The Russian's strategy, even though hurtful to the US, probably deserves a little more credit than "Russian roulette."
IS OIL SUPPLY/DEMAND HISTORY REPEATING ITSELF FROM 30 YEARS AGO TO CHANGE USA ENERGY?
ISSUE: Coronavirus results in economic cutback in China. Worldwide oil supply exceeds worldwide oil demand.
ISSUE: USA exports oil and natural gas to the world during most 2020 weeks.
NEXT STEP: Oil prices fall but not dramatically. OPEC looks to reduce oil supply. But Russia refuses to reduce its worldwide oil exports.
NEXT STEP: Saudi Arabia increases worldwide oil exports, driving down worldwide oil prices.
RESULT: US shale oil and shale natural gas production won’t be profitable. Bankruptcies anticipated. USA may again become a net oil importer.
30 YEARS AGO
ISSUE: USA is a net importer of energy, e.g. oil and natural gas. USA experienced oil supply shortages from OPEC cutbacks. 1973 crisis and 1979 crisis increased oil prices by 400% and 100% respectively.
ISSUE: In late 1970’s, USA looked to decrease energy dependence. US began coal to oil research and funded pilot plants. (Germany during World War II made oil from coal).
USA has very large coal reserves but not large oil and natural gas reserves. In the early 1980’s, large coal projects and investments are made in the Rocky Mountain states, Texas, and Louisiana.
NEXT STEP: OPEC increases worldwide oil supply that drives down oil prices.
RESULT: Low oil prices make coal to oil research and direct coal to energy projects not profitable. Projects were cancelled and not begun again.
2
That these organizations and nations would further drown us in oil, and accelerate climate change is an outrage.
There is an urgent need for everyone who can, to purchase an EV or hybrid. Travel by air less, and do what you can, because it is clear that there are nations and organizations who are both making the problem worse and doing nothing.
When it comes to lessening the effects of climate change we need a hive mind, not leaders.
3
Oil, blood and money make the world go around. We're all the victims, we're all the pawns. Until we're not.
If I were advising either the Saudis or the Russians I would tell them to find another way to make a living. The next US President will have to make substantial progress on reducing the use of fossil fuels, perhaps adding a carbon tax. This is not optional, it is existential for our planet. A significant carbon tax will further reduce consumption which will reduce oil prices further. Reduced revenues to support corrupt dictators couldn't happen to a nicer bunch than Russia, Saudi Arabia, Iran and Venezuela.
5
The Saudi - Russian spat has more to do with weakening western economies and financial markets than with some disagreement between Riyadh and Moscow.
It is an act of economic warfare against the west at a critical time. Recall who was behind the 9-11 attacks, and who sowed dissent in the 2016 elections.
Seems to me that a capable US administration would have had some involvement in trying to broker a deal to share production cuts, maybe even in the Permian, to defuse this.
I'm generally not a conspiracy theorist, but this is simply too much to ignore.
4
So Putin and MBS agree to crash oil prices, causing a big hit to the US and world economy. Trump then hands out money to voters (passes a stimulus package) just before an election. Then Putin and MBS restore the prices, and Trump gets to claim credit for a "miraculous" recovery. Welcome to the show.
4
Russia's objective appears to be hurting the US shale oil industry, and MBS was trying to protect the US by cutting output. Now the whole deal is off, and we have Americans cheering for it? Wait till oil stocks collapse and thousands are laid off. Then maybe people will wake up?
1
Is it just me or does everyone feel terrible that we will be paying less for gasoline? I feel so guilty saving money. I only wish I could pay more for everything to the point I can’t afford anything. That would be so wonderful.
4
".... Now Saudi Arabia is trying an alternative: inflicting pain."
Why a bunch of criminals (remember Jamal Khashoggi?) are so emboldened to feel they can inflict pain on the entire world just because they could not strike a deal with Russians?
Reminds one of the spats the Ewing brothers -- JR, Bobby, -- had on the TV drama "Dallas". But even the Ewing brothers' conflicts had a Jock (or Miss Ellie) to step in, call a meeting at the South Fork Ranch, and cool things off.
2
So, how will all the American gasoline companies justify not dropping prices accordingly?????? ...will we get months of the usual "our refineries are down for "planned" maintenance"...
4
"The Russians also argued in meetings that there was an opportunity to damage the shale industry in the United States, which had hurt both of the big producers. And Russia has built up a $570 billion fund that Moscow hopes will tide the country through an oil-revenue famine."
Both the Russians and Saudis are smart. The coronavirus has crushed demand (Chinese import demand reportedly fell from 13MM B/D to 8 MM B/D). Prices were going to be weak anyway. The Russian government has been socking away $ from oil prices above $50 (plz check this). They, and the Saudi's, can therefore take this opportunity to drive a number of over-leveraged US producers, who have for many many years outspent their cash flows, out of business.
This strategy is rather brilliant. Here's the Russian oil minister talking about oil production taxes last year:
“We have the highest oil taxes in the world. On average they amount to 68-70% of REVENUES. But in the case of West Siberian fields with no tax breaks, for example, they amount to 85%,” Novak said in an interview.
5
@David S Smaller players in the US will go out of business no doubt. But larger players who are a more well capitalized can just buy the assets pennies on the dollar. They can continue producing, keeping the level of production up. How does Russia win in this case?
"You live by the sword, you die by the sword."
Oil is the Saudi and Arab's sword that they wield at times effectively and at times foolishly. The world is trying to get away from it's dependence on the carbon fuels and eventually will whether the fuel runs out or the technology makes it unsuitable for use.
And, then there are the Russians who also depend on Oil for their export earnings. Russian economy, sad to say for such an advanced technical country, is slave to oil as well.
And when the world demand changes, the suppliers act in panic. And, that's what is happening right now.
The consequences for hte world economy could only be bad.
STAY TUNED!!
1
My gut feeling right away was that Russia and the Saudis are more prepared to weather low oil prices and are cooperating to punish new shale oil money. But who else besides the Saudis, the U.S. and Russia turn a big wrench on oil production? India and Brazil fall in line with the Saudis. Who is this article leaving out?
Oh yeah: Canada.
The Trump Organization, who is heavily invested in Energy Transfer Partners and... whether Trump supporters believed Trump or even Trump believes Trump... Koch Industries is also heavily invested... are together busy digging an oil pipeline to move dirty tar sands from Canada to Kochs’ dirty refineries in Chorpus Christi, Texas (too dirty for shale oil).
The Kochs and Goldman Sachs were happy stealing from the worlds’ largest oil reserve in Venezuela until recently Venezuela went public, partly to US vulture capitalists like John Paulson but largely to Russian interests like Rosnef. Proceeds go to stealing US elections.
Then the Saudis go public but first they get the US to pay for refinery repairs with a false flag attack. Trump even took our troops out of Syria and prostituted them to the Saudis, ceding even his own oil and Trump Tower interests in Turkey. We know Trump drops the meat in his mouth for a golden steak. And he gives away the agenda of blaming the coronavirus on shaking down competitors in the power grab.
The way to cut through all the bull in politics is ask WHO owns all the resources, and HOW does everyone get paid?
6
Call me crazy but in a fight between Saudi Arabia, Russia, and American frackers it's hard to figure out who the sympathetic interest is.
4
@beenthere
Our planet.
4
Remember “peak oil”, “running out of cheap oil”, and similar terms used by global warming alarmists in the 70s’ and 80s’? How that played out? Oil is so cheap we left most untouched because it’s not profitable to drill for it. Producers fight each other to see who can sell for cheapest.
The current Hollywood led climate change fad will play out the same way. Scientists say something but after the media spin it no longer have any base in reality. Earth will get slightly warmer but nothing really change; it have been way warmer before.
Think about it, if 99% of all the carbon dioxide ever captured by natural process in the past 1 billion years are still untouched because it’s not profitable to get them out, what are the chances human can heat up the planet with just what we mined?
If someone is trying to sell you climate change, he is either ignorant, stupid, or wants you to do something against your best interests.
2
@AmateurHistorian
So we have a forever supply of oil that, if not being manipulated on the supply side, should be cheaper than it is even today. Right? So why in the world are we not jailing oil execs who are notorious for crimping the supply to jack up prices? Free market as it were?
@AmateurHistorian
What a properly named moniker. Have you tried research? It’s marvelous.
The Saudis are passed their peak oil which is why they staged a false flag attack on their refinery in Riyahd to get Trump to get US tax dollars to pay for upgrades and repairs... right before the Saudis go public with their oil, cash in the profit and leave stupid investors (like Trump) with the dwindling supplies.
You know where the biggest oil reserve is? No, not the US: we’re exporting expensive shale oil which is why our companies are overextended and less prepared to weather an oversupply of oil from a fake war between the Saudis and Russia.
It’s Venezuela. Sanctions on Venezuela are being lifted now that they went public too... partly to US vulture capitalists but mostly to Rosnef, Russia’s largest oil producer. So Russia doesn’t even have to sell it’s own oil cheap; they can weather it out on Venezuelan oil.
And if you don’t believe in climate change or human carbon emissions heating up the planet, just lay down in some Hollywood traffic and ask whether the climate affects you.
7
@Pass the MORE Act: 202-224-3121 It's not the Hollywood traffic that's the big agent of climate change, it's your friends in India and China (and to a certain extent, a dozen or so 'developing nations') who emit greenhouse gases in great volume, without any cares.
And you think having NY ban plastic bags will have any effect on the floating island of plastic (the size of Rhode Island)? Nope, because much of that effluence comes from third world nations of the PAC Rim.
Go ahead, pass the New Green Deal, and when we're all poor because energy costs skyrocket to unbelievable heights, the world will still be warming unless you get India and China to wise up.
2
A tragedy of shakespearean size. Two houses brought apart by greed. One, a kingdom of the most despicable kind. The other a foolish inconsequential King-to- be. Both suffer the slings and arrows of their hubristic fate. Both houses fall. Armies of the world could march on both, unopposed. Except, the world is consumed by a pandemic. Meanwhile, the Prince and Princess of Wales depart for the new home in Victoria, free from the shackles of kingdom....it goes on and on. Luckily, I have girl scout cookies.
1
Drop in oil demand is typically linked to an overall loss in economic activity since most of our transportation and manufacturing are powered by oil and oil derivative. So having top oil producer freak out is freaking out global stocks.
Less oil being used is great from an environmental prospective, but unfortunately this will be a short term thing (pandemic related) that will be more than offset by the damage of a pricing war on oil on investment in the renewable energy space.
It is very sad that when the world show us we should be collaborating more, we are actually doing the opposite.
2
Pretty scary when you consider who is running the world these fine days.
1
Nicely orchestrated gambit between the Saudis and Russians driving down prices to put “the competition” out of business. The competition you say??? American shale oil and fracking adds supply that OPEC et. al has no control over. Shale can’t compete at these prices! Smart timing too as everyone’s attention is focused on coronavirus and will hardly notice what’s afoot!
If the shale oil business goes bust, watch what happens to oil prices from OPEC!
They come by it honestly though. Just a page out of JD Rockefeller’s Standard Oil history when he’d knock the competition out by undercutting their prices, even if he took a loss on the deal. Ahhh...monopolies!! Can’t wait!!
The Saudis and the Russians.....Just good men of business I guess!
18
@SAH
Meh. The shale is still there, and the oil is still in it. Someone will pick up oil rights and leases for a song, and when MBS and Putin finish being passive aggressive, can develop those resources for a tidy profit. If Trump was smart (but I contradict myself) he would make sure that foreign actors cannot buy up those rights and leases.
4
Shale is better than regular reserves because production can restart with much smaller investment required compared to normal drilling. Whatever benefit the Saudis get, it won’t last long. Almost as as soon as they stop discounting crude, the shale producers, maybe not same people, will be right back in the market.
2
Seems the puppet in the White House has lost his usefulness. MBS and Putin now competing to put their democratic puppet with the next election.
1
Oil prices fluctuated sharply in the last ten years.
In the 2011 it was 80 $ and in 2016 it was around $25.00 per barrel, then it was in the 40's per barrel in 2018/2019, and a little over $60 at the beginning of this year.
Saudi Arabia depends only on oil for almost everything specially the expensive ventures like the war in Yemen, destabilizing Iraq, Syria and Iran, and entertaining their people.
Russia on the other hand does not care that much about its people as we can see clearly. Many lived under communist rule and would follow whatever the Comrade in Chief Putin would say.
Putin can play a wide range of games while Saudi Arabia has no hand in this high stake poker game.
This may be the last hurrah for the Saud family who survived on looting the oil of the country while squandering the ludicrous wealth they looted.
1
Russia may need cash. There’s a lot of oligarchs to pay off.
1
I hope all the fossil fuel Trump fans from Texas and Alaska read this: because bother the Saudi and the Russians are - as we all have learned - praised BFFs of Trump and family.
Irony of ironies, this is exactly what putin did not want to deal with, not after installing our "president", and thinking he could maneuver some deal to reduce or eliminate the highly justified sanctions against the russian oil companies he (personally, actually) benefits from, as oil IS the russian economy. putin engineered this, and was banking (!) on russia having success with Arctic drilling. He still needs highly specialized technology (such as ExxonMobil's) to extract the oil, but that equipment is expensive (either purchased or part of a "deal"), and that whole process of Arctic oil extraction just got yugely more expensive, as in the red zone.
At this point. it's highly doubtful our government would touch those sanctions, but guess what? Mnuchin is meeting with russia! They're desperate!
SO, this Covid-19 is not only taking down the markets, it's exposing the criminal desperation of putin's white knuckling of Mnuchin. So if that fails, what good is our current president to putin? And putin is way overdue for payback, after getting his fingers in our national election process.
4
Actually there are downsides to this spat between Russia and Saudi Arabia firstly our progress on renewable energy will be slowed , secondly there will be widespread unemployment in our oil and related industries .
I hate the fact that markets are effectively controlled by our enemies. Energy is a strategic commodity and we can manage it by setting up an equalization account whereby we set the price in the USA of petroleum products , this will enable us to build up financial and physical reserves to subsidize renewable energy, to cover future price increases and keep our own industry on a steady footing. The ultimate aim to have this Country 100% energy independent as soon as possible
5
Mohammed bin Salman and Vladimir Vladimirovich Putin deserve each other. A socioeconomic plague on the corrupt crony capitalist corporate plutocrat oligarchs in Moscow and Riyadh would be fair and just.
13
Honestly.. good to see the Saudi's and the Russian's at each others throats economically. Let the despots slug it out for economic survival.
7
Beggar thy neighbor. This is how a "depression" begins. Collapsing prices brings layoffs, reduced capital spending and debt defaults. Hope you had fun while it lasted.
1
Oh my!! Another hit to the US by Russia, trying to destroy this country. It's working, as some of the shale-oil companies will go bankrupt, but it might destroy the Russian economy too??? But, not Putin, and in a Communist country, that is all he cares about. I hope the November election will rid us of wanna-be dictator, who is ready to throw the country under the bus, just so he can win re-election!!
5
@Vicky HANNEMAN
Don’t know if it ever was a communist country (as I understand the term), but Russia is clearly not a communist country just now.
3
Lost in all this talk is the environment...hurt by fracking.. cheaper prices for gas translates into more burning of fossil fuels and maintains interest in gas guzzling machines.. all of that fits nicely with Trump’s deregulation of pollution/climate inaction worldview. Be on the lookout for violence (e.g. unfortunate terrorist attacks on refineries, accidental plane crashes, etc.) ... egos in the oil cartel are bumping heads with Putin and Russian oligarchs. Expect boisterous tweets and false claims made by you know who... but rest assured that contrary to what will be claimed...the self proclaimed stable genius can’t fix this.
6
I wonder how much money our banks have on loan to the booming shale oil industry ?
I wonder if they're going to be repaid....and by whom?
4
@GG Lots and no. Read Bethany McLeans book Saudi America. Pretty much mapped this out.
1
@Gg Typically US banks only make reserve based loans, for something like 50-70% of the PV 10%. I don't know how low they stress test prices.
More typically, oil producers (E&P's) borrow money in the bond markets, because they can get equal or better rates, less restrictions, and avoid the threat of early repayment demands in times like these. Energy credits made up 11-15% of total HY debt, before the credits all were repriced downward by 20% today.
Banks are declining because people perceive the woefully low interest rates to be negative for them. There is some truth to those concerns. To me, I'd be more concerned about bank losses on construction loans than energy loans.
1
Interesting...other considerations aside, my read on this is that Putin and MBS no longer see Trump as useful going forward. They see the virus and the administration's response as fatally wounding him politically.
7
It’s like watching a shootout between 2 gangs!
7
Trump is just a pawn on a chessboard he doesn't understand.
27
Hard to believe that MBS and his old pal Vlad weren't aware that this "spat" would tank markets at this particularly vulnerable time. Smells fishy to me.
6
Time to buy some US oil and put into the Strategic Petroleum Reserve?
8
Oh, Goody! A price war in the oil industry.
Let’s see who gets hurt by this:
Russia, Saudi Arabia, Iran, Iraq, Venezuela, Nigeria …
And multinational oil companies as well.
I think I can live with that!
6
@AKJersey Are you huffing gasoline? What did Iran, Iraq, Venezuela, or Nigeria ever do to US to wish them pain? We've waged unjust war on the first three mentioned, and they reacted. And Nigeria, what did they do to US?
4
How predictable. Saudi Arabia tries inflicting pain as methodology.
4
In the foreign press it's more a Mexican standoff between Russia, Saudi-Arabia and US-Canada, the cheaper price now making the shale-oil business no longer viable.
5
Excellent article in The Economist came out on Saturday regarding this very thing.
2
So odd.
I'm not one for conspiracies but when I see Russia (Putin), Saudi Arabia (MBS), and Trump intersecting, I see trouble.
We all know Trump has a pattern of breaking something so he can claim genius when he later supposedly fixes it (see: family separations at the border).
Did Putin and MBS break the oil market (on Trump's behalf) so its repair can be used to heal the stock market of its COVID-19 woes?
Let's wait and see.
13
Can't Donald Trump just pick up the phone and put an end to this oil squabble between two of his best friends? Don't they both owe him a favor? After all, he sent our troops to guard bin Salman's oil fields and he got Ukraine to take the blame for Putin's meddling in our last election and held up military aid for Ukraine. I'd think he has a card to play here to save the American economy.
6
@abigail49 I think this means they've decided he's no longer useful, and are throwing him under the bus.
6
@By George: Hillary said they wanted a Puppet in the WH
Global corporate and government elites warring. How do we protect our own? Less reliance on fossil fuels in the first place. Discipline, Responsibility and Freedom work together but we rarely invoke and support them. If we want to surmount these kind of obstacles, they are our natural and national resources.
8
Time to reopen the Khashoggi investigation, Donnie?
10
US's victims fight back.
Perhaps Jared should pick up the phone and call his buddy MBS and Trump should pick up the phone and call his buddy Putin and both can actually perform their jobs.
7
It's great knowing your friend are always there when you need them.
6
Russia's intention is to damage the American shale producers? This is a big test for Trump - his loyalty to the Republicans of the oil patch vs. his loyalty to Putin. Who will win? (is there any doubt?)
16
@TJGM Read Rachel Maddow's new book, Blowout and you will hope shale goes down the tubes, so too speak.
1
If oil sells as low as $12 Saudi Arabia makes a profit. Russia needs at least $45 to keep Putin in power. I guess Putin could damage SA refineries in no time! Watch out!
6
Finally some actually consequential Russian meddling. Both it and Saudi Arabis should cut it out immediately. But I presume we’ll help Covid-19 all we can, nations and individuals alike. It’s what we do. No, not all of us. Just enough of us. As with carbon, nukes.
From the WP: "The stock markets suffered stunning declines Monday — with the Dow Jones industrial average losing 2014 points..."
Too bad it couldn't have tried just a bit harder, to close down 2020.
Oh well, there's always tomorrow...
It reads like the biggest losers will be American shale companies. I personally wonder if less fracking in the US is a good thing. But I'm surprised that the President is not rushing to the defense of a major American industry and threaten to put a tariff on imported oil. This is odd especially since so much of shale is in red states.
4
@William Fang
Trump does nothing. You can bet that the Koch brothers are rethinking their support of this ineffective grifter in the White House.
3
@William Fang Putin owns trump.
2
The oil fight between Saudis and Putin feels staged.
Remember Putin and MBS being chummy with each other a few months back?
My bet is that they decided to bankrupt American shale producers - long a thorn in their side. And they see US in chaos with inept administration - easily manipulated and bamboozled. And they see the virus panic taking hold.
What better time to pull the trigger?
20
Russia and Saudi will drain their respective sovereign wealth funds and kill their local currency, thus causing internal inflation and producing an unhappy populous. The US can stand back and watch the fireworks. Fracking will continue, and the renewable energy revolution cannot be stopped.
3
Russians never saw a crisis they did not try to capitalize on. They produce an insignificant amounts of oil and they should be ignored. Moreover, the world just just boycott Russian oil and stop buying it and put them right out of business. They only have to exports, oil and crime. They need some of their own medicine.
7
@Mike Oilproducers, ranked:
US, 18 million bbl/day
Saudi, 12 million
Russia, 11 million
2018, numbers from EIA.
So ...really not that simple.
Nothing ever is.
2
The American economy and its financial markets are vulnerable to swings in the price of a barrel of oil. Maybe America needs to consider economic stability as another variable in the debate about phasing out oil and phasing in renewable energy.
8
Shale producers in the US have certainly changed the landscape.
All the while, an electric infrastructure looms on the horizon driven forward by the cattle prod of climate change.
I’m impressed that Russia has a $570 billion dollar fund to shield it from the pain of low barrel prices.
But the fortunes of Russia and the Saudis is soon to be short lived.
Battery technology is the only thing keeping EV’s from dominating. Once a 400-500 mile range is achieved with battery technology it should be game over.
I wonder if Russia or Saudi Arabia wants to hack this space? The seeds of their destruction.
Naturally they cannot develop this on their own because the spark of innovation has permanently left those countries, never to return in any measure. Therefore, like all backward countries, they are forced to spy to stay viable.
Once the US starts building molten salt nuclear reactors, the kind that don’t meltdown, and better battery technology, it’s game over for the hostile countries.
Ironically then, I suppose hostilities ramp up because if you don’t own any game changing technology, you must wage war to acquire it.
10
@PC Never, ever keep your eggs in one basket. Simple minded dictators keep things and the people around them simple.. Without Oil the Arab world is ruined.
Let let these narrow minded short sighted despots starve. Shale makes us energy independent and our work on alternative energy is getting more of the pie every day. Our free economy makes us strong.
$570 billion reserve fund in Russia - what a joke. The US is worried that a 70 trillion SS fund surplus will last past 2035??
That is what "By the people, for the people" does for a nation..
1
Welcome to warfare in 2020. This is the equivalent of an economic shot across the bow. Does anyone remember when the Iranian-backed Houthis temporarily disabled a Saudi refinery using drones? For every action there will be an equal and opposite reaction. There was quite a war associated with the 1918 Pandemic. WWI.
4
@T.H. Williams
Maybe I’m not strategic enough. This looks like something that is really bad for domestic fossil fuel producers and hurts institutions that are deep into oil and coal stocks. But bad effects on the markets are future problems that don’t negatively affect regular folks immediately, and a drop in fuel prices can only be good for pocketbooks. Of course, if that promotes more consumption, the climate issues could loom.
In light of the dramatic drop in the cost of petroleum products it seems ironic, but here in Oregon where our crybaby Republican Legislators (by walking out of the 2020 legislative session, and then and refusing negotiations) just sabotaged the plan's of our newly reinstalled Democratic Governor-Kate Brown- to implement a environmental friendly minimal and progressive Cap and Trade style tax on the use of petroleum products, by our our citizens and businesses.
Even more ironic: It seems that after negotiations with the Democrats became a non-starter to the GOP and walked out, we Oregonians were immediately bombarded by GOP supporters in the voracious fossil fuel using industries- like the agriculture, timber and the trucking industries- screaming about the "Terrible price" we'll all have to pay for Cap and Trade taxation on fossil fuels. This, even though with or without Cap and Trade legislation, because of the oil glut, we all will be paying less for petroleum based fossil fuels (including it's heaviest users) then we paid only one or two years ago.
But what was it that President Bill Clinton used to say: 'It's impossible to negotiate with Republicans; because each time you think you have a deal-They keep moving the goalposts further back!"
6
Shale industry bonds will be cheap might be a value play coming
1
Prince Mohamed bin Salman just ordered a power grab and now he has troubles with Putin/Russia. Couldn't happen to a better twosome. I can't wait until we have a democrat president in January, 2021and MbS gets held responsible for killing Adnan Khoshogghi. Monsters must be held responsible or else the go on to worse. Same thing goes for our deplorable president.
28
Putin is determined to demolish the US energy market and MBS is right there with him. Under the guise of "production cuts" disagreements. Don't be naive. This will hammer the neophyte industry, much into bankruptcy, with the direct effect to severely damage below investment grade credit, furthering the economic damage of COVID 19. Wake up.......
13
Until we get a democratic administration that can correctly impose reasonable environmental oversight on frackers, I’m not sure of what the downside issues are you’re emphasizing?
6
@Northcountry
Putin may be interested in demolishing the US energy market, but I also think he is interested in maintaining and increasing the revenue stream from his own oil sales. Russia needs the money. With a chokehold on Rosneft growth, and massive reductions in current pricing, that is going to present a problem. Looks like the Saudis are better poised to take a huge whack on price, in the hope that they will make it up on volume.
3
@Northcountry
Exactly! According to energy consultant Philip Verleger who was just interviewed today on Bloomberg, he views the "price war" as an intentional economic attack on the US by Putin at our most vulnerable time during this virus crisis.
4
What does Putin want trump to do?
15
@John M, end sanctions. That is the primary reason why Putin installed Trump as President of this country. Putin can also lead Trump around by the nose at will. Not a bad deal actually.
9
From the point of view of fascist one party rule Wyoming, it doesn't matter who is enriched by killing the Earth: Russians, Americans, Arabs. They all wear Armani... in Monte Carlo, Lincoln Center, Knightsbridge.
Here's the Wyoming POV of fracking in America: a fracked well loses half its output first year, half that second year, half third. The structures can be re-fracked and perhaps give first year yields in the range of first generation fracking's second year yields.
In other words, fracking is buying time for world markets... for only 10-15 years. Then, the refracking of old shales will have no yields- compared to now- and America will be forced to buy oil from nations who hate our guts.
9
Yes, and by then most people will be using electric , solar powered cars, trucks, semis, lawnmowers, tractors and just about anything else you can put a motor on...
3
@Paul Yes, electric, powered by WYOMING COAL!
1
#45 ought to sit down and talk to his two buddies!
2
@JB
I imagine that #45 sits down and speaks to them both regularly while doing #2...
5
Russia and Saudi Arabia cut the production and US shale industry makes money? No working! Now it will go bankrupt
So the glowy ball and the visit to MBS was all for nothing? Trump has lied so much that he believes the lies of other leaders.
7
"Gee, Wally, the Iranians are going to be real sore about this."
"I know and Dad is still mad about all those pallets of money Obama gave Tehran. He was madder than the time Eddy Haskell stole two doughnuts off Lumpy's tray at school."
I will translate this. The Iranians will probably attack the Saudi oil production and tanker facilities. If Saudi Arabia can't pump oil, the price will go up. That is good for Russia and Iran. And, the US.
I expect hostilities soon.
2
@Mike Gee Beav, where did you get that? The money belonged to Iran in the fist place...geez..
1
@Mike , In the 1970s, Iran paid the U.S. $400 million for military equipment that was never delivered because the government was overthrown and diplomatic relations ruptured. After the nuclear deal, the U.S. and Iran announced they had settled the matter, with the U.S. agreeing to pay the $400 million.
Tell Wally!
@Anton 52(plus) American hostages for 444 days. What, no charge?
Russian roulette. Funny. More like Putin playing three dimensional chess while Trump plays checkers: "King me! King me! I'm the smartest businessman in the room!" said the Prez.
Opening move? Get Trump elected. Putin's pawn. Current move? Sacrifice Oil Price, take US oil industry off the board.
Next move? Hmmm... The American Election gambit, redux.
12
Trump’s supposed two best friends, Putin and MBS, got in a tiff and the US economy is collateral damage. Trump and Jarvanka cannot fix this. That they are astoundingly beyond their depth is now obvious to all. Twitter fix?
8
"Blowout" by Rachel Maddow is a great read re: oil/gas industry, Russia, fracking, etc. You may or may not like her politics but she can write a good story.
7
I just watched Philip Verleger, an energy sector consultant, opining on the Bloomberg channel that this "price war" is an intentional economic attack on the US by Putin. I agree, and I add "our great friends" the Saudis are co-conspirators.
On the firm's website Verleger writes:
"The Mueller report, along with many articles and books, has made it clear that President Putin wants to create as much chaos and discord as possible in the Western alliance and the US economy. The coronavirus presents him with the ultimate opportunity to wreak havoc."
"COVID-19’s impact on the oil market gives Russia a way to respond to US sanctions imposed on the Nord Stream 2 natural gas pipeline’s construction and Russian trade with Venezuela, as well as to plans by US oil companies to drill in the Russian Arctic. The global demand for oil has dropped precipitously. In response, Saudi Arabia proposed that OPEC members and the other producers that work with OPEC (OPEC+) cut production to maintain crude oil prices."
......
"Russian authorities do not make braggadocious statements like Trump, Pompeo, and other members of the Trump administration. Instead, they act somewhat like the KGB agents many once were."
"Russia has declared economic war on the US oil industry. Closings will follow."
For the complete essay:
https://www.pkverlegerllc.com/assets/documents/200309OurViewRussiaDeclaresEcomicWaronUS.pdf
10
@GG Doubtful putin would do this before re-electing his man trump. Disrupting the US now doesn't make sense for him.
1
Economy good: “Hah! The United States is energy independent, we don’t need foreign oil!”
Economy tanks: “Okay... well, it turns out, the United States isn’t energy independent at all, and as long as our primary source of energy is oil we will always be at the mercy of international petroleum markets. Whoopsie!”
This is the absolute best case for a diversified energy generation portfolio on a national level. Imagine if 90% of all of our domestic energy came from renewable sources right now. Oil is poisonous. Its not just poison to the planet, it’s poison to the economy.
45
@Austin Ouellette Too late
Strikes me as a great time to install a gas tax. Cheap fuel might be good for the short term economy, but is it good for the climate? Or at least impose a protectionist tariff on imported oil. Me. Trump likes tariffs. This would be a good time
20
Putin needs high oil revenues to keep himself in power. The Saudi Kingdom, who produce oil for less cost than all the others, doesn't want to reduce the revenue the Kingdom needs to keep it's people happy. Here in the USA, oil producers need high prices in order for shale to still be profitable, otherwise barrels will cost more to produce than sell. The industry's solution is more consumption. To me, it's time to buy that electric car, and look-away when these Mother Earth plunderers struggle to survive!
28
The Saudis are make the most of the situation, time to purge the kingdom of your problems and mess with Iran...time for a red wedding.
1
Hi, I'm posting from the future, contrary to my superior's wishes.
Keep this to yourselves, no hoop-la and what not.
Hush, Hush.
Shhh...
Oil is a worthless sham.
There is no reason to contemplate the value of oil.
Uh-oh, someone's banging at the door, gotta hide.
Take my word, abandon oil.
later
16
We just celebrated Woman's day...I wonder what it would be like to have women in these countries. Seems that we are surrounded by macho men in Saudi Arabia , America, U.k....etc
7
Putin is way smarter than the trump. For some reason he has our president in the palm of his hand. All of trump's ego maniac friends around the world are going to take trump and America on a wild ride.
9
@Bella
For some reason? I think we already know what those are.
3
The Saudis have too much power and they use it recklessly.
Just one more reminder of why we need to drop our dependence on oil. I look forward to the day when the murderous Saudi leadership is dragged out of their palace by their own people.
13
We have been a net exporter of oil for a while now, which means we are no longer dependent on foreign sources.
6
Times are changing on the long there is more oil offered then needed. Sustainable energy and an electric future will win. I am looking forward to independence day celebrating solar and wind power.
8
@La Resistance We are a net exporter while fracking is profitable. Since others (Russia, Arabia) control the price, fracking being profitable depends on the choices the others make. If they make the price low, goodbye U.S. exports, and goodbye oil income. Suddenly the boom is over.
Putin has us over a barrel (or a million of them).
5
Interesting that MbS, the Saudi Crown Prince fired Khalid al-Falih that had a good rapport with Mr. Novak, then put his own brother in law in al-Falih's place. Also, quite recently, MbS put a few of his potential rivals for the throne under arrest. Looks like MbS is more interested in loyalty than ability.
10
@Just Me Who does he remind you of?
3
@Just Me MbS never graduated collage.....it shows doesn't it?
3
Well, whatever, oil use is horrifically destructive to the environment and we really need to stop using it completely. If oil companies fail, or if Saudi Arabia suddenly ceases to exist completely, that can only be helpful for the world and humanity's future.
14
Does anyone remember the Republican presidential candidate Donald Trump in 2015 calling for barring all Muslims from entering the United States? Whether one agrees with that racist call or not, the fact is that stunt made Mr. Trump the Republicans' front-runner and eventually got him elected as the US president.
Similarly, if I were in Mr. Biden or Mr. Sanders shoes, I would be inviting the US media this evening for a news conference to ask Mr. Trump and Mr. Pompeo a simple question: How is it possible that a country that is totally reliant on the US for its national defense - and effectively everything else - has been allowed to put the US economy and national security at risk?
Mr. Trump should tell us if the Saudis consulted with the US before deciding to enter into the current oil price war against Russia. If they did and Mr. Trump did not realize its consequences for the US oil industry, that should tell us how incompetent Mr. Trump and his administration are in managing the US economy.
If the Saudis did not feel they need to inform the US regarding their decision to drop oil prices and start a price war against Russia, that would be an indication that the Saudis consider Mr. Trump to be in their back pocket. After all, that was exactly what they said regarding Mr. Kushner (Please see 1).
1. CBS News Report: "Saudi crown prince says Kushner was 'in his pocket'"; by Alex Emmons of The Intercept; March 22, 2018.
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@Eddie B.
I think we already know Trump is incompetent. We need no more proof of that. We need to just get rid of him.
6
Gas prices have dropped significantly in my area so.... not going to complain.
1
@Nathan I am glad that it helps your budget. What about everyone else?
2
@Nathan
So as long as gas is cheap all is right with the world? Give it a month. Just don’t blame Obama.
3
@Nathan
Until they once again run the U.S. industry into the ground. Then they can pop prices back up to where they want.
Their goal is to hurt competition so that long-run prices can be higher.
4
I don't fault President Germaphobe for the virus, I blame him for his Katrina-esque response and petty attempts at political finger pointing. He truly is Nero and his base will either be poor or sick within 2 weeks time.
13
Still looking forward to absolutely no change at the pump. They’ve got Trump on their side.
Big Oil, the Saudis, his buddy Putin.
They own us.
Until November. GET ANGRY!!!
4
Actually this is the prove that Saudi Arabia and Russia do not own us they own their oil and gas but need somebody to buy it. What else do they really have to offer?
3
Kudos to the Saudis.
First, for sticking it to the Russians, second, for cheaper gas.
2
This won’t last for long will be interesting to watch. The world is different now snd there is more oil available then needed.
3
Russia and Saudi Arabia, Trump’s favorite pals! I have a hunch the stable genius will be able to get the two parties to agree to a beautiful deal. Or not.
5
@Yup
Not a beautiful deal, a perfect deal.
@cl
I would reply to your comment, but I don’t know how to write “bigly” in either Arabic or Russian.
1
Opec and Saudi Arabia are bad players in world markets as we just saw. Knowing the world's need for stable prices, they to glut the market creating more drops in the energy sector which affect oil workers and will put many drillers out of business. Other than that, they sent us Bin Laden, Mohammed Atta, Bin Salman (friend of Jared), bombed Yemen to smithereens, and the list goes on. With friends like this, who needs enemies. These are not our allies: they're a Mafia disguised as simpatico to the West, but competely out of control. We should ban military sales to Saudi immediately.
13
I thought they were best friends!
What a circus act between Sado-Arabia, Russian mafia and trump alt right factions . their only goal is to make oil so cheap in order to slow down alternative energy technologies from developing. I wish I could spit in the faces of all these tyrants.
4
@Zozola
You can vote to get rid of one of them, and if you have free time on your hands, you can go to battleground states and knock on doors. Or you can wander over to the Central Valley on weekends and do what you can to send Devin Nunes back to his dairy farm and Kevin McCarthy back to the desert.
1
It is surreal that another 2008 like crisis is going to happen during Republicans reign.
What is happening?
4
@SU Since and including Eisenhower, ALL recessions of the last 60 years have occurred under Republican presidents.
It's not surreal. It's what they do.
11
Why would this effect us in the Untied States?
We are now the largest exporter of oil and gas
We get our oil from Canada and Mexico
Russia is broke
Saudi’s are a myth
Answers please
3
1) Oil is a global commodity and, with minor exceptions (US sanctions on Iran, for instance) can flow from any producer to any consumer.
2) The US is now a net exporter (thank you George Mitchell and the shale revolution) but our refineries still require significant volumes of heavier crude from other countries to run full. Shale crude is light.
3) Canadian export capacity is maxed out due to the inability to build new pipelines (read Keystone XL - thanks Obama) and Mexico’s production has been falling for years due to gross mismanagement and lack of investment in their oil industry.
4) Some of the biggest markets for US oil exports are also markets for Saudi (Asia) and Russian (Europe) exports. So when the Saudis drop their price, China can buy Arab Extra Light instead of WTI. So the market prices equilibrate.
5
@Independent voter
1. SA exports 2.5x what we do. Russia is just under double our exports.
2. OPEC exists to operate as a single bloc. OPEC has 45% of the world's exports and more than 80% of the proven oil reserves.
3. It's a global market, so international prices hit us as much as anyone else. It doesn't matter where you get your oil, you're paying prices determined by the world market. If world supply goes down, Canada's prices go up.
4. Our oil is expensive to extract, which is why Russia and SA flood the market to ruin our industry. They did it before, and North Dakota oil production vanished. There is a point where it is no longer profitable for the U.S. to produce much of its shale oil. That price point is much higher than OPEC or Russia. This is also why U.S. oil production doesn't do much to lower oil prices. If it gets too low, we can't produce oil any more.
3
If a recession is what it takes to get Trump out of office, I’ll take it.
29
Solar power.
Wind power.
Hydroelectricity.
THAT is the future.
81
Exactly fossil fuels are for fossils!
@Ed Mahala and @daniel see this and decide https://www.ted.com/talks/michael_shellenberger_why_i_changed_my_mind_about_nuclear_power?language=en
@Ed Mahala And nuclear.
1
Of course Russia would take this action. Russia is a one trick pony. Oil is all they have and Putin needs to keep those deposits going to the Caymans. Maybe now America might realize we need to emphasize renewables when the Russians and the Saudis have this much power over the world. But maybe Trump is okay with that since he likes Putin and Saudi royalty so much.
17
@markd If Russia is a one trick pony what is Saudi Arabia?
Why is pushing the price for oil down a sign of power? In the past they pushed it up now they fight each others because America is the No. 1 oil Producer and sustainable energy is growing fast. Russia should start to think what else to offer besides oil.
My concern is that this situation will precipitate a
'bail out the poor U.S. oil companies'. Unlike the auto industry bailout that was a loan. I am sure that this will be an (don't say socialist) subsidy addend to the ridiculous amount we currently subsidize.
Everybody loves capitalism when they are making money but they instantly want to be non-labeled socialist when they are not.
14
I concur. Trump will bail out the airlines & the oil companies in a few days.
In light of the Climate Crisis that is upon us, the bottom falling out of oil investments is the best thing that could happen to humanity.
With today's technology, we could move the full U.S. electric grid to 100 percent renewable energy in a decade or less, and transportation (thanks to electric cars and trucks) in 20 years or less. But the first steps are to get the fossil fuel companies out of the decision making process of our government, and then stop subsidizing the trillion dollar pollution industries.
Perhaps this is the beginning of step one right now. We can certainly pray and hope that is the case, anyway. It might give my children a fighting chance at a livable planet when they reach adulthood.
22
@MEW , unfortunately I think the opposite, if the price were over $100 a barrel there would be a natural shift to alternatives as they would be more economically competitive. Now who wants to buy an electric car when gasoline is heading back to 1980's prices? I realize though, as someone said, the stone age didn't end for lack of stones, but the stones didn't own the government back then.
10
@MEW Not a chance. Those of us in oil producing states like Texas, where our livelihoods and most of our wealth stems from oil and gas, will fight like tooth and nail to protect the high paying, blue collar jobs that the left likes to pretend to care about. A future without fossil fuels is fantasy.
4
@Iconoclast Texan
Fossil fuel is not renewable. It is fossil in more ways than one. It is going to be a relic of the past. Start training and looking for careers in renewable energy before you get left behind. You sound a lot like those coal miners.
8
Stock prices are not the economy. They reflect the exuberance or torpidity of speculators. Or, occasionally, their equanimity, but that’s rare because stock speculators, like gamblers of all stripes, tend to be bipolar.
11
@Rex Page
Tell that to those who rely on stocks and retirement funds.
I’m talking about speculators who make their living by trading stocks, not those who are being taken for a ride by those speculators. Probably it would be a good idea for the riders to consider safer places for their retirement funds and to figure out how to live on the income that would bring.
For those who believe that this price war does not hurt the US- think again. There are hundreds of thousands of employees of oil companies, not all in the large exploration companies. And these smaller companies are highly leveraged, which means that many of them will go out of business, causing catastrophic misery for their workers, and subsequently for those who work with them. Such as? The retailers, the nurses, doctors, restaurant workers, hotel workers, real estate agents, teachers, lawyers, who work in places where oil is a major force- Houston, other parts of Texas, the Dakotas and PA. (although fracking will continue for a while)
39
@boji3
One has to ask how low gas prices could help one's finances, if one does not have a job to drive to.
10
@boji3 ~
Kind of what WalMart and Amazon have done?
Please note that it was under Obama, much to the dislike of his supporters, didn't try to stop fracking. Even as the economy was recovering, the oil industry was going through a rough time.
Guess they didn't save enough $$ from the tax cuts?
It’s nice to see masters of the universe smash us underfoot, knowing that they personally will never suffer the consequences of their petty bickering.
24
The US has become less dependable on foreign oil due to domestic natural gas production and renewable energy. Thanks Obama.
21
@Justvisitingthisplanet Domestic *oil* production, dude. The % of oil imports that are replaced by renewables is minuscule -- renewables and nat gas have mostly replaced coal, not oil.
What supplanted these oil imports was domestic shale production. The very industry threatened by this price war. Did you actually read the article before posting a comment on it?
9
@Justvisitingthisplanet It's a global market, and our oil is among the most expensive to produce, which is why OPEC and Russia can decide our industry's fate on a whim by simply increasing production and lowering prices below profitability for the U.S.
U.S. oil doesn't have the price-lowering effect that others do because there's a pretty firm floor, and everyone else's floor is well below it.
6
Also the US just blocked NordStream 1, the 94%-done pipeline to Germany, in time to prevent its use for this winter. So Putin has a bone to pick.
The article could use some information on the forces driving OPEC+ together. Does Russia want the Saudi's to sign off on Russian bases in Syria, or are the Saudi's trying to keep it from blending Syria, Lebanon, and Iran? What's the status of Saudi financial reserves? How does this help MBS?
It's too soon to say, but as OPEC+ falls, so too should the petro-dictators in Saudi Arabia, Russia, and Venuzuela. We can only hope (and wish that our leaders would plan).
1
Northstream is a gas line, that is already done and has been operating since 2011. The US is trying to block Northstream 2.
2
The Fed said a few years ago that oil price drops were sort of a wash for the U.S., with consumers with more money in their pockets but reduced oil/fracking investment. I suppose that's why Trump and Co. are tweeting that it's good for America.
Gasoline prices have moved in a range around $2.50 since early 2015, so we'll see how much lower gas prices go.
1
I see something much more strategic in this decision. I believe that the Saudis went through with the Aramco IPO because they saw the handwriting on the wall. Their reserves will someday be essentially worthless as the production and use of fossil fuel necessarily declines in response to the threat of catastrophic climate change. So they decided to lay off some of the risk to investors by selling part of the company. This new production bump gives them the opportunity to mitigate some of the future impacts by getting it out of the ground now, further monetizing their reserves in the near term.
67
Yes, there seems to be some backend strategy or hidden collusion going on here besides just a history of bad cooperation between the countries.
5
Back in the 70's Carter struggled to make American Energy Independent due to OPEC shenanigans. The country was warned over and over and over to invest in renewables and keep off of foreign oil for the sake of national security.
And here we are. OPEC is once again going to manipulate the markets to hurt the United States and Russia is dancing a dervish in celebration (despite being the cause and the ones who angered OPEC).
Is anyone NOW interested in pursuing a renewables based future with Energy Independence as the goal? Anyone?
139
@Darin OPEC is not hurting the US. It is hurting itself and Russia much more. These economies are heavily dependent on oil revenues. Our economy is not.
Why can't anyone see this simple point?
16
@Greg
Probably because Putin and MSB, and by extension, Russia and Saudi Arabia, are the most sinister and corrupt forces on the planet and cannot be trusted on any level.
5
@Darin
The US is now pretty well import independent where oil is concerned... except when there is a collapse of oil prices in the market.
But even then... US oil companies simply stop pumping domestically and buy what they need off the open market. An OPEC v Russia price and delivery war actually helps US oil interests because of all the cheap oil on the market as OPEC and Russia try to undercut each other.
OPEC will win in the long run, simply because they don't need the influx of hard currencies that come with oil... whereas Russia does.
2
"Saudi Arabia and Russia...recently have cooperated in trimming production" to fix prices.
In business, there's a word for that kind of cooperation: "collusion."
If only the United States had an expert on collusion with Russia, preferably somebody who's on good terms with Mohommed Bin Salman and Vladimir Putin. Where could we find someone like that?
114
@Jim U Yes. This is why when people talk about "why can't renewable fuel just compete against oil on its own?" it's madness. It's not a free market. OPEC would be illegal in the U.S., but because we are dependent on oil we have to sit back and watch open international anti-trust activity, and read coverage of it like it's normal.
8
@MM
You willfully elide the fact that IN THIS COUNTRY, the subsidies on offer from government to fossil fuel extractors is orders of magnitude greater than subsidies for renewables.
Turn the tables and we could be free from the Putin and MBS shenanigans. Of course, both despots look at the US and see a big orange sucker in charge.
6
The coronavirus seems to be nature’s intervention in restoring equilibrium to a human race that is now governed solely on avarice and power, and which has lost all powers of reason, let alone good will among its peoples. History cleaves toward that solution, time and time again.
60
Trump and his economic advisors either didn’t see this coming, or Trump had no power to do anything to moderate its impact. Apparently Trump’s relationship with Saudi Arabia and Russia is more one-sided than we may have been lead to believe. What’s the point in having ‘beautiful” relationships with these countries if you can’t leverage them to influence policy when Americans are suffering greatly? One is left to conclude that Trump is promoting these relationships more in the hopes of future personal (financial) gain than in America’s interest. We’ve seen this story before.
181
@Kman This "policy" is a boon to Americans. Gasoline, home heating oil, diesel fuel, and all the petroleum derivatives become cheaper. Costs fall for the airlines, truckers, public transportation, and Uber drivers, as well as those who heat their facilities with oil. The travel industry, harmed by the coronavirus scare, will treat this as a gift from heaven.
And the harm done to the Russian and Saudi economies by the price war will be far greater than the harm done to our shale oil extraction industry.
16
@KR
It's my understanding that shale oil has to go to specific refineries that are located in Texas. This could cause a lot of layoffs in Texas. Louisiana is another state that could be hurt if the shale oil demands stops due to costs being too high.
These are two key states for trump.
32
@Greg What is the basis for your assertion that the harm to Russian and Saudi economies will be greater than to our own oil industry? Obviously the Russians and Saudis and don't believe that and are probably in a better position to know.
Moreover, the markets don't seem to predict that cheaper gas prices (@KR) will be some great boon to the American economy. On the contrary, the lower oil prices seem to be contributing to the coronavirus-related meltdown.
5