Momentous Change in US Crude Oil Market, with Global Impact

But US “Energy Independence” is More Complicated.

By Wolf Richter for WOLF STREET.

US exports of crude oil and petroleum products – this includes gasoline, diesel, jet fuel, naphtha, and many others – exceeded imports in September by 89,000 barrels a day, the EIA reported today, and so the US became a “net exporter” of crude oil and petroleum products for the first time on a monthly basis in the  EIA’s data going back to 1973:

The US has exported petroleum products – gasoline, diesel, heating oil, naphtha, propane, etc. – for a long time. This is the business some refineries are in. They buy crude oil from wherever they can get it, including other countries, and sell refined product to customers in the US and other countries.

For example, California produces some crude oil and gets some crude oil by tanker from Alaska and some by oil train across the Rockies. But there is no oil pipeline across the Rockies. So refineries in California, including in the San Francisco Bay Area, also import some of their crude oil from other countries, refine it, and then sell gasoline, diesel, and other petroleum products to other countries largely in Latin America.

Texas, the largest oil-producing state in the US, faces a still more complex landscape, with its enormous crude-oil production, its large refinery operations, pipelines connecting oil producers in the state to refineries in other states, and its import and export terminals, via which it both imports and exports various grades of crude oil and all kinds of petroleum products, depending on market conditions and other factors.

In other words, some of the crude oil that the US imports is then re-exported as value-added finished petroleum products, such as motor gasoline and diesel.

And so imports of crude oil exceed exports of crude oil, given that the US imports some of the crude oil for the purpose of re-exporting it as refined products. But this difference between imports and exports of crude oil has been plunging as well, to 3.4 million barrels per day in September:

Imports of crude oil and petroleum products from OPEC dropped to just 1.4 million barrels per day, the lowest in the data series going back to 1993, down 75% from 5.6 million barrels per day at the peak in 2008:

Saudi Arabia was in first place among OPEC countries, selling the US about 0.45 million barrels per day of crude oil and petroleum products in September – down 73% from 2003. Ecuador was in second place among OPEC countries, selling the US about 0.16 million barrels per day. Imports from Saudi Arabia are now minuscule and nearly irrelevant in the US, given the surge in US production.

US production of crude oil and petroleum products has spiked from 6.8 million barrels per day in 2008 to 17.5 million barrels per day in September, largely due to the ramp-up in shale oil production. Shale wells can also produce large quantities of gases that are counted separately as gas. These production figures here are just crude oil and petroleum products:

But “energy independence” is more complicated.

The US market is tightly interwoven with global markets, in numerous aspects. For example, unless a pipeline appears out of nowhere across the Rockies, the West Coast will continue to import foreign crude oil. Hauling crude oil via oil train across the Rockies is risky and expensive, and while this is being done to some extent, the added transportation cost renders this oil a difficult business proposition; and the risks of oil trains have engendered a lot of resistance in populated areas that the oil trains have to go through.

Then there are the various grades of crude oil and various petroleum products that are being produced and refined in the US and around the world, and it makes economic sense to trade with other countries – importing some and exporting others – to balance out the supply and demand equation around the world. So the US remains dependent on the global market, at least in normal times.

But the US cannot be blackmailed anymore over oil.

If another oil embargo came along, the US would just shrug it off, and when the price of oil rises due to this embargo, US drillers would ramp up production and within months, the world would be awash in US oil. In other words, the US cannot be blackmailed anymore over oil – the way it used to. And the world knows it. And that’s a form of independence.

The glut and the costs of shale oil.

That surge in production in the US over the past 10 years – from 6.8 million barrels per day to 17.5 million barrels per day – added nearly 11 million barrels per day to the US market, and thereby to the global market. And this completely changed global pricing dynamics.

As a result of this production boom in the US, the price of crude oil started to collapse in mid-2014. Today, at $55 per barrel of WTI, it remains about half of where it had been before the oil bust in early 2014.

US shale oil drillers are among the high-cost producers. They need a high oil price in order to sustain their businesses. You’d think that the collapse in the price of oil would have curtailed production, and it did briefly in 2015 and 2016 – see the dip in the chart above – but then new money started to pour into the sector, in the hope that prices would rise again, and they did, only to re-collapse late last year. But shale oil drilling is not sustainable at these prices, and investors are losing their shirts.

In 2019 so far, at least 33 oil and gas drillers in the US have filed for bankruptcy. Since January 2015, over 200 have filed for bankruptcy. Others are now jostling for position at the bankruptcy filing counter. Investors who’ve jumped into this in 2016, thinking they’d picked the bottom, have grabbed falling knives, and their fingers have gotten sliced off, including those of fracking billionaires. Read… Fracking Blows Up Investors Again: Phase 2 of the Great American Shale Oil & Gas Bust

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

 

  131 comments for “Momentous Change in US Crude Oil Market, with Global Impact

  1. Another Scott
    Nov 29, 2019 at 7:41 pm

    Even the phrase “energy independence” is problematic, because it focuses, often exclusively, on petroleum, ignoring other products, such as coal, electricity, natural gas, and niche products like uranium and now biomass. These are traded less than oil products, but should still be included when making any calculation about energy trade.

    • char
      Nov 30, 2019 at 9:48 am

      But those are in the US not significant imports. The only regional significant import, and you didn’t mention it, is electricity from Quebec.

  2. RD Blakeslee
    Nov 29, 2019 at 7:58 pm

    Some of us get all the energy we need for heating our houses totally outside the energy markets: Home-grown firewood.

    • 2banana
      Nov 29, 2019 at 8:32 pm

      Just a FYI.

      Many lib/prog areas now ban wood heating of homes. And you must register them.

      The deadline to register wood-burning stoves and fireplaces in Montreal was December 22, 2015…

      These types of bans are already becoming commonplace in the United States…

      https://www.naturalnews.com/052752_wood-burning_stoves_Agenda_21_Canadian_government.html

      • timbers
        Nov 29, 2019 at 11:28 pm

        Just an FWI.

        Canada is not the United States.

        As much as some would like it to be.

        The article you link makes no reference to lib/prog areas in the United States.

        It does reference Canada which is governed by a not lib/prog, pro war pro corporate pro business, worker hating PM.

        • 2banana
          Nov 29, 2019 at 11:52 pm

          Another FYI.

          You can freeze in the dark. It’s for your own good.

          SAN FRANCISCO — Wood-burning heaters — including modern pollution-fighting wood stoves — will not be permitted in new homes built in the Bay Area starting next fall, as part of a first-in-the-nation ban approved by air quality regulators Wednesday.

          https://www.eastbaytimes.com/2015/10/21/bay-area-first-wood-burning-heating-devices-to-be-banned-in-new-homes/

        • Lance Manly
          Nov 30, 2019 at 6:30 am

          Who is going to use a wood burning stove in the bay area?

        • Gandalf
          Nov 30, 2019 at 8:47 am

          Wood burns with more smoke and air pollution than coal.
          In the Texas border towns, almost all homes are connected to cheap clean natural gas, but not in Mexico. In the winters, the heavy smell of wood fires heating their homes often drifts across the border and hangs heavy in the air. You won’t encounter this degree of wood smoke pollution anywhere else in the US

          Wood burning stoves were a fad for a while, back in the nostalgic 1970s and 80s
          Many American homes, including the one I had in Ventura, CA, are built with fireplaces where you can burn wood logs. I never wanted to deal with the mess of burning logs, so I had one of those fake porcelain log sets with a gas burner that was designed to be used in the fireplace

          If it’s a lib/prog thing to ban burning wood, that’s a GOOD THING. Burning wood logs in the fireplace generates air polluting smoke, and unless you’re prepared for the embers they throw off (need screens) are fire hazards, which California certainly does not need more of. And they are messy to clean up.

        • nhz
          Nov 30, 2019 at 10:54 am

          Burning wood in simple heaters is a bad idea because of relatively low energy efficiency and relatively high pollution (especially NOx and soot), even more so in densely populated areas where the neighbours could get health problems. From what I understand there are some heaters around that do pretty well environmentally, but they are the exception to the rule.

          Here in Netherlands this also is a contentious issue. Quite a few people have switched to “green power” in the last decade by installing a wood burning stove instead of the usual gas boilers, which was subsidized for some time. With electricity power stations the same is happening now, our government heavily subsidized conversion of big gas/coal plants to “bio-fuel” which is often wood pellets imported from countries like Canada and the US (i.e. hauled over here from the other side of the globe, and produced at huge energy cost). And now that these plants are starting to operate it is obvious that they are really dirty and emit far more CO2 and NOx than the traditional power plants.

          You can always leave it to politicians to turn a problem into a disaster ;(

        • Redbriars
          Nov 30, 2019 at 11:27 am

          Just out of curiousity, does the “not” in your last sentence modify the word “lib/prog” or does it modify the whole clause? In other words, are you for him, or against him?

          It’s hard to tell

        • Rcohn
          Nov 30, 2019 at 1:59 pm

          Just last night there was a feature on the local San Francisco tv news about how strong the market for wood has been last year and so far this year.

        • Suzie Alcatrez
          Nov 30, 2019 at 2:21 pm

          Gandalf – Fairbanks is the most polluted city in the US and rivals Beijing on some days due to particulate smoke from wood burning.

        • alex in San Jose AKA Digital Detroit
          Dec 1, 2019 at 3:05 am

          Lance Manley you go 30 miles outside of San Jose here, or any major city, and wood burning for heat, bonfires, burning household trash, etc are all as well and fine as such practices were in the 1950s.

        • gary
          Dec 1, 2019 at 9:39 pm

          Great replies on this thread. I’m so glad to hear others also complain about woodsmoke.

          I think it should absolutely be banned in any urban area (unless of course you enjoy choking on noxious smoke).

      • tom
        Nov 30, 2019 at 9:02 am

        Ya der hey, no bans here in the land of snow & ice.

        Outdoor wood boiler, fireplace, and a burning barrel.

    • Unamused
      Nov 29, 2019 at 8:56 pm

      If you run out of matches you light the fire by rubbing together two pieces of dry wit.

      You could just plug in a politician and have him blow hot air, but he’s going to want campaign contributions.

      • otishertz
        Nov 29, 2019 at 10:04 pm

        A water filled condom in sunlight can lights fire.

        • 2banana
          Nov 29, 2019 at 10:16 pm

          Was the condom purchased at DollarGeneral?

        • phathalo
          Nov 30, 2019 at 12:01 am

          Does it have to be water?

        • Frederick
          Nov 30, 2019 at 5:53 am

          Never realized what a bunch of dirty olde pervs were reading Wolfs site They must be from California

        • Paulo
          Dec 1, 2019 at 7:43 am

          Wood Heat comment.

          Our stoves are 85% efficient with no discernible smoke, whatsoever. All modern stoves are. Our wood for heat comes from logging waste or from our property. Wood Heat is considered to be Carbon Neutral, as what is consumed is regrown. In fact, we grow 100X or 200X more wood than what we use for lumber or heating. The logging waste or dying trees release their C02 into the air the same as in combustion. I have not had a heating bill for 40 years, and this morning it is minus 8 C. Our house is 21 deg and the flames are visible behind the glass. Very cosy. In fact, I am writing this in my gitch and tee shirt with that 1st coffee.

          http://pacificenergy.net/support/tools/2gramemissions-2/

          Of course, this cannot be done in a city. It is probably the major reason why I will never live in a city, plus the crowds, noise, traffic, etc.

          My sister heats her home with nat gas, which releases fossilised carbon into atmosphere. So does everyone who heats with nat gas, and gas -fired/coal fired electricity. Just sayin’.

          The big plus is exercise. No gym pass needed. My 92 year old neighbour still heats with wood, in fact, I believe this simple chore is one of the routines keeping him healthy and alive.

          The key word in the article was ‘products’. US burns approx 18 million bbl/day and produces 13? It is still a net importer of petroleum and always will be as the Permian and Shale, itself, is said to be peaking…right now, actually.

          regards

          regards

      • rivereddy
        Nov 30, 2019 at 2:44 pm

        Buying politicians is an expensive way to heat, and they provide little in the way of light.
        But, if you are in business, they can provide other services, like tax relief and deregulation for your business, and may be an excellent buy in that way.

    • roddy6667
      Nov 30, 2019 at 6:50 am

      Wood stoves produce massive amounts of air pollution. Some lefties try to justify it by claiming that firewood is CO2 neutral in the long run. So are coal and oil. And that is only important to those who believe that CO2 is a poison gas, not a necessary ingredient of life.
      Vale, CO banned wood stoves decades ago. The air had gotten pretty bad there from all those wood stoves and fireplaces.

    • General
      Nov 30, 2019 at 7:58 am

      The reduction in crude.oil imports is a big win for national security no matter what the chattering classes, ideologues and nattering nabobs of negativity may say. As usual they are always wrong, never in doubt

      • rivereddy
        Nov 30, 2019 at 2:53 pm

        General, perhaps you did not notice the part about frakkers going bankrupt squeezing rocks for oil and their investors losing lots of money. Maybe you’re one of those investors, just livin’ the dream, abetted by a Fed makin’ low, low rates and easy terms.

    • Iamafan
      Nov 30, 2019 at 8:13 am

      I noticed NG wasn’t part of “oil” energy independence. That really is a big part of the equation.

      • Nov 30, 2019 at 10:50 am

        Iamafan,

        Yes, it is a big part of the question. The US has become a net exporter of natural gas on an annual basis in 2017, including by pipeline to Mexico and as LNG. There is bilateral trade with Canada by pipeline, with the US importing more from Canada than exporting to it. New England, including the Boston area, is not sufficiently connected via pipeline to the US production regions, so they import from Canada, and occasionally in the winter from other countries as LNG.

        https://wolfstreet.com/2018/03/02/u-s-natural-gas-lng-imports-exports-global-impact/

        That’s part of the problem in the US: the NG producing regions have come on line so quickly that pipeline infrastructure has lagged woefully behind, despite major efforts to catch up. This is still the case in the Permian, where much of the gas is flared because of insufficient take-away capacity.

        • John
          Nov 30, 2019 at 3:22 pm

          Instead of saying ” the gas is flared off because….” how about saying squandered, wasted, pissed away. Flared off makes it sound so innocuous.
          In the history of the oil industry, I wonder how much nat gas has been squandered by burning it off because it was too much trouble to deal with.
          We have been squandering natural resources in this country since the beginning.

        • Nov 30, 2019 at 3:26 pm

          Yes, this has been a waste of truly mind-boggling magnitude over the years, in so many ways.

        • PC
          Nov 30, 2019 at 9:32 pm

          Wolf,

          What about the human costs due to ingesting fracking fluid via polluted aquifers. What’s in fracking fluid? We don’t know because states like PA have made it illegal to know.

          Whats’s the health risks? We don’t know because states like PA have made it illegal for health care professionals to discuss it with their patients.

          The madness is appalling.

        • Nov 30, 2019 at 9:55 pm

          PC,

          Yes, the human costs of energy production can be staggering. My in-laws live in a suburb of Tokyo that is worrisome close to Fukushima. And the human costs there continue. All forms of energy production come with drawbacks. In some, (mountain top coal mining, fracking, etc.) the drawbacks are big, in others the drawbacks are a lot less bad. But they’re all compromises and trade-off.

          What humans need to do is reduce demand for energy by increasing energy efficiency in everything we do. And there has been some progress, but there is still a long way to go.

  3. Iamafan
    Nov 29, 2019 at 8:15 pm

    So they can’t OPEC us out anymore. Oil embargo erased from history. So what will be the new petrodollar or chinodollar recycling? I guess it’s USD debt standing alone.

  4. Augusto
    Nov 29, 2019 at 8:26 pm

    “Energy Independence”, is not just a slogan from the past but a public policy reaction to the OPEC cartel raising world prices on a “necessity” in the 1970’s (by 400% in 1974 alone). Every western government, including the US, put restrictions on exports and actively managed internal energy development. I’ll bet the EIA’s 1973 stat gathering you mentioned was part of this policy move (i.e. panic) that created all kinds of government organizations, initiatives and rules around Energy and Oil in the 1970’s. Now, oil is returning to what is was before 1970, a base commodity business, where the long-term price curve is angled straight down. And despite this price dejectory, the same downward one miners and farmers are on, there will always be investors thinking they can make a buck or speculators who believe they will beat the odds.

    • Gandalf
      Nov 30, 2019 at 9:39 am

      Like all commodities, oil prices go up and down, but the cycles for oil are long. Like all commodities, they follow market conditions of supply and demand.

      The 1970s were when US oilfields started to tap out. At one time, the US was the Saudi Arabia of the world. One of the reasons Japan attacked Pearl Harbor was because the US was the only country willing to sell oil to Japan, and that got cut off when Japan invaded French Indochina.

      The Arab oil embargo and the Iran crisis were the major events that caused oil prices to skyrocket, in combination with US fields running dry.

      I remember reading in the 1970s that the US had one of the largest known reserves of shale oil in the world, but the technology to extract it was not there and that it might cost $100/barrel to extract.

      By the 1990s, horizontal well drilling and fracking had been developed. This technology was first used in known oilfields that had run dry. The two technologies could squeeze the last barrels of oil out of those fields, and it’s always cheaper to drill in proven fields (hits rates for unproven fields generally ran about one oil strike for three drilled wells)

      What made shale oil/gas fracking take off was when oil prices did go up to over $100/barrel in the mid 2000s. This was caused by a combination of China’s massively booming economy and the uncertainties created by the chaos of the Iraq War.

      The future suggests further global increases in demand for oil from India and Africa and Southeast Asia as those economies start to grow – these are places with huge still growing populations

      Unless fusion energy finally becomes a reality, oil and gas will still be the the cheapest source of energy available 24/7. That is the real unknown here a potential complete paradigm shift

      • Augusto
        Nov 30, 2019 at 10:48 am

        I remember when I first joined the oil industry years ago and the old hands just laughed when people claimed “we were running out of oil”. The earth’s crust is literally soaked in hydrocarbons, oil, coal and natural gas. It’s just a question of cost and technology. Even for shale oil, there are so many shales, clays and other formations that hold oil that fracking can’t get at….yet. To me the question is real how much of these hydrocarbons we can burn before we choke ourselves and our planet to death….My guess that will come long before “we run out”

        • Adam
          Dec 2, 2019 at 11:10 am

          “Running Out” as you have stated is not the issue, our civilisation is having to tap lower and lower quality sources of energy.

          For example oil onshore, then offshore, now tar sands and fracking, these shales are what they refer to as the
          “source rocks” there is nothing else, literally the bottom of the barrel.

          You can see the effect of this on the companies bottom lines, none of these frackers are making money on this resource.

          When is the price going to really rise so we can make some money now that all the good quality stuff is gone??

      • nhz
        Nov 30, 2019 at 11:02 am

        cheapest available 24/7 indeed, but when good storage solutions for solar and wind become available everything changes – because those are already cheaper when they can be directly used (e.g. wind power in recent parks in the Netherlands, and solar in many parts of the world).

        Such a storage solution is far more likely within a reasonable time (1-2 decades) than cheap fusion power (which seems to have been at least 30 years in the future for several generations already, and it getting more astronomically expensive every year …).

        • Gandalf
          Nov 30, 2019 at 12:07 pm

          Thirty years ago, we did not have EVERY major industrialized country engaged in at least one, and sometimes far more than one fusion energy projects. All are different designs. The profusion of ideas and money spent has never been greater.

          Controlled fusion has already been achieved. The problem is sustaining the fusion, and getting more energy out of it if than inputted. Those are doable engineering challenges, not science fiction fantasy, much like manned flight in the late 1800s or sending man to the moon in the 1950s

          Wind power is well known to Kill large numbers if birds. Most people just haven’t bothered to check this fact out yet.

          Batteries? Just as eco-hostile once you actually look. From cobalt bring a conflict mineral in the Congo to future destruction if seafloors to these spent batteries piling up in landfills, no, good.

          Solar energy with hydrogen fuel cells (even with the chemical inefficiencies) make much more sense

        • nhz
          Nov 30, 2019 at 1:13 pm

          @Gandalf:
          I haven’t seen any credible fusion proposal that aims to be net energy positive on a useful scale (not too small or too big) within 30 years, despite (in many cases) staggering costs. It could happen, but I’m not counting on it after so many years or false promises. And then there is still a significant problem with nuclear waste (although small compared to fission technology).

          Yes, alternative energy has their own risks especially with large scale installations. Damage to sea birds could be one of those (the Dutch wind parks are far from the coast and much depends on if they can keep birds away from those off-coast installations). Another problem is damage to sea life due to the loud noises of drilling for the foundations of those huge windmills.

          Agree about batteries in general, but it depends very much on the technology. I worked on bio-solar long ago (using purple bacteria) and would prefer small scale installations whenever possible, where energy is produced directly as bio-fuel or stored with fuel cells. There is interesting biochemical research currently for direct production of H2 with solar energy (e.g. using modified Hydrogenase) instead of with electrolysis or other expensive and inefficient technologies. Also lots of interesting research aiming to use solar to directly capture CO2 and use it to produce biofuels – similar to what plants are doing but producing e.g. methanol instead of sugars. IMHO this is more promising than fusion and far less risky, but it’s not economical yet (possibly in 1-2 decades).

        • Gandalf
          Nov 30, 2019 at 3:05 pm

          The main reasons for optimism for fusion are that multiple countries besides just the Soviet Union and the United States are now working on fusion

          What caused the long lag in fusion energy development was the decisions of both countries to focus for three decades only on the tokamak design, and the deuterium tritium reaction. These choices, clearly, I believe will prove to be dead ends, which means of course that ITER, which is based on the ultimate expression of that path, will be a hugely expensive waste of time and money.

          The laser inertial confinement idea was an offspring of the Star Wars programs to build giant lasers – lasers are inherently highly inefficient and this path will not work either for net positive energy production

          Many new ideas are finally being tried – plasma focus, initial electrostatic confinement, and field reversed configuration.

          The aneutronic path with hydrogen boron fusion, although requiring much higher temperatures, has the promise of ZERO radioactive waste, and a means for DIRECT energy conversion to electricity

          That’s the reason for optimism. The next thirty years are definitely going to see more progress than the last thirty years, which were working towards a dead end

        • nhz
          Nov 30, 2019 at 4:39 pm

          @Gandalf:

          just imagine that real competition in fusion research develops to the 100 billion or so or so ITER boondoggle (100B by the time they finally admit it won’t work). There will be whole EU agencies working overtime to prevent that from happening, gotta keep the money flowing ;(

          Newer fusion approaches might work but still, I haven’t seen anything that looks solid. When I was studying long ago, some mavericks in my country were experimenting with artifical Ball Lightning, which was supposed to be some kind of fusion. But they quickly ran out of money and support; I heard they are looking into that again.

          For now I will settle for a free fusion reactor at a safe 150M km distance ;)

        • char
          Nov 30, 2019 at 6:15 pm

          ITER was IMHO more a way to finance engineering excellence with high temperature superconductors than a research into fusion. For that it was worthwhile

  5. 2banana
    Nov 29, 2019 at 8:27 pm

    The chart of “US Imports from OPEC” makes me smile looking at 2018.

    Right off the freaking cliff.

    The first time in two generation – OPEC can go crazy, bonkers for F themselves, and America wouldn’t even yawn.

  6. Nov 29, 2019 at 8:37 pm

    US imports 6-7 million barrels of crude oil per day, most of it from Canada and Mexico, sez EIA.

    https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epc0_im0_mbblpd_m.htm

    Can the US be blackmailed by an overseas petro-state? Of course we are right this minute. Saudia, Russia, Brazil, even Mexico have the goods on our so-called ‘political leadership’, they don’t even have to threaten us any more. We’ve lost the will and common sense needed to gain control over our own destinies.

    But we do have cars, so there’s that.

    • Nov 29, 2019 at 9:00 pm

      steve from virginia,

      You just willfully ignored one side of the equation and then drew a conclusion. I explained this in the article.

      In September the US imported 6.5 million barrels of crude oil per day AND it EXPORTED 2.9 million barrels of crude oil per day. The US imports crude oil from Mexico but it exports gasoline and diesel to Mexico. Gasoline and diesel don’t count as “crude oil,” they’re “petroleum products,” as I explained — hence the importance of “crude oil and petroleum products,” of which the US exported more than it imported. So have a look at the article.

      • Gandalf
        Nov 30, 2019 at 9:49 am

        In fact 60% of Mexico’s gasoline now comes from the US. Most of Mexico’s corn now comes from the US. NAFTA wiped out Mexico’s small corn farmers.

        This didn’t increase jobs in the US, BTW, as US farms are massively mechanized and automated, as are the refineries. It did increase sales and PROFITS for US agribusiness and the oil refineries

        Y’all understand now where the jobs went?

    • Nov 30, 2019 at 3:00 pm

      The US can be blackmailed, and probably is happening as we speak. We export oil to China, which is now making strategic alliances with Iran for oil. The underbelly of this concerns the petrodollar, the rise of the Yuan, and continued Chinese investment in Iran. US sanctions are in place against Iran but obviously we ignore them where it concerns China. https://www.reuters.com/article/us-iran-nuclear-usa/china-criticizes-new-u-s-sanctions-over-iranian-oil-deals-idUSKBN1WA1M6 US exports to China are down due to trade wars but still significant. https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTEXCH1&f=M The US would be even more energy independent without that deal. HK is sidebar. There is a problem with military aid to Iran, and protecting old friends in SA. What would the loss of that export market do to US energy prices? The shale oil revolution is built on cheap credit, is there a reverse effect when prices fall? Wall St seems to hang on this deal at every turn, now maybe we know why. Blackmail is such an unpleasant term.

  7. Unamused
    Nov 29, 2019 at 9:14 pm

    “Energy Independence” is More Complicated

    It’s further complicated by the fact that the fossil fuel industry gets five or six trillion a year in subsidies, plus the losses due to oil company bankruptcies because of heavy expenditures and policies of low prices, plus externalities like pollution and other environmental degradation, climate change, damage to public health, and the occasional earthquake, none of which ever seem to figure in any official calculations.

    ‘Energy independence’ evidently comes with truly spectacular costs, a great deal of which will never actually be covered.

    • 2banana
      Nov 29, 2019 at 9:44 pm

      $6 Trillion a year in subsidies to evil oil corporations?????

      That is quite a conspiracy.

      Hint: the entire proposed 2020 American budget is only $4.7 Trillion

      • Mean Chicken
        Nov 29, 2019 at 10:32 pm

        Perhaps, but it sounded like a really strong argument, authoritative on an MSM level, not compounded felony level.

        • phathalo
          Nov 30, 2019 at 12:14 am

          Thanks for link.
          Had quick read:
          1. That’s figure for global subsidies
          2. Authors tried to factor in Environmental and other externalities costs
          3. It covers all types of fossil fuels (e.g. Coal)- not just oil

          The largest subsidizers in 2015 were China ($1.4 trillion), United States ($649 billion), Russia ($551 billion), European Union ($289 billion), and India ($209 billion).

        • SaltyGolden
          Nov 30, 2019 at 3:04 am

          I think this is something to gently feel good about, at least for a moment… am I wrong?

        • Happy1
          Nov 30, 2019 at 10:58 am

          On a per kilowatt hour basis, the subsidies for wind and solar dwarf those for fossil fuels in the US, although the difference is declining.

          https://www.forbes.com/sites/jamesconca/2017/05/30/why-do-federal-subsidies-make-renewable-energy-so-costly/#2c026d6c128c

          And there are very real collateral costs for solar and wind that are completely ignored in most accounts (deaths of migratory birds, cost of mining materials for solar arrays, mining Lithium for battery arrays, land use for large scale solar and wind).

        • nhz
          Nov 30, 2019 at 11:11 am

          just for the record: the most recent wind parks in Netherlands are build without any government subsidies and for some new solar installations subsidies are also low or even zero because it is now competitive without subsidies (but depending on the situation and kind of use, not always).

          But in general these subsidies are indeed a problem but they are necessary to jumpstart the transition (if only because of the existing huge subsidies and tax exemptions for fossil fuels). This is most evident in EV subsidies, which require a HUGE amount of money with very little environmental benefit at best.

        • wkevinw
          Dec 1, 2019 at 12:05 pm

          The (subsidy) dollar figures are very misleading (see phathalo reply), but the overall point is valid. The subsidies are bad and should stop. Note: I do business in this industry.

    • nhz
      Nov 30, 2019 at 11:07 am

      Agree, and there is the another cost because local US oil production is tied to its finance economy, where huge amounts of “free money” from the stock market (FED) are available for fracking and because it is tied to continuing inflation (of oil prices, but that means basically for almost everything) and US$ reserve currency status. If oil prices really start deflating say goodbye to that energy independence.

  8. otishertz
    Nov 29, 2019 at 9:46 pm

    Aboliotic oil is more than a theory Fossil fuels is a misnomer.Oil is not dinosaur juice or plankton.

    Hydrocarbons aka mineral oil are gotten from deep earth processes that actually bubble to the surface

    • otishertz
      Nov 29, 2019 at 10:18 pm

      “Abiotic oil” is a real thing.

    • Gandalf
      Nov 30, 2019 at 11:21 am

      The abiotic theory has been around for a long time.

      My dad was a geophysicist for Mobil Oil and his livelihood depended on his success in finding new oil/gas deposits for Mobil. He was, apparently, one of the most successful at this job in his time. I asked him about this abiotic theory once and he thought poorly of it.

      The reason was simple. Every successful new field he found was in SEDIMENTARY ROCK, meaning rock created millions of years ago by layers of stuff buried on top of each other and then crushed and folded and buried under other rock or upheaved by the Earth’s crustal plate tectonics.

      He used to joke when we passed a cemetery that someday millions of years from now that would be an oilfield

      In fact, in Earth’s ancient past, there was a MASSIVE explosion of plant life. Trees evolved, which sequestered the CO2 in the air as wood and turned released oxygen. Bacteria to digest the tough cellulose and wood did not evolve as fast and so those dead trees and other plant life did not decompose, but got buried intact in the sedimentary rock, which then got reburied and crushed by plate tectonics.

      In the beginning, Earth’s atmosphere had little oxygen and was high in CO2. This natural carbon sequestration by plant life caused CO2 levels to plummet and O2 levels to go up to 30% or more. This high O2 concentration was what allowed for the ancient giant dragonflies as big as eagles.

      Anyway, some of those organic deposits got squeezed into coal – you can find coal lumps with leaf imprints on them. Some, if mixed with water, got squeezed into oil and gas.

      The Swedish government became enamored with this abiotic origin idea and spent some $40 million with other investors drilling the world’s deepest dry hole in the Siljan Ring in the 1980s. So much for that idea.

      There’s lots of evidence to suggest that SMALL AMOUNTS of abiotic oil/gas collect in rock formations, and are generated from deep within the Earth. The problem is that these are NOT COMMERCIALLY VIABLE quantities and no working geophysicist in the oil business is going to base his/her career telling telling their companies to spend millions drilling in places based on this idea. If you do, you’ll end up a massive flop like the Siljan Ring failure

      • otishertz
        Nov 30, 2019 at 12:49 pm

        My understanding is that Russia has been very successful in exploiting Abiotic oil from strata below the buried graveyards of past flourishing masses of organic matter. Don’t they supply like 80 percent of the oil to Europe?

        All I’m saying is consider a different possibility. What if oil is not a limited resource? If you were an oil producer wouldn’t you want people to believe it was a scarce resource?

        Wasn’t peak oil supposed to be decades ago? Why do “spent” oil Wells begin producing again?

        • Gandalf
          Nov 30, 2019 at 3:57 pm

          Here’s a good article that deals with all you questions about abiotic oil:

          http://www.diva-portal.org/smash/get/diva2:338107/FULLTEXT01.pdf

        • Gandalf
          Nov 30, 2019 at 4:08 pm

          Bottom line: a few oil deposits found trapped under nonsedimentary rock likely migrated there from nearby sedimentary deposits through common boundary layers. There’s been lotsa crustal motion to mix things up like that. The really big oilfields, including those in Russia, are in sedimentary rock formations

          And, nobody has made any money drilling for abiotic oil, although such a thing could exist. It’s a huge money losing idea right now. Feel free to lose more money chasing this dream

      • otishertz
        Nov 30, 2019 at 1:06 pm

        By the way, plant growth is optimized at about 1200ppm co2. Current atmospheric co2 levels are about a third of that. I make a living dosing plants with co2 in controlled environments.

        Co2 is not a problem. It is a diversion from the real problem with “Fossil fuels” which is persistent pollution.

        • nhz
          Nov 30, 2019 at 1:39 pm

          Plant growth is not optimized at way above current CO2 levels. Plants do not just grow and optimize for maximum growth, they have many different activities. There is a lot of wrong information going around about this subject e.g. regarding the basic carbon fixing protein Rubisco which has to balance carbon fixation with photorespiration, heat stability etc.

          CO2 is a potential problem for sure, the last time CO2 concentrations near current level existed temperatures were up to 8 degrees higher than they are now and sea levels were way higher. If that happens again (as CO2 concentration keeps going up) 95% of the developed world will be under water, even 2-3 degrees of warming will already do it (but a bit slower).

          Fortunately that wont happen in just a few decades but higher CO2 concentration for sure is a big problem for human society; and unfortunately because it takes time there will continue to be people who claim that CO2 is no problem at all so we do nothing and let things get completely out of hand :(

        • otishertz
          Dec 1, 2019 at 4:01 am

          I appreciate what you are telling me. I’m only speaking about plant growth from personal experience of a few thousand crop cycles. Plants like up to about 1200 ppm. They like 800 ppm too. Seems likely to me that they evolved in a much higher atmoshperic co2 level. Good? bad?

          Climate is probably changing. No argument there. Change is the only constant with climate. I’m more concerned with pollution because it has a more immediate effect on the public health than a gradual change in the weather.

      • nhz
        Nov 30, 2019 at 1:25 pm

        Just for the record, the high O2 concentration allowed giant dragonflies (with 70-80cm wingspan) but was not a requirement. Dragonfly fossils almost as large have been found from much later periods when O2 level was very similar to what it is now; so clearly O2 is not THE factor for dragonfly size. It’s an interesting example of how science can be wrong, I was told the same story in school and possibly still at university when I was young …

        The new theory is that giant dragonflies disappeared because they were out-competed for larger prey by newer, more intelligent or efficient lifeforms like birds and later on sometimes bats. They continued to exist for smaller prey (like small insects) where they had less competition from birds.

        Agree that abiotic oil is probably a sideshow but it’s interesting that many of such important issues are scientifically tough to decide.

        • otishertz
          Dec 1, 2019 at 4:11 am

          That was awesome.

    • David
      Nov 30, 2019 at 11:59 am

      Even today’s oil producers debunk this hypothesis …
      https://rationalwiki.org/wiki/Abiotic_oil

      https://skeptoid.com/episodes/4616

    • Lisa_Hooker
      Dec 1, 2019 at 9:42 am

      Many seem to express the view that abiogenic and fossil oil are mutually exclusive. They are not.

    • hidflect
      Dec 2, 2019 at 4:50 am

      I got tired of the to-and-fro in the abiotic argument so I developed one argument that ends the debate. There is no oxygen in oil. There’s a ton in all life forms.

  9. Iamafan
    Nov 29, 2019 at 9:51 pm

    I guess the point is fracking is expensive. So energy independence is just deciding whether we fund the frackers or import from Saudi Arabia and tell them to buy our bonds. Choices.

    • Mean Chicken
      Nov 29, 2019 at 10:27 pm

      Saudi Arabia wins hands down, we hate ourselves that much (red/blue divide).

  10. JB
    Nov 29, 2019 at 9:56 pm

    well lets all pray then that the price of oil remains “buoyant” . but you first.

    • David Hall
      Nov 29, 2019 at 11:37 pm

      The US refineries are configured to process heavier crude than West Texas light. Some refinery conversions are occurring.

      The Canadian dollar was weakened by falling oil prices. Processing tar sands is not cheap.

      Some called oil companies evil, but reaped the benefits of internal combustion engines, nor could they collect enough people to boycott the use of these products including gasoline, jet fuel and ethane feedstock for plastics and other polymers.

      The German wind power market is saturated. They are still mining coal. Natural gas produced by oil companies is less carbon intensive.

  11. Mean Chicken
    Nov 29, 2019 at 10:13 pm

    “the US cannot be blackmailed anymore over oil – the way it used to. And the world knows it. And that’s a form of independence.”

    And thus, the $US is absolutely headed for the dumpster (I keep reading this, repeated over and over for decades, seems like trolls have infiltrated the internet and MSM).

    • Dan Pearl
      Dec 1, 2019 at 10:11 am

      I’ve noticed that. A lot of younger americans who are not doing well financially seem to be wanting the US economy to fail. Personally, I think as long as the US keeps investing in research and technology the future will be bright. Just need to stay out of wars and hopefully fix healthcare.

  12. WES
    Nov 29, 2019 at 10:55 pm

    And all this time I was lead to believe the Fed was converting “printed out of thin air” money into something real, like oil!

    • Unamused
      Nov 30, 2019 at 1:15 am

      The Fed prints money just to mess with you, mostly to make the owners richer by making you poorer. It’s sortof what they’re for.

  13. Harry
    Nov 29, 2019 at 11:40 pm

    Wow, exports from OPEC dropped 2/3rds under Obama and exports doubled?

    • Happy1
      Nov 30, 2019 at 10:47 am

      Yes, Obama mocked his Republican opponent for a strategy of “drill baby drill” in 2008, and then ironically, the fracking revolution happened without his approval, and we did drill our way back to near 2$ gasoline. He owes Sarah Palin an apology.

      It’s one of several instances where Obama has proved wildly wrong (mocking Romney about Russia being our most important geopolitical foe in 2012, now Russia is the idee fixe of the left because “Trump”, confusing the Arab spring for New England circa 1776, declaring his Presidency as the moment the “rise of the oceans would slow and the planet began to heal”,etc). Hard to heal the planet when you’re doubling oil and gas drilling.

      But I will give him full credit for winding down our involvement in Iraq, if not Afghanistan. Weirdly, Trump has been even better for reigning in our overseas military involvement. Who would have thought? Perhaps Obama should give Trump his I’ll gotten Nobel Peace prize?

  14. Lance Manly
    Nov 30, 2019 at 6:44 am

    The amount of gas flaring in the Permian basin is a crime. https://www.rystadenergy.com/newsevents/news/press-releases/Permian-natural-gas-flaring-and-venting-reaching-all-time-high/

    “Flaring and venting of natural gas in the Permian Basin in Texas and New Mexico reached a new all-time high in the first quarter of 2019, averaging as much as 661 million cubic feet per day (MMcfd), according to research conducted by Rystad Energy. This widespread waste of a valuable commodity is the result of persistent infrastructure challenges, a lack of sufficient takeaway capacity and an unexpected outage on a key pipeline in the area.”

    They should have help back bumping up production until pipelines were put in to make the gas useful. And this is Texas, so environmental regulations are moot. But I guess when you are going bankrupt you just don’t care.

    • nhz
      Nov 30, 2019 at 1:45 pm

      In general the pollution of ground water and nature in general due to fracking (and other extraction technologies like with tear sands) and increased surface instability are also going to be big problems. By that time most of the people/companies who made their money with fracking will be gone or untouchable and the taxpayers and individual victims will have to bear the cost.

    • Gandalf
      Nov 30, 2019 at 5:42 pm

      Obama had instituted a regulation that all new oil wells drilled would gave to collect the natural gas and not flare it off. Trump nixed that regulation.

      Land and homeowners suing frackers is already big business for lawyers in Texas, Pennsylvania, Oklahoma

  15. Cafe Baghdad
    Nov 30, 2019 at 7:01 am

    How does buying less opec oil affect US exports such as big ticket, big profit, items such as airplanes, construction equipment, drilling equipment, weapons?

    Opec folks are the biggest buyers are they not?
    If the Opec folk get less oil revenue they will spend less. Less Escalades, less private jets, less silly spending on US goods.

    In a global economy slowing the velocity of money will surely have a negative impact on a big ticket exporter like the US. Once those companies get hit and go broke, which they will, like GM did, the effects, the scars will last possibly forever, the lost jobs, broken communities in the US are bearing the brunt of this. That has knock on effects on the local economies too: on housing, builders, car sales, wallstreet gets hit because lower oil prices effect the balance sheets of the biggest oil companies which happen to be American. That hits pension funds and pensioners aka the consumer. it’s a downward spiral.

    Hillbilly stupid if you ask me.

    • Nov 30, 2019 at 10:35 am

      Cafe Baghdad,

      There are other folks out there buying OPEC oil, including China and India. The growth in consumption of petroleum products in those two countries is what has kept the oil story alive because transportation fuels have been a no-growth story in the developed economies for years. Now all eyes are on China and India, and there have been signs of weakness in growth too recently.

    • cb
      Dec 2, 2019 at 1:18 pm

      If less dollars are expended on opec oil, then those dollars will go elsewhere.

  16. raxadian
    Nov 30, 2019 at 7:11 am

    And all it cost is scamming bilions out of people thanks to fracking for oil not being profitable.

    And let’s not even start with fracking for metals and minerals, that one pollutes so much babies are literally born poisoned, if they get born at all. And yes I wish I was joking.

    • Anthony Aluknavich
      Nov 30, 2019 at 1:34 pm

      Fracking for minerals? Sounds like you don’t understand the process of hard rock mining.

      Oh, BTW, we have been “fracking” oil wells since 1920 in the U.S. How else is a driller going to break the hard rock formations to get the hydrocarbons out?

  17. Joe
    Nov 30, 2019 at 7:39 am

    Wolf,
    I am really impressed on how the US sanctions are losing their bite as countries replace out of the SWIFT system for the new INSTEX.
    I imagine that too will effect the dollar as countries now can bypass the reserve currency.

    • Xabier
      Nov 30, 2019 at 3:00 pm

      Failure of sanctions might make strategic planners in the US resort to other means in desperation – not at all an agreeable prospect.

      Empires are most dangerous when the grip is beginning to weaken but dominance still seems possible.

      The US is clearly on the long-term slide, we should all be wary of the consequences……

  18. james wordsworth
    Nov 30, 2019 at 9:20 am

    Just think what would happen if americans actually drove fuel efficient cars instead of all those ridiculous gas guzzling SUVs and pickups.

    There might actually even be a trade surplus! or we might have a small chance at avoiding a climate disaster.

    Remember – just because you can (waste), does not mean that you should (waste). We do all live on just one small planet with 8 billion other folks.

    • nhz
      Nov 30, 2019 at 4:55 pm

      Add some changes to all those supersized McMansions, supersized American diet, overstretched military and overconsumption in general and you have potential for real change. Not just in the US of course, but it’s more obvious there that politics will ignore the most obvious options for avoiding disaster because they cannot benefit (especially in the short run) from such a change of direction.

      In my country there is a lot of noise about fighting climate change, with hugely expensive plans that accomplish a lot on paper but very little in real life; it’s basically paper shuffling and pretending that something is done. Listening to recent ECB and EU policy speeches things will get even worse soon. Problem is that for politics the economy, and especially the profits of the old multinational establishment (financials, oil industry, Big Agri, weapons industry etc. etc.) must continue to grow. Living within your means regarding diet, home, car, vacations etc. etc. doesn’t fit the thinking of “no limits to growth” that all politicians in the West still seem to have – including most of the Green Party folk.

      I have no doubt the planet could handle 10 billion people without environmental disaster – but with the current US lifestyle even 1 billion would be too many to avoid disaster.

      • otishertz
        Dec 1, 2019 at 4:51 am

        Continual compound growth is maintained as a media mantra because the financial system is built on continual compound interest. Easy money and forced low interest rates pull demand forward and thereby waste resources. The necessity of compounding interest is in the interest of the status quo and ensures rapid resource depletion that will probably span generations.

        Conservation and efficiency are more important than growth long term but also not inconsistent with long term growth. The Earth is large with lots of room so I don’t subscribe to the advertised doom about overpopulation or climate. There are other pressing problems like financial instability, insane mispriced debts, negative interest rates, unsustainable asset bubbles, and the eugenic medical services industry.

        Maybe, if the whole thing falls apart, it will be mostly only financiers and rentiers that feel the pain. After all, goods will still flow when stock prices are low.

        • nhz
          Dec 1, 2019 at 5:33 am

          The current financial system is a bad incentive for sure, but we can have “growth” (in e.g. GDP) while strongly reducing resource use at the same time, by shifting to a less material consumption pattern (which in fact may be happening in some areas) and encouraging sustainable technologies. But this would be totally contrary to the current consumption economy that everyone has grown up with and that politicians and banksters love; difficult to change things especially when the bad consequences are easy to escape for the elites, for now.

          I doubt the rentiers will feel the pain if it all falls apart, they are counting on their money and power to stay ahead (e.g. by moving to countries where the bad consequences have not fully arrived yet). In a world were money and power have no value, 99% of the population in the developed world would quickly perish because they have no way to acquire the basic necessities.

          Climate change is a very pressing concern in some parts of the world already, within a few decades already countless millions will be forced to move or die. While all those financial problems have a huge social cost, a financial crisis has a low kill rate, life goes on. BTW, I think a lot of goods will stop to flow when stock prices are low – much of the current economy is hooked on easy money and it would cease to function without it. Agricultural production (based on cheap energy, water, fertilizer, pesticides etc.) is a prime example that cannot survive in a very different world, it would be back to small-scale sustainable production and in many parts of the developed world that is no longer an option.

    • Serge
      Nov 30, 2019 at 10:18 pm

      Just think if Americans would grow their fruits and vegetables in their massive yards instead of grass. Just imagine how much diesel you could save by not transporting food from mexico or other parts of the country. Save a trip to the store, eliminate packaging waste, get a real organic vegetables, better health etc.

  19. Laurel Phoenix
    Nov 30, 2019 at 9:58 am

    Wolf, if you are assuming that conventional oil and fracked oil are all “crude oil,” then I’m not sure we’re so independent from OPEC, since fracked oil is too light to be useful for what the country uses most (diesel). It’s mostly only useful for making plastics. Since our energy problem is mostly a transportation fuels problem, fracked oil doesn’t help us there. Our conventional crude production has not increased, but decreased, and only fracked oil has increased. But it only increases if new suckers can be brought in to invest in it, since it costs more to produce it than they can sell it for.

    • Nov 30, 2019 at 10:58 am

      Laurel Phoenix,

      Just look at the numbers and charts in the article, including the chart on imports from OPEC. As the article points out, “energy independence” is complicated in the US, including for the reasons stated in the article, such as geography, with there not being oil pipelines from the producing regions east of the Rockies to the West Coast. It’s a global business, and US refineries are heavily woven into this global business, exporting finished petroleum products such as gasoline and diesel to other countries, including Mexico, from which the US imports crude oil.

    • Anthony Aluknavich
      Nov 30, 2019 at 1:41 pm

      Laurel, we have been “fracking” wells in the U.S. since drilling started over 100 years ago. And we use natural gas as a feedstock to make plastics, not oil.

      Wolf: maybe a short course on what “fracking” really is should be presented as most people here don’t understand that it’s been part of the normal (conventional) oil drilling and well completion process for a long time. Recent horizontal well drilling into hard shales uses a modified fracking process with more materials (water, ssand, chemical, etc) and higher pressures to break the hard rock in longer runs of horizontal well legs. Just my 2 Cents.

      • Laurel Phoenix
        Nov 30, 2019 at 6:14 pm

        Anthony, sorry, I wasn’t being specific when I said “It’s” since there I was thinking of all products produced from fracking, including gas.

  20. IslandTeal
    Nov 30, 2019 at 10:57 am

    Morning.. Good article and comments. Let’s all hope that GretaT doesn’t ever get a link to WolfRichter… LOL

  21. LouisDeLaSmart
    Nov 30, 2019 at 11:29 am

    \\\
    It is absolutely fascinating how this small fact can change the world.
    \\\
    So far the US was interested in low prices to be able to afford oil. With domestic oil capacity growth, the interest are now to have higher prices for it’s products to be competitive on the market. The foreign pollicy will always be aligned with economy, but it’s strategy might be heavily influenced by this event. Let’s see who gets their way, the oil lobby or the war lobby?
    \\\

    • nhz
      Nov 30, 2019 at 1:48 pm

      seems to me the oil lobby and war lobby both LOVE the Forever War, they are both on the same side.

      • LouisDeLaSmart
        Nov 30, 2019 at 2:15 pm

        \\\
        To clarify, it’s a matter of how the war machine makes money. If they sell their merchandize to foreign countries, noone really cares. But if these exports seize, the largest buyer is the US, meaning US soldiers need to go to war. So, yes, they are in bed together, it’s just how they will make the money that differs.
        \\\

        • Rcohn
          Nov 30, 2019 at 3:03 pm

          Three interesting facts about crude from the Permian basin.
          1.Natural gas from that area was selling below zero at times this year.Natural gas is a byproduct of oil fracking.It can either be flared(burned),injected into the ground or put in storage. There are environmental limits to how much and how long natural gas can be flared. Lacking the expensive equipment to reinject the gas back into the ground,oil drillers have paid storage companies to take natural gas .
          2.Oil from the Permian and the Delaware Basin trade at a discount to WTI oil , even though oil from the Permian is higher quality crude(less sulfur content). This is because the refineries along the Gulf coast altered their mix to refine more heavier oil from countries such as Venezuela.
          3. Very few companies have made money fracking oil in the Permian Basin if you include not just the marginal cost of getting the oil out of the ground , but the cost of capital.
          OXY has been among the few who have made money overall , while its takeover partner APC is at the other extreme.

  22. Joe
    Nov 30, 2019 at 11:30 am

    Wolf,
    The one ingredient that the Climate Emergency folks have missed in their push to impose this tax is fuel is mostly composed of water. The crude is imposed with steam to get that octane and other chemical components.
    Soooo, the carbon measurements are incorrect as they include water in their weight components which don’t burn and come out the exhaust.

    • Nov 30, 2019 at 3:08 pm

      Joe,

      Not sure where you got your theory. Hydrocarbon molecules consist of hydrogen and carbon atoms. For example, methane (main ingredient in natural gas) = CH4. Water molecules consist of oxygen and hydrogen atoms (H2O). There is no carbon in pure H2O.

      In fracking, the processing equipment at the well separates fracking fluids, including water, and debris coming out of the well from the hydrocarbons, and the hydrocarbons are processed into gases and liquids, etc.

      “Production” at the well is measured in hydrocarbons not in the amount of frack fluids or water.

      Then at the refinery, the petroleum products are produced that the end-user (industrial companies, consumers, etc.) consumes, such as gasoline, diesel, lubricants, bitumen, wax, etc. If contaminants in these products reach a certain level, the product is rejected.

    • Joe
      Nov 30, 2019 at 8:04 pm

      The steaming process helps to suspend the hydrocarbons (octane). Similar to Kerig coffee makers do for the coffee carbons. The chem trails from jets are too releasing water vapour along with a minute burnt carbons ( monoxide). Cold air shows this as well with cars.
      I have also had the experience of fuel jellying at minus 50 back in the middle 80’s.
      Mixing alcohol with fuel is also creating a vast array of problems for our machinery.

  23. DR DOOM
    Nov 30, 2019 at 1:16 pm

    Momentous will be when gasoline goes over $3.50 a gallon in the US market. Natural gas will follow .We are pretty much in Homer Simpson auto-pilot mode till then. I burn locust and hickory for the winter. Nothing better than having the front door open in the middle of winter while having a full body heat soak nap after a good lick on a spey side scotch. Even the old springer spaniel is getting a good heat soak for his old joints also. Sometimes life is just good cause it is.

  24. Mars
    Nov 30, 2019 at 2:04 pm

    There are two sides to every trade. So…

    I waited to see if anyone mentioned current free cash flow $/bbl for shale drillers/operators.
    On a SS I have been working on I have several efficient large and small companies with shale exposure who reach fcf at $40-55/bbl while most of the others are $60-90/bbl, even with all of the technology. Thousands of shale wells, o & g, have been drilled and await the hoped-for rise in a global commodity price or pipeline construction before completion, as you mentioned. Just a year ago oil was between $60-74/bbl.

    Some states use Google Earth to map well sites and pipelines. The amount of real time information is overwhelming. I used to use old maps I inherited from an Uncle. There are also new macro theories about pricing, scaling up and pinch-points, interesting info.

    ARAMCO goes public and OPEC meets next week. Saudi Arabia has not been completely transparent on free cash flow but estimates range (depending on basin/field) $10-40/bbl. While US imports are low they still have global marketing power and OPEC, in general, has no desire to see cheap US shale oil lower their income or cash flow so it looks like they will keep production high to limit shale oil exposure on global market. On the other hand a higher oil price would help ARAMCO IPO and beyond. We’ll see how that goes.

    China still has to pay for oil in Dollars.

    Thanks for including the Western US production/marketing summary – I used to tell friends about this and they didn’t believe me. Most are unaware.

    If you need more info on fracking just google Halliburton and Sclumberger and find the about us history page. Anthony Aluknavich :) +

    There are lots of inputs in this global commodity situation but some frackers will be gone, for sure.

  25. Rcohn
    Nov 30, 2019 at 2:09 pm

    Refineries in the San Francisco Area face stricter regulations than do refineries in other countries and states. These stricter regulations result in higher costs and higher prices for refined products . Just look at the current price of regular gasoline at @$4.00. These higher costs in turn makes it less profitable to export refined products to other countries

  26. Nov 30, 2019 at 3:41 pm

    No telling where these numbers would be if “sanctions” were lifted unilaterally. Venezuela for instance is an export refining country. The US may only be energy independent because it has banned some of the largest producing countries from the global market. Cheap credit met a set of manipulated supply constraints. Break the chain at some point the global market (OPEC) returns with more supply and far lower prices. I suppose if Americans knew they were paying high prices for gasoline so we could sell oil to China they would react differently to the political theater.

    • Happy1
      Nov 30, 2019 at 5:09 pm

      Venezuela isn’t exporting oil partly because of sanctions, but mostly because oil production has plummeted as the government has looted resources necessary for oil production and development and lost the intellectual capital needed for those projects because of their inept government and resulting massive humanitarian crisis. Sanctions are a relatively recent thing in Venezuela, oil production has been declining for many years.

      https://en.m.wikipedia.org/wiki/History_of_the_Venezuelan_oil_industry

  27. Rickrod
    Nov 30, 2019 at 4:21 pm

    I suggest the blog “oilystuff.com” to help put the US shale boom in perspective. The energy content in a barrel of crude is a lot more than a barrel of natural gas liquids so US crude production is actually around 12 million barrels a day. The long term viability of shale oil production is being hammered by high depletion rates. Shale oil is a cash destroying operation that cannot last.

  28. Brant Lee
    Nov 30, 2019 at 6:17 pm

    As soon as we can harness lighting and the tides of the ocean, we’ve got it made.
    For instance, Twice each day, 160 billion tonnes of seawater flow in and out of the Bay of Fundy, Canada — more than the combined flow of the world’s freshwater rivers! re: http://bayoffundytourism.com/worlds-highest-tides/

    The answers could be out there.

    • nhz
      Dec 1, 2019 at 5:42 am

      This is really tough, it has been tried many times in the past and up to now nothing has acceptable efficiency and durability. There is a new experimental tidal energy installation near where I live (North Sea coast), after several earlier designs over the last few decades were quickly terminated because they were found to be unprofitable (often even before they were really build, or after e.g. a one year trial period). An additional problem is that many of the best spots are not close to where the energy is needed, so you would need energy storage or long (expensive) transport lines.

      The same goes for other kinds of energy that ultimately originate from the sun. Energy in e.g. thunderstorms is orders of magnitude more than the most powerful nuclear bombs, but harvesting it seems an illusion.

  29. Wisoot
    Nov 30, 2019 at 7:16 pm

    Less drilling = less earth quakes

    https://www.scientificamerican.com/article/drilling-for-earthquakes/

    Birds don’t poop in their own nest….

    This is a public safety issue, and there’s been a lot of denial and ignoring of the problem.

    The following text source: USGS: Why are we having so many earthquakes?

    According to long-term records (since about 1900), we expect about 16 major earthquakes in any given year, which includes 15 earthquakes in the magnitude 7 range and one earthquake magnitude 8.0 or greater. In the past 44 years, from 1973 through 2017, our records show that we have exceeded the long-term average number of major earthquakes only 11 times, in 1976, 1990, 1995, 1999, 2007, 2009, 2010, 2011, 2013, 2015, and 2016.

    The year with the largest total was 2010, with 24 earthquakes greater than or equal to magnitude 7.0. In other years the total was well below the 16 per year expected based on the long-term average: 1989 only saw 6, while 1988 saw only 7 major earthquakes.

    Did they finish tunnelling the maglev underground trains connecting Australia to USA in 2016? Oil and gas has been a great cover. Did the Earth move for you in 2010 or did you not notice caught up in the aftermath and ‘public outrage’ of the economic collapse in 2008? Look over here, while we quietly deviate from socially acceptable activity over there. The previous article on Telefonica suggests a replay is about to begin. Keep your eyes peeled in the opposite direction to the one being pandered.

  30. Unamused
    Nov 30, 2019 at 7:24 pm

    Was the oil spill in Brazil reported in US news? Thousands of tons over 4000 km. Maybe it’s so common it’s not news. Or maybe TPTB just don’t want to talk about it.

    • Wisoot
      Nov 30, 2019 at 8:07 pm

      Rumours suggest it is (ongoing spill) Deepwater Horizon oil spill 2010 stuff that had been sunk with chemicals in the aftermath to ‘clean up’ surface while pushing it downwards suffocating the oxygen from the lower levels of sea. Not releasing the laboratory tests to public …. Definitely being minimised to public news exposure.

      https://en.m.wikipedia.org/wiki/2019_Northeast_Brazil_oil_spill

  31. Willy Winky
    Nov 30, 2019 at 9:08 pm

    ‘Nationally, fracking produces two-thirds (67 percent) of the natural gas in the United States, according to the US Energy Information Administration, and approximately 50 percent of the nation’s oil.’

    So two thirds of all oil produced in the US generates a loss on each and every barrel produced.

    And the kicker – the price of oil can NOT climb high enough to make shale profitable in the long run

    PLEASE NOTE THE KEY WORDS BELOW ‘SUSTAINED’

    HIGH PRICED OIL DESTROYS GROWTH

    According to the OECD Economics Department and the International Monetary Fund Research Department, a SUSTAINED $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.

    http://www.iea.org/textbase/npsum/high_oil04sum.pdf

    Hardly a situation worth celebrating.

    And I again ask the question, if there is so much oil remaining why are we fracking and losing money on every barrel.

    DUH

    • Nov 30, 2019 at 9:46 pm

      Willy Winky,

      “And I again ask the question, if there is so much oil remaining why are we fracking and losing money on every barrel.”

      There are enormous deposits of hydrocarbons left in the crust of the earth. They’re just harder and more expensive to extract, and require advanced technologies some of which we may not yet have.

      For example, the HUGE Monterey shale formation in California. It was hyped to pump up the share price of a certain oil company (Oxy and its spin-off California Resources), but turned out to be too difficult to extract with today’s technologies. So it will sit there untouched until technologies improve and prices rise far enough to make it worthwhile. This stuff is all over the place around the globe.

      For now, there is an oil glut. Hence the collapsed price.

      I always say, only partly tongue-in-cheek: “We’re going to run out of clean air to breathe before we run out of hydrocarbons to burn.”

      • Willy Winky
        Dec 3, 2019 at 6:23 am

        Wolf – I agree with you there — there are enormous amounts of oil remaining – and we will absolutely NEVER run out of oil. NEVER.

        But we are no longer discovering any oil reserves that are economically viable to extract.

        Let me repost this as it is important:

        HIGH PRICED OIL DESTROYS GROWTH

        According to the OECD Economics Department and the International Monetary Fund Research Department, a SUSTAINED $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.

        http://www.iea.org/textbase/npsum/high_oil04sum.pdf

        A SUSTAINED increase of $10 bucks whacks 0.4% off GDP. Straight from the IMF’s mouth.

        Shale has never really turned a profit even with oil priced much higher than it is now.

        And at 50 bucks the industry is bleeding to death.

        Can the price of oil rise and remain at a level that makes shale profitable?

        Absolutely NOT.

        Even at 50 bucks (massive losses) that is KILLING growth. Imagine what 80 or 100 bucks looks like?

        The only thing that has offset the impact of expensive oil on growth is stimulus – ultra low interest — and mega debt. And even those countermeasures losing steam. You can only fend off the pernicious effects of 50+ oil for so long. And you can only feed a money losing industry (shale) for so long.

        And to boot, if you do some research, shale wells deplete rapidly — and we are closing in on the peak.

        Shale is responsible for 2/3s of US oil production — it loses money on every barrel pumped — and the industry is peaking.

        • Dec 3, 2019 at 10:24 am

          Predictions – however fun they may be – of the US economy collapsing if the price of oil goes up over time are total nonsense.

          A few years ago, until mid-2014 when the US oil glut crushed the price of oil, the US economy was doing just fine with WTI at $100 – $110. That’s double today’s price. Fracking is profitable at these price levels.

          The US economy will do just fine at $150 or in 10 years at $200. Sure, there will be big shifts, for example from ICE vehicles to EVs, and toward energy efficiency. Developing and building these energy-efficient technologies can be good for the economy too.

          The oil sector in the US, the largest in the world, will be booming and will be recycling the money brought in by oil. This will be a huge benefit for manufacturing (equipment makers), the transportation sector, construction (pipelines, housing, etc.), consumer products (because these highly paid employees in the oil and gas industry (tech workers, scientists, oil field workers, finance and insurance workers, manufacturing workers, etc.) will be spending their money. This is different than shipping the oil money to OPEC as it happened decades ago.

    • Tyson Bryan
      Nov 30, 2019 at 10:32 pm

      Human physical mobility (travel) is our primary dollar velocity stimulant. Travel is still 98% oil fueled. The energy input necessary to subsidize oil to the tune of several trillion USD comes from an alternate source.

      https://www.forbes.com/sites/jamesconca/2018/05/15/nuscales-small-modular-nuclear-reactor-passes-biggest-hurdle-yet/#699c92205bb5

      There are likely many hundreds of these SMRs in operation around the world, outside the US & Canada, but it’s all kept unpublicised for ‘security’ reasons.

  32. Dr Scanlon
    Dec 1, 2019 at 9:16 pm

    ‘What’s Wrong With the Oil Industry Nowadays? Too Many Claims of Victory are Starting to Sound Suspicious’

    https://cassandralegacy.blogspot.com/2019/12/whats-wrong-with-oil-industry-nowadays.html

  33. Unsk
    Dec 2, 2019 at 6:36 pm

    Burning wood in a fireplace has been illegal in much of
    Southern California for several years. Wood burning fireplaces are not allowed to be sold. Thanks to the AQMD. ( Air Quality Management District). Fireplaces now are essentially gas furnaces with a window. There is no more flue. The exhaust pipe is much smaller.

  34. Willy Winky
    Dec 4, 2019 at 9:22 pm

    Wolf – it was NOT doing fine.

    Superficially yes, because stimulus was already in play to offset the $100+ price of oil

    Which went as high as $147 – just before ‘doing fine’ turned into ‘imploding’ as the medicine (stimulus) nearly killed the patient.

    I have this article saved and changed the title to:

    The Beginning of the End

    JUNE 13, 2003 – There is increasing evidence that massive economic stimulus — monetary, courtesy of the Federal Reserve, and fiscal, thanks to the president and supply-side minded lawmakers — is taking hold.

    The magnitude of the policy turnaround, which caps a constructive, multi-year reflation process, should overwhelm the economic negatives — including the drag from expensive oil and poor finances at the state- and local-government levels.

    Expensive oil and its impact on other energy costs remains a concern.

    The current level of U.S. monetary stimulus is massive. Real interest rates have fallen 5.2 percent from December 2000 to March 2003, reaching -1.2 percent. A swing of this magnitude may be historical.

    Read more at: http://www.nationalreview.com/article/207227/reversal-fortune-david-malpass

    So there you have it – a rising oil price just after the turn of the century was met by ‘MASSIVE ECONOMIC STIMULUS’

    That stimulus continues TO THIS DAY.

    The primary purpose of all stimulus we are witnessing is to offset the impact of increasing costs of oil and energy production in general.

    If you don’t believe me then take a journey down google lane starting with ‘the impact of high oil prices on economic growth’

    If you still don’t subscribe to my theory, then you can go on believing that the central bankers and global leaders are engaging in the seemingly insane policies we are witnessing because they are

    a) crazy
    b) stupid
    c) suicidal
    d) all of the above

    The answer is actually e). The central bankers are not stupid, crazy, or suicidal.

    They understand that the machine cannot run on expensive oil (or other energy)

    They understand that there is no alternative to fossil fuels (solar and wind are far more expensive energy sources and when you add battery storage the price becomes astronomical)

    They are attempting to keep the machine running knowing that expensive oil will eventually blow the machine into a million pieces.

    There choice since the turn of the century has been stand back and let high priced oil blow up the machine (it nearly did in 2008 in spite of their best efforts) or to keep it going allowing civilization to continue awhile longer.

    They choose Door 2 — ‘WHATEVER IT TAKES’ — which is a good choice.

    Because if they had chosen Door 1, we would have been long dead by now.

    On a personal note, I did not have this epiphany until around 2010. Prior to that I thought the central bankers were stupid.

    And because I recognize the true nature of the beast, I have been bucket-listing (even though I am nowhere near retirement age) since 2010 going on very lengthy adventure vacations 3 or 4 times per year.

    Sadly it is looking like the central bank medicine is beginning to fail.

    It’s like you’ve got a wonderful horse but the only food you have for him is not very nutritious. No matter how much you feed him he weakens.

    So you call in Lance Armstrong and inject him with ‘whatever it takes’ to keep him running. Eventually you can inject him with higher doses, you can beat him, you can whip him – but he will stagger and he will ultimately fall dead.

    I suspect our horse is in the staggering stage now. The central banks are whipping and beating him but he is not responding.

    The end approaches

Leave a Reply

Your email address will not be published. Required fields are marked *