, important thing about the oil market: that if planetary catastrophe is to be avoided most of the presently known reserves of oil, and all the still undiscovered reserves. must never be burnt. They are "stranded assets" of negative economic value. For the regimes and megacorporations in possession of exploitable oil, the most profitable, perhaps the only profitable, option is to burn up that oil as fast as profitable (and damn the Earth) before enough of us wake up to the imperative necessity of draconian greenhouse-gas-emission reductions and impose the indispensable taxes-on-polluting/subsidies-on-renewable energy investment. That use-it-or-lose-it choice facing the billionaires swollen with resource rents
is by far the most important factor driving oil prices down, and bankrupting the fools who believed in the "shale oil miracle."
is by far the most important factor driving oil prices down, and bankrupting the fools who believed in the "shale oil miracle."
10
Yes it certainly appears you are more right than wrong. Americans need to understand what is happening but most seem to wallow willingly in ignorance
4
In 2003 George Bush Jr. opened up oil futures for free-for-all trading. Now any insurance company, plutocrat, or group of wealthy individuals could manipulate the oil supply for their own monetary gain, rather than relying on supply and demand. Gas went up over $4.00 a gallon and the citizens of our nation suffered- except the plutocrats. (The citizens' crumb was that we would make "lots" of money in Wall Street, magically translating the money we need now into retirement accounts we can use someday in the future, maybe. More magical thinking, more trickle down theory.)
So the little guys got in to oil production, tar sands, oil shale and all that, and the plutocrats feared loss of control. So, they drop the price temporarily, drive out competition, and when the little guys are gone, back to their monopoly.
So the little guys got in to oil production, tar sands, oil shale and all that, and the plutocrats feared loss of control. So, they drop the price temporarily, drive out competition, and when the little guys are gone, back to their monopoly.
22
No mention of the environmental consequences of fracking, rail transport of crude, tar sands oil and drilling. Consideration of the human suffering in poorer oil-producing countries must take a back seat - Washington wants to punish Russia and Venezuela.
So long as energy policies are formulated by politicians owned by big oil and cheered on by PR men such as Yergin, we will be on the road with only one destination: disaster.
So long as energy policies are formulated by politicians owned by big oil and cheered on by PR men such as Yergin, we will be on the road with only one destination: disaster.
49
You are so right about this. Oil and gas interests rule. From the color of smart phones to food stuff our country is highly dependent on oil. But we could overcome much of it through different fuel for transportation and energy to heat and power buildings. Oil and gas is blocking progress in particular on these fronts.
9
As I would expect there is not a word here about the total lack of involvement of our Federal Government in creating this revolution that has come closer to making the U.S. Energy independent than any Federal Program or talking point.
In fact quite the opposite has taken place. Beginning with the scorn from the Federal Government and the Left heaped on those "poor simpletons on the right" who were foolish enough to think that we could solve our declining oil and gas production simply by drilling more in our own country. Continuing with a "parade of talking heads" both government and "green" telling us to "get over it" all the easy oil and gas were gone. Culminating with active obstruction when it became obvious that a tidal wave of production was headed to market.
Lack of faith in America's ability to solve complex problems without government intervention is a "hallmark" of the Left in this country and a reason that they rarely are given the opportunity to run things. Here we have the classic example. For the last 6 years the Obama Administration has done everything possible to keep energy prices high and the keep the U.S. an importer of oil.
Today the average American, including the "working poor" who rely on their cars for transportation to and from work, who also generally own older cars are saving around $30 every time they fill up. No one believes this is a result of any government program or policy! Everyone knows it is the result of investment by private industry.
In fact quite the opposite has taken place. Beginning with the scorn from the Federal Government and the Left heaped on those "poor simpletons on the right" who were foolish enough to think that we could solve our declining oil and gas production simply by drilling more in our own country. Continuing with a "parade of talking heads" both government and "green" telling us to "get over it" all the easy oil and gas were gone. Culminating with active obstruction when it became obvious that a tidal wave of production was headed to market.
Lack of faith in America's ability to solve complex problems without government intervention is a "hallmark" of the Left in this country and a reason that they rarely are given the opportunity to run things. Here we have the classic example. For the last 6 years the Obama Administration has done everything possible to keep energy prices high and the keep the U.S. an importer of oil.
Today the average American, including the "working poor" who rely on their cars for transportation to and from work, who also generally own older cars are saving around $30 every time they fill up. No one believes this is a result of any government program or policy! Everyone knows it is the result of investment by private industry.
3
You are wrong about this. Huge support from the Obama administration early on for fracking and new drilling was apparent. They reached out to energy companies to facilitate greater domestic supply of gas and oil.
7
The Obama administration early on reached out to owners of energy companies to pursue and support fracking and drilling. The administration greased the works.
8
Carol,
Really!
"Somehow, we have to figure out how to boost the price of gasoline to the levels in Europe.” – Energy Secretary Steven Chu (Sept. 2008)
“The next time you hear some politician trotting out some three-point plan for $2 gas, you let them know, we know better. Tell them we’re tired of hearing phony, election year promises that never come about.” — President Barack Obama (March, 2012)
Read more: http://www.politico.com/news/stories/0312/73891_Page2.html#ixzz3Pq47Xo00
Really!
"Somehow, we have to figure out how to boost the price of gasoline to the levels in Europe.” – Energy Secretary Steven Chu (Sept. 2008)
“The next time you hear some politician trotting out some three-point plan for $2 gas, you let them know, we know better. Tell them we’re tired of hearing phony, election year promises that never come about.” — President Barack Obama (March, 2012)
Read more: http://www.politico.com/news/stories/0312/73891_Page2.html#ixzz3Pq47Xo00
1
While not denying the importance of the supply-demand equation, I think that we need to devote more attention to the geo-political factors. To be specific...
The declining oil price will lessen the revenues not only of Saudi Arabia, but of two governments that the Saudis intensely dislike: Russian and Iran. They fault the Russians for providing the weaponry that had kept Bashar al Assad in power in Syria and they regard the Iranians as political and religious rivals for influence not merely in the Gulf, but throughout the Middle East.
Both Russia and Iran are far more dependent upon oil revenue for their short and medium term government needs than are the Saudis. So Riyadh can accept the financial equivalent of a small loss of blood if that means inflicting a much bigger wound on its rivals in the hope of curbing their actions. If that goal is achieved, could not the Saudi then, for example, halve their production in the hope of forcing the price back up?
The declining oil price will lessen the revenues not only of Saudi Arabia, but of two governments that the Saudis intensely dislike: Russian and Iran. They fault the Russians for providing the weaponry that had kept Bashar al Assad in power in Syria and they regard the Iranians as political and religious rivals for influence not merely in the Gulf, but throughout the Middle East.
Both Russia and Iran are far more dependent upon oil revenue for their short and medium term government needs than are the Saudis. So Riyadh can accept the financial equivalent of a small loss of blood if that means inflicting a much bigger wound on its rivals in the hope of curbing their actions. If that goal is achieved, could not the Saudi then, for example, halve their production in the hope of forcing the price back up?
5
Daniel Yergin is expert in this area, but why does it have to be this way? The petrodollar imperative demands that regardless of the price, oil is the energy source to uphold the petrodollar.
Engineers know that we can use the sun and the tides for our energy needs, and systems engineers can create pathways for distribution that would provide more jobs that are site specific if only given government priority support.
Daniel Yergin knows that the oil is in a fire sale aimed to blockade immediate alternative sources for what our civilization is fully dependent on, a surplus of clean, really clean, energy.
The transformational superconductor electric motors and generators are in the wings, and I beg the Expert to aid in what is right, not what has might.
Engineers know that we can use the sun and the tides for our energy needs, and systems engineers can create pathways for distribution that would provide more jobs that are site specific if only given government priority support.
Daniel Yergin knows that the oil is in a fire sale aimed to blockade immediate alternative sources for what our civilization is fully dependent on, a surplus of clean, really clean, energy.
The transformational superconductor electric motors and generators are in the wings, and I beg the Expert to aid in what is right, not what has might.
21
RSD says: "Engineers know that we can use the sun and the tides for our energy needs"
Solar is going to be problematical, because at present there is no efficient, economic way to store surplus energy captures. The 'best' benefit of Solar at present is in hot, sunny locations where it can directly add electrons onto the grid when it is hottest, and many ACs are running, thereby relieving pressure to build more power plants.
Likewise, 'wind' is great when it is blowing, or wherever it can be immediately put to use, because again, no really good currently available means to store electrons/energy.
The one thing mentioned that is seldom discussed is 'the power of the tides'.
On the coastal regions, there is an endless nearly constant inflow of energy from incoming waves, and the kinetic energy potential of the twice daily differential of high and low tides.
It should be very simple to use some type of paddlewheel technology somewhere offshore to harness the incoming wave energy, which could also be used quite efficiently for desalinatzation projects for much needed fresh water, and also the energy to pump it to inland locations that need it too.
Solar is going to be problematical, because at present there is no efficient, economic way to store surplus energy captures. The 'best' benefit of Solar at present is in hot, sunny locations where it can directly add electrons onto the grid when it is hottest, and many ACs are running, thereby relieving pressure to build more power plants.
Likewise, 'wind' is great when it is blowing, or wherever it can be immediately put to use, because again, no really good currently available means to store electrons/energy.
The one thing mentioned that is seldom discussed is 'the power of the tides'.
On the coastal regions, there is an endless nearly constant inflow of energy from incoming waves, and the kinetic energy potential of the twice daily differential of high and low tides.
It should be very simple to use some type of paddlewheel technology somewhere offshore to harness the incoming wave energy, which could also be used quite efficiently for desalinatzation projects for much needed fresh water, and also the energy to pump it to inland locations that need it too.
American shale oil producers may indeed be the world's oil "swing producers." However, to rule the oil market these producers will have to form a cartel. The issue is whether we let our representatives in Congress allow it.
1
One interesting theory voiced at Connecticut Maritime Association lunch this past week was that Private Equity would buy up cheap shale oil assets (similarly to forays made into tankers- at least by Wilbur Ross). Also during the week, Energy Forum had excellent exposition of how shale comes first, then the next phase is all about "storage" (including on big oil tankers booked for $40K/day or more). On Linked-In, we've had some good discussions about whether US oil export questions are really more about geo-politics than about barrels and molecules. Personally, I come down on the side of geopolitics- we are in a war (though neither side wants to use words like that), which will keep Mr. Yergin and other experts very busy over the next year or two.
5
The time has come to tax oil for its environmental negative external cost.
62
I completely agree, but the devil is in the details.
Yergin writes "Come the middle of the year, however, growth will flatten out"
What DY is not telling us is the incredibly quick decay rate of production from these fracked wells. In North Dakota the typical production falls by 6 to 8 per cent per month. This implies that after 24 to 36 months these wells have gone dry. The operator can then re-frack or abandon the well depending upon economics.
Our role as "swing producer" is dependent upon this continual re-fracking of wells, which means that only a sky-high oil price will sustain that production.
Stay tuned for a wild and crazy ride as production and price go through a series of major ups and downs. (remembering that the current market is over supplied by only about 1.6 % production greater than demand)
What DY is not telling us is the incredibly quick decay rate of production from these fracked wells. In North Dakota the typical production falls by 6 to 8 per cent per month. This implies that after 24 to 36 months these wells have gone dry. The operator can then re-frack or abandon the well depending upon economics.
Our role as "swing producer" is dependent upon this continual re-fracking of wells, which means that only a sky-high oil price will sustain that production.
Stay tuned for a wild and crazy ride as production and price go through a series of major ups and downs. (remembering that the current market is over supplied by only about 1.6 % production greater than demand)
8
Who PAYS for cleaning up the abandoned fracked well site? Are any regulations in place to "force" the cleanup of a site once it has been changed from natural land?
2
"Even at prices well below $100, American shale oil producers will find ways to drive down costs and output will start rising again. And the world’s new swing producer will find itself back in the swing of things."
Yergin's article is mostly more of the usual seductive optimism that dominates our national conversation about energy. Regardless of circumstances, we'll "find ways".
There's no sense here of any limitations. No space given to the idea that high oil prices, related to the scarcity of easy oil and the high cost of modern oil production, might actually have played any role in killing demand. Europe's economy, and China's economy, have slowed, lessening demand, but why? Could it be that $100 a barrel oil is actually a drag on industrial economies?
And could it be that American shale oil producers won't be able to just "find ways" to reduce costs and compete effectively at $70 a barrel, and that the loss of their production will drive prices right back up above $100? Could it actually be that fossil fuel energy scarcity, and high expense, is actually our future, and that it will be the main factor that limits the GDP growth we've come to count on?
You can count on it.
Yergin's article is mostly more of the usual seductive optimism that dominates our national conversation about energy. Regardless of circumstances, we'll "find ways".
There's no sense here of any limitations. No space given to the idea that high oil prices, related to the scarcity of easy oil and the high cost of modern oil production, might actually have played any role in killing demand. Europe's economy, and China's economy, have slowed, lessening demand, but why? Could it be that $100 a barrel oil is actually a drag on industrial economies?
And could it be that American shale oil producers won't be able to just "find ways" to reduce costs and compete effectively at $70 a barrel, and that the loss of their production will drive prices right back up above $100? Could it actually be that fossil fuel energy scarcity, and high expense, is actually our future, and that it will be the main factor that limits the GDP growth we've come to count on?
You can count on it.
33
You are so right. Now is the time to gear up renewables. Europe is in a much better position than the U.S. because they have been intergrating solar winded etc at a much more rapid rate beginning in the early 2000's.
21
BRAVA!! Ms. Egeli ! NOW is the time to fund and secure our participation to discover and produce EFFECTIVE RENEWALBLES.
2
How do you do that when you have representatives that deny the critical need? That prefer the status quo of the 1950's. It is appalling to see now more SUVs and those scary Hummers back on the road. As someone here said this morning, people are stupid, they are correct about that. As along as they have their big car, beer and TV to watch football, what else is there.
Whether it is climate change, the climate has and will always change, consideration for clean air, clean water and healthy soil represent the life of our planet. Without those basics there is no planet.
Whether it is climate change, the climate has and will always change, consideration for clean air, clean water and healthy soil represent the life of our planet. Without those basics there is no planet.
With all due respect, I disagree with Mr. Yergin's position. OPEC lost control of the market in 2008, when they could not halt the runaway price increases by increasing production. Despite what they may say publicly, the Saudi's are encouraging this price decline. It removes many non-OPEC suppliers (e.g.,Russia) from their dominant roles, and puts pressure on the shale oil production at risk sooner than it would be otherwise. OPEC is back in control, eliminating competition.
The DOE has predicted US shale oil production to peak in 2018, even in a high price scenario, which we no longer have. Production from wells that have a 70% decline during their first year is not sustainable. Even maintaining production requires year-over-year increases in wells drilled. Sooner or later (and probably sooner) the industry will lack the capital, equipment and manpower to continue.
If we do not take action to reduce consumption between now and 2018, the drop in US production, coupled with the increased demand during the recovery will lead to another price crisis like the one in 2008.
The DOE has predicted US shale oil production to peak in 2018, even in a high price scenario, which we no longer have. Production from wells that have a 70% decline during their first year is not sustainable. Even maintaining production requires year-over-year increases in wells drilled. Sooner or later (and probably sooner) the industry will lack the capital, equipment and manpower to continue.
If we do not take action to reduce consumption between now and 2018, the drop in US production, coupled with the increased demand during the recovery will lead to another price crisis like the one in 2008.
22
Interesting that having sanctions on Iran actually benefits US economy?
The question is why would US remove the sanctions now?
Interesting.
The question is why would US remove the sanctions now?
Interesting.
2
The drop in the price of oil is a problem, even though many people are relieved. It's an ecological catastrophe, however... It will reinforce addiction to oil and produce even more pollution. It would behoove countries to institute a fixed floor price using a pump tax and use the current surplus created to pay up debt and put cash aside for later. Meanwhile, the low cost of oil will mean deteriorating infrastructures for the oil producers (at least some).... And in about two or three years the price will ^start coming up again as consumption skyrockets (it's an addiction, remember?) and people will start yammering again that gas prices are soooo expensive. Apparently no one explains to kids the laws of supply and demand and the role societies have in controlling prices. This is not the time to buy SUVs, nor to sell them (but the car companies do). But tell that to Ms Average, who drives around with an iPhone stuck on one ear.
Human beings are simply stupid. Whoever called this generation "sapiens sapiens" must have been drinking hard liquor.
Human beings are simply stupid. Whoever called this generation "sapiens sapiens" must have been drinking hard liquor.
13
Mr. Yergin is an estimable expert on oil production upstream and oil distribution downstream. What I find deeply disturbing about his analysis is the complete absence of analysis. There was not a single original thought is any of his threadbare comments. Virtually everything written in this opinion piece has been widely circulated since oil began its vertiginous drop in prices.
17
He represents the petrochemical interests.
15
Daniel Yergin has again and again proven himself as a crafty PR spokesman for Big Oil. But don't count on him for truthful analysis or forecasting. Yergin says nothing here about how the so-called "shale revolution" has been financed -- i.e. through the Fed's zero-interest rate policy and QE -- leaving stand the ridiculous idea that the shale industry's massive debt load will allow American "energy independence." Instead, we may be facing a repeat of the subprime mortgage crisis as fracking's bad debts now go bust.
4
Less drilling, too expensive for fracking. Wonderful! Loss of worker's jobs. Not a problem, an emerging alternate energy industry needs workers.
I'd like to think the fuel efficiency of new cars, trucks and buses along with efficient heating equipment, domestic appliances, less energy use in manufacturing processes had something to do with this beyond economics.
Our governments can and should sponsor research into further technological advances to use, for example, energy from the oceans.
These are factors that all nations can control and will continue to reduce the burning of fossil fuels.
I'd like to think the fuel efficiency of new cars, trucks and buses along with efficient heating equipment, domestic appliances, less energy use in manufacturing processes had something to do with this beyond economics.
Our governments can and should sponsor research into further technological advances to use, for example, energy from the oceans.
These are factors that all nations can control and will continue to reduce the burning of fossil fuels.
6
Agriculture, too, will need workers, as the productivity curve from fossil-fuel-based mechanization levels off and the externalized environmental costs begin catching up.
The rationale for auto-industry bailout was that it represented 30% of our economy. What if food (which everyone needs, every day) were that 30% instead of 5-7%?
The rationale for auto-industry bailout was that it represented 30% of our economy. What if food (which everyone needs, every day) were that 30% instead of 5-7%?
A clever and sophisticated take on the current environment, by Republican leadership, would be to impose a small tax on oil to step into the windfall that has been created by the precipitous drop in prices.
That "fund" could then be deployed as a renewable energy investment fund, allowing entrepreneurs to step up for co-investments, alongside their own, to make progress on renewables. This would recognize the difficulty that most banks will have entering this space in a time of overwhelming regulation, and it will allow the US to begin gearing up for a new technological revolution in energy. By swinging renewables in behind oil, we would be ensuring dominance in the century ahead and building further independence.
The decline in influence of non-US oil producers also provides a respite from the world policeman role.
Now, this could be undertaken by Republicans alone, if they had the moral courage to ask Obama to sell an investment tax to citizens, something that would test is middle class economics. Or it could be pressed by Obama behind closed doors, if he were truly a leader, stepping forward to give his adversaries a victory by ensuring unanimity with Congress.
But they will simple fight. And both are despicable.
That "fund" could then be deployed as a renewable energy investment fund, allowing entrepreneurs to step up for co-investments, alongside their own, to make progress on renewables. This would recognize the difficulty that most banks will have entering this space in a time of overwhelming regulation, and it will allow the US to begin gearing up for a new technological revolution in energy. By swinging renewables in behind oil, we would be ensuring dominance in the century ahead and building further independence.
The decline in influence of non-US oil producers also provides a respite from the world policeman role.
Now, this could be undertaken by Republicans alone, if they had the moral courage to ask Obama to sell an investment tax to citizens, something that would test is middle class economics. Or it could be pressed by Obama behind closed doors, if he were truly a leader, stepping forward to give his adversaries a victory by ensuring unanimity with Congress.
But they will simple fight. And both are despicable.
11
Great idea. If we could only believe the the money would really go in to a renewables fund and be used for the purpose for which it would deb allocated.
Distrust and cynicism is what today's politics has breed.
Distrust and cynicism is what today's politics has breed.
1
@c.
Even when I agree with a "progressive" approach to anything, I have to remind myself that the "destination" and the "means" will be incompatible with my understanding of how you get things done.
If, for instance, I wanted to cure poverty, I would not shovel a billion dollars into a government agency that is associated with a MOC and a few hundred below-average civil servants to move the funding around.
When Americans care strongly about something, they do it themselves. Expecting anything from Washington is a fairy tale.
Even when I agree with a "progressive" approach to anything, I have to remind myself that the "destination" and the "means" will be incompatible with my understanding of how you get things done.
If, for instance, I wanted to cure poverty, I would not shovel a billion dollars into a government agency that is associated with a MOC and a few hundred below-average civil servants to move the funding around.
When Americans care strongly about something, they do it themselves. Expecting anything from Washington is a fairy tale.
2
This article, by Daniel Yergen, seems to tell me that the Saudis aren't controlling the price by withholding oil anymore. They are letting market forces rule. So, for now, market the supply is great, and thus our cheap prices. Things will affect supply, but I'm wondering if it will cause the prices to return to $4.00 oil in the forseeable future. Doesn't seem likely for a long while. Glenn
That's how it seems to me. It appears that a few things will now happen.
1. gas prices will probably be more erratic. but favoring the cheaper end since we cannot depend on the Saudis to limit their production.
2. I think our number of proved reserves is going to shrink. if the the Saudis won't reduce their supply, and we can buy it for the same price, then many of our reserves are no longer technically and economically extractable at todays market price. That will limit our production and cut jobs.
so I think what we will see is probably oil booms when prices get a bit higher (if we try to fill in the role that the saudis have played) followed by times of layoffs once supply stabilizes and prices begin to fall again.
1. gas prices will probably be more erratic. but favoring the cheaper end since we cannot depend on the Saudis to limit their production.
2. I think our number of proved reserves is going to shrink. if the the Saudis won't reduce their supply, and we can buy it for the same price, then many of our reserves are no longer technically and economically extractable at todays market price. That will limit our production and cut jobs.
so I think what we will see is probably oil booms when prices get a bit higher (if we try to fill in the role that the saudis have played) followed by times of layoffs once supply stabilizes and prices begin to fall again.
The huge rise in the U.S, dollar recently, much based on oil revenues, supports import growth and revenue groth. It may delay diversification and investment in alternate energy, however.
After all, oil, still priced in U.S. dollars, must be paid for in U.S. dollars, depressing other currencies and their export values. See. the Euro, just at a time when the latter's economy is slipping, where a 45% fall in oil price in a year is mated to a decrease in Euro-conversion of 20%, The fall from $100 to $45 is in local currencies equivalent to about $54. Should the dollar rise, oil-importing nations may profit (!) less from this round.
Oil-rich can become oil-impoverished, too. Canada, now an energy exporter, faces startlingly high revenue losses -- it was predicting surpluses. Alberta faces deficits never before seen in its provincial accounts, and $300 billion in expected investments slipping from certainty to delay and some potential cancellation. Meanwhile Norway, Saudi, and the Emirates, with diversified income policies, can sit and wait it out, revenue fairly consistent.
Alberta Premier Peter Lougheed, architect of the government still in power, warned our oil patch that with diversified investments and income (a sales tax, e.g.) a resource price dip could crash the provincial budget -- that caveat came almost 4 decades ago. No one listened. Are they listening now?
After all, oil, still priced in U.S. dollars, must be paid for in U.S. dollars, depressing other currencies and their export values. See. the Euro, just at a time when the latter's economy is slipping, where a 45% fall in oil price in a year is mated to a decrease in Euro-conversion of 20%, The fall from $100 to $45 is in local currencies equivalent to about $54. Should the dollar rise, oil-importing nations may profit (!) less from this round.
Oil-rich can become oil-impoverished, too. Canada, now an energy exporter, faces startlingly high revenue losses -- it was predicting surpluses. Alberta faces deficits never before seen in its provincial accounts, and $300 billion in expected investments slipping from certainty to delay and some potential cancellation. Meanwhile Norway, Saudi, and the Emirates, with diversified income policies, can sit and wait it out, revenue fairly consistent.
Alberta Premier Peter Lougheed, architect of the government still in power, warned our oil patch that with diversified investments and income (a sales tax, e.g.) a resource price dip could crash the provincial budget -- that caveat came almost 4 decades ago. No one listened. Are they listening now?
9
My typo: last paragraph's first sentence should read "with diversified investments and income....a resource price dip could NOT crash the provincial budget..." Oil people missed Premier Lougheed's advice. And I missed the "not" in my brain! Sorry.
Folks like the Kochs never will suffer,
Diversifying is a buffer,
No unions to battle,
Just horsefeather prattle,
Life in their mansions won't be tougher.
Diversifying is a buffer,
No unions to battle,
Just horsefeather prattle,
Life in their mansions won't be tougher.
36
The origin of OPEC is widely misunderstood. It came of the fears of the 1950's and early 60's, when steady discovery of middle east oil in country after country threatened oversupply at very cheap prices.
Middle East oil came out of the ground cheaper and easier than water. It was mostly of very high quality.
Established oil production could not compete. The US and the older British Empire fields were threated with wipeout.
Meanwhile, the new cheap production threatened to make itself near worthless to those who lived on the oil. The industry was threatened with convulsions if cheap Middle East oil was pumped as fast as possible until it was gone, while all other fields were abandoned.
It was in the interests of all oil producers, the US foremost among them as until then the biggest producer with the most invested, to restrict oil supply in order to maintain market prices. The distators and absolute monarchies of the Middle East could offer that, and enforce it.
Until the Arabs attempted to use it as an "oil weapon" it was seen as a good thing for all of the industry everywhere. "Stability." Long term price predictability made investment possible in exploration and production.
Those holding prices up were the "good guys" to us. We wanted that. We needed that for the market to include us and for the market to maintain supply souces from many regions.
The dollar also benefited from its position in this scheme, and so the US budget games were possible.
Middle East oil came out of the ground cheaper and easier than water. It was mostly of very high quality.
Established oil production could not compete. The US and the older British Empire fields were threated with wipeout.
Meanwhile, the new cheap production threatened to make itself near worthless to those who lived on the oil. The industry was threatened with convulsions if cheap Middle East oil was pumped as fast as possible until it was gone, while all other fields were abandoned.
It was in the interests of all oil producers, the US foremost among them as until then the biggest producer with the most invested, to restrict oil supply in order to maintain market prices. The distators and absolute monarchies of the Middle East could offer that, and enforce it.
Until the Arabs attempted to use it as an "oil weapon" it was seen as a good thing for all of the industry everywhere. "Stability." Long term price predictability made investment possible in exploration and production.
Those holding prices up were the "good guys" to us. We wanted that. We needed that for the market to include us and for the market to maintain supply souces from many regions.
The dollar also benefited from its position in this scheme, and so the US budget games were possible.
23
It's so curious that with the decline of supplies the suppliers are hastening to burn up the oil while the can. Renewables are inevitable. Americans could be ahead of the game but our politics and economy are controlled by oil and gas clearly.
10
Oil prices were always controlled by the market. OPEC did not set prices. It set production levels of members.
What is new is that the biggest producer has now thrown open the taps. Production levels are now as much as anyone can pump.
The market price now reflects that extra supply, or more correctly it reflects the expectation of that extra future supply continuing (which is why the Saudi King's death led to a small price spike despite reality being unchanged and "no change" being the announced policy).
Opec set its production quotas according to anticipated price ranges from market forces. They'd modify those quotas based on market results.
This price drop is entirely the product of a specific decision on a specific date to flood the market, a decision made in Saudi Arabia for political reasons of international conflict.
What is new is that the biggest producer has now thrown open the taps. Production levels are now as much as anyone can pump.
The market price now reflects that extra supply, or more correctly it reflects the expectation of that extra future supply continuing (which is why the Saudi King's death led to a small price spike despite reality being unchanged and "no change" being the announced policy).
Opec set its production quotas according to anticipated price ranges from market forces. They'd modify those quotas based on market results.
This price drop is entirely the product of a specific decision on a specific date to flood the market, a decision made in Saudi Arabia for political reasons of international conflict.
5
Mark overstates the freedom to select production levels. Rigs are closing down by the hundreds every day in No. America -- drilling is more expensive, and so is refining in No. America. You can shut down and wait rather than lose money. Fracking has high start-up costs and low petro/nat. gas prices may bankrupt inefficient or small frackers. No one can bear to lose money every minute for many months. Already, thousands of oil, gas, and tar sands workers have been furloughed.
Dr. Bob -- You are quite right about those specific supplies.
The key is that much oil comes out of the ground in the Middle East cheaper than water there. Their production costs are only a couple of dollars/barrel. They would make 20 times their cost at $40-50/barrel. THEY are still making money. It does not optimize their income, but they are still making a lot, not losing every minute of every day.
They also claimed to have at least 50% production capacity "in reserve" held off the market to maintain prices. All they needed to do was turn it on.
The original purpose of OPEC was to prevent that, to enrich them of course, but also to preserve the more expensive producers, including American, which is why the rest of us went along with them and even encouraged it.
They just unwound that deal, at a time when American production costs were going to 40x their own, rather than 4x their own as in the past.
The key is that much oil comes out of the ground in the Middle East cheaper than water there. Their production costs are only a couple of dollars/barrel. They would make 20 times their cost at $40-50/barrel. THEY are still making money. It does not optimize their income, but they are still making a lot, not losing every minute of every day.
They also claimed to have at least 50% production capacity "in reserve" held off the market to maintain prices. All they needed to do was turn it on.
The original purpose of OPEC was to prevent that, to enrich them of course, but also to preserve the more expensive producers, including American, which is why the rest of us went along with them and even encouraged it.
They just unwound that deal, at a time when American production costs were going to 40x their own, rather than 4x their own as in the past.
1
We should have a vote to see if the oil market is caused by man made activity.
1
Remember all the cries of conspiracy, Wall Street, speculators greed when oil prices soared?
What are they saying now?
What are they saying now?
12
This makes it obvious there was a conspiracy to restrict supply. Since that was openly acknowledged in the beginning, that ought not to be a surprise.
32
Apart from OPEC, which is now broken, the oil conspiracy theories have been shown to be groundless.
However, this is being ignored. But when the next increase in oil prices occurs, those who are unhappy will resurrect it, once again.
Get a grip!
However, this is being ignored. But when the next increase in oil prices occurs, those who are unhappy will resurrect it, once again.
Get a grip!
3
They are saying they have shorted the market. And they probably right.
1
Saudi Arabia and others are the oil producers, but the price of oil is determined by NYMEX, freighted with lots of speculation by Wall Street banks and hedge funds, as discussed by Rex Tillerson, Exxon-Mobil chairman, to Congress:
http://www.huffingtonpost.com/2011/05/12/exxon-ceo-wall-street-oil-price...
and echoed by Patrick Kennedy:
http://www.nytimes.com/2012/04/11/opinion/ban-pure-speculators-of-oil-fu...
The author leaves out the effect of Dodd-Frank rules on bankers' proprietary trading, from which the bankers' won a 2-year reprieve in the waning days of the last Congress.
And we notice that pump prices have quit falling just as bankers are no longer needing to un-wind their trades, even though hedgies are still needing to prop up bad bets on junk-bond lending to frackers.
Which all makes sense when you remember that in today's world, upturns in Libyan production are not a sudden surprise, downturns in China demand/production are not a sudden surprise, nor are ramp-ups in Iraqi production, increases in Bakken production, etc., etc.
These production factors are foreseeable, and were predicted, but speculation kept the NYMEX price at unreasonable levels despite observable facts/reality.
Speculation distorts markets.
http://www.huffingtonpost.com/2011/05/12/exxon-ceo-wall-street-oil-price...
and echoed by Patrick Kennedy:
http://www.nytimes.com/2012/04/11/opinion/ban-pure-speculators-of-oil-fu...
The author leaves out the effect of Dodd-Frank rules on bankers' proprietary trading, from which the bankers' won a 2-year reprieve in the waning days of the last Congress.
And we notice that pump prices have quit falling just as bankers are no longer needing to un-wind their trades, even though hedgies are still needing to prop up bad bets on junk-bond lending to frackers.
Which all makes sense when you remember that in today's world, upturns in Libyan production are not a sudden surprise, downturns in China demand/production are not a sudden surprise, nor are ramp-ups in Iraqi production, increases in Bakken production, etc., etc.
These production factors are foreseeable, and were predicted, but speculation kept the NYMEX price at unreasonable levels despite observable facts/reality.
Speculation distorts markets.
73
correction - second link is to article by Joseph Kennedy III.
I think speculators did help drive the price of oil up to $147 a few years ago but in this case there's too much hard evidence showing a glut of supply and reasonable expectations for that to continue.
2
No. The price of oil is determined by supply and demand and the Saudi's control the supply and are purposely driving the price down to kill US fracking industry and to prevent the expensive but productive fracking to spread to other oil consumers dependent on Middle East oil.
6
Yergin wrote a very well researched and informative piece, but the point I find interesting is that he said the Saudis are giving up their role as the swing producer. In a true free market economy, the swing producers are generally the high cost ones, not the low cost producers. It would be most informative to see a supply curve showing how the suppliers rank from low to high cost.