Pickens: Without Iraq’s oil, prices could hit $200

24 Comments on "Pickens: Without Iraq’s oil, prices could hit $200"

shortonoil on Sat, 14th Jun 2014 11:37 am 



There has been considerable discussion regarding what price crude would advance to if Iraq were to be taken offline, and no substitution occurred. Using the ETP model we have built the chart below. The left hand column gives the loss in mb/d, the right what the price would advance to if that occurred. Prices may advance over the short term to higher levels, but will settle at the values below. Prices are rounded to the nearest dollar.

mb/d loss Price $

1……………….$139
2…………………159
3…………………178
3.3 ……………..185

http://www.thehillsgroup.org/

Perk Earl on Sat, 14th Jun 2014 12:09 pm 



Pickens two hundred seems wildly high. We have to keep in mind that as price rises from here, those that can deliver spare capacity will, even if they only can short term, to take advantage of the higher price. Let’s say that is 1.8 mb/d then 3.3-1.8=1.5 mb/d demand reduction, which per your chart is 149 a barrel, call it 150.

That’s the limit I think it could go to worse case scenario. But last time the economy broke oil reached 147, so 150 is the same drill over again. Yellen, what does the Fed have remaining in the Wizard’s bag behind the curtain?

SilentRunning on Sat, 14th Jun 2014 12:09 pm 



I’m confused. How can there be a “shortage” of oil such that would cause the price to surge like that? The cornies keep screaming that we have an infinite amount of oil, thanks to fracking, etc.

If the cornies are right, there will be no oil price surge if Iraq goes offline. If the peakers are right, there will be a massive spike in the price.

Right now, it looks like the market is siding with the peakers.

Perk Earl on Sat, 14th Jun 2014 12:20 pm 



“Take the Keystone, wrap up North America and you are in really, really very, very good shape,” he said.

That has a sort desperate plea to it. Like if all hell breaks loose in the world but North America sticks together maybe can keep BAU for a very long time. Let’s hunker down! Wrap this baby up nice and net and tidy!

bobinget on Sat, 14th Jun 2014 12:28 pm 



Pickens financed a ‘Swift-boating’ campaign portraying John Kerry war hero, into a coward. A charge he knew to be false.
Now, he’s all full of guilt for helping “W’s reelection.
BTW, it will take at least 18 months to prepare to lay pipe to GOM in order to export Canadian oil to South America. By that time Canada’s OS exports will be solidly in China’s hands.

ISIS has no intention of curtailing all oil exports, even if they were capable, at least not until future shipments are redirected. In the north, Peshmerga are doing a great job defending Kurdish turf. This operation is more akin to a coup than a military onslaught.

Saudi Arabia could not permit any closer alliance between Iraq and Iran for fear of Russia pushing KSA
out of OPEC.

I’m waiting for ANYONE to ask the questions;
Where did ISIS get funding for years of anti government fighting in Syria?

What ME oil exporting nation gave tacit permission to invade Iraq?

Will the US bomb ISIS positions knowing it could lead to a break with KSA?

Does the US still need KSA’s oil now that more and more is going to Asia then the US?

Contrary to reports Iran has yet to intervene. WHEN they do, who will the US bomb first? Iran, Iraq, ISIS?
If the US does drone and bomb, will Russia respond?

Should various Western Intelligence Chiefs resign for total incompetence?

Every observer of note has known for a year, Syria’s proxy war would metastasize. This potential disaster for western oil supplies should never have come as a shock. (Ukraine was, as I pointed out, a distraction)

US popular press never mentions and still refuses to acknowledge Saudi Arabia’s roll, motives, in Syria and now Iraq, soon, Jordan and Lebanon, IRAQ all bursting at the seams with four million Syrian Refugees will explode on the scene. Factor in another million displaced Iraqis and that situation
makes $6 bucks a rationed gallon look cheap.

We won’t send troops to Iraq.. again. However Nigeria,
seeing as we could be squeezed by KSA and Iraq and Iran and Venezuela and Ecuador takes on a far greater importance.

Boko Haram will doubtless take courage from events in Iraq. The Nigerian army also, refuses to fight.
Boko Haram so far has restricted it’s aggression to hit and run operations. If they too get Mideast funding it’s
likely tens of thousands of poverty stricken Muslims will join up just for the work.

Davy, Hermann, MO on Sat, 14th Jun 2014 1:03 pm 



This Iraq crisis has the potential to open the spigot of Iraqi oil potential. You know these three group will move to maximize their oil production efforts. The Shia south is already positioned to increase production. The Kurds are ready to make it happen. If the Sunni’s get just enough to be satisfied they too will get after the game of making money from their oil assets. There still may be a sporadic smoldering war that will flare up from time to time but for the most part all sides are in a power balance. The world is in need of their oil and no outside force sees a benefit of a cutoff of Iraqi supplies. Everyone remembers 2008 when the global economy tanked. Even the radical Sunni’s need money to consolidate their power and fight their war in Syria. With all the political uncertainty that has been present since the American’s departure we now have a situation where the country has been divided by force and the will of the people. This should have been done from the beginning. It was another example of the idiot American leadership at the top believing in a nation state called Iraq where three diverse cultures could live in harmony. What a joke and what a waste of lives and money. Reality is showing its face and the real world on the ground is now in place.

eugeni on Sat, 14th Jun 2014 1:43 pm 



@Davy, Hermann, MO
in Libya that didn’t happen. After war there was no reconciliation and look their oil production now. We’ll see…

nemteck on Sat, 14th Jun 2014 3:44 pm 



shortonoil: I plotted you table and the values can be connected by a straight line. I rather thought that, if there is panic, then the curve would be concave, at least in the beginning.

Otherwise the curve could be convex since restrains (rationing, open strategic resources, Sunday driving restrictions, speed limits, etc) would come into effect to slow down price increases.

shortonoil on Sat, 14th Jun 2014 3:48 pm 



“Let’s say that is 1.8 mb/d then 3.3-1.8=1.5 mb/d demand reduction, which per your chart is 149 a barrel, call it 150.”

Pickens sounds like he’s talking his book here. It seems impossible that all of Iraq’s production could come offline, short a nuclear war. My “guess” would be a high of $120 and a settle between $110 and $115. The producers would appreciate that because their production cost have been rising the last couple years with no compensating increase in price.

Dave Thompson on Sat, 14th Jun 2014 3:56 pm 



Pickens $200 price could just as well be $190 or $210, or even a lot less. He sounds like an industry spokesman touting his own interests in a time of uncertainty. We all know at a certain point the average person stops being able to afford “stuff”. When the “stuff” becomes unaffordable, the economic machine slows down, people suffer and then? We are still feeling the effects of the last spike in oil, if that tells us anything.

shortonoil on Sat, 14th Jun 2014 4:07 pm 



“shortonoil: I plotted you table and the values can be connected by a straight line. I rather thought that, if there is panic, then the curve would be concave, at least in the beginning.”

There is only four points in that chart. The the full data set produces an exponential curve. Past about 10 mb/d it starts increasing very steeply. Crude prices are driven by production costs, and production costs are not linear. Nothing is linear in the world of oil, the only reason you see linear graphs is because reservoir engineers linearize everything. They do it to make field work easier, not because that is the way thing really are.

http://www.thehillsgroup.org/

Davey on Sat, 14th Jun 2014 4:29 pm 



Eugeni, the lines are drawn better in Iraq than Libya. But as in Libya there is much hatred and volitility so anything is possible. I was just trying to be optimistic.

Kristen on Sat, 14th Jun 2014 5:24 pm 



Not too mention (continuing from Davey) that Iraq exports much more oil and is more dependent then Livya on such funds.

Northwest Resident on Sat, 14th Jun 2014 6:47 pm 



Going from the chart that shortonoil provided, we can be sure that the global financial system absolutely needs the oil it is getting from Iraq. I wonder what a sustained price of $139 per barrel of oil would do to the already fragile and deeply indebted world economy? It could be that the $139 per barrel would open up more drilling opportunities and therefore more potential oil — but it would also be another twist of the ratchet down on the finances of hundreds of millions of businesses and people that have to buy that gas. I know I’m not getting a pay raise if the price of oil goes up — how about you?

rockman on Sat, 14th Jun 2014 9:44 pm 



I view the situation as rather simple actually. There is no shortage of oil today nor will there be a shortage if it jumps to $200/bb: anyone who can afford the price of oil, be it $100/bbl, $200/bbl or $500/bbl, will have all they want available to them. Demand destruction at higher prices will assure it. I built the model long ago and there is only one scenario when there would be a “shortage” of oil: when prices fall to the area of $30/bbl. At that time the number of purchasers who can afford that price will exceed the max oil delivery. Additionally such a low price will greatly inhibit new oil development.

At higher prices supply will always satisfy demand in the long run. Demand being what one can afford to acquire…not what they would like to acquire.

Davy, Hermann, MO on Sat, 14th Jun 2014 10:07 pm 



Rock, I agree when I time frame is put on your argument. Systematically oil prices above or below the production/demand Goldilocks region will “break the bank” so to speak. If the duration and degree of price imbalance is too great for too long all bets are off for BAU. Since a functioning economy is needed to support an oil industry and vice versa we cannot have extremes for more than a relatively short time before permanent damage is done.

Perk Earl on Sat, 14th Jun 2014 10:58 pm 



139, for that matter anything above 130 for say 4 straight months, would make for interesting times as we watched things start to unravel (faster and worse than they already are).

I keep wondering what will happen if oil does go high enough to cause a recession of -3 to -5% for six months, will the wheels come off or is there still enough resiliency in the system to reignite BAU?

Makati1 on Sat, 14th Jun 2014 11:30 pm 



Perk, you see the future of $130 oil clearly. It would crash the financial system and bring depression to the whole world. We are straining at $100 oil. A 30% hike would be the final nail in the globalization coffin.

And Iraq is not the only hot spot with internal trouble. Add in: Libya, Ukraine, Egypt, Nigeria, Syria, Saudi Arabia, U.A.E., Etc. Not to mention the depleting wells in the US of all kinds.

The Elites have only a few years left to conquer the world or it is all over.

Perk Earl on Sun, 15th Jun 2014 2:27 am 



Yeah, Mak. What is sort of fascinating or unfortunate, or both, is most people not of the peak oil savvy choir think the potential collapse of 08 is over, and we somehow permanently averted disaster. And although things are not quite up to snuff, oh well, as long as we have BAU we’ll do just fine.

When in reality as we know here the situation is pressuring up as evidenced by the hot spots you listed and fiscal problems in the developed countries, building to some crescendo moment that will change things in a way that will mark to some extent the end of the oil age.

So these people are all settled in to watch some flick with their extra butter theatre microwave popcorn oblivious to what lies ahead. Should be a hoot to get out of their way and watch them bustle around in full on panic mode.

rockman on Sun, 15th Jun 2014 7:50 am 



Earl – Yes…it’s amazing how so many either can’t or won’t appreciate the time lags in the system. Maybe they are so distracted by daily changes in oil future contracts. And I feel a lot of politicians take advantage by pushing short term reactions they get brownie points for instead of pushing long term (and often unpopular) plans that might lose a election for them.

For a long time I was impressed with the global economy handling $100 oil. But now I sense that, while not technically a recession, energy costs are taking a cumulative toll. Gov’t actions, like creating $trillions out of thin air, are hiding the reality to some degree. Lower NG prices in the US helped buffer the situation as well as the drop in coal prices giving a bit of a shot in the arm to the global economies.

But it’s like putting a clamp onto to an arterial bleeder: the patient is stable now but if the clamp slips “death” won’t be far off. Death being a jump in energy prices. The cure, of course, would be fixing the artery permanently. Unfortunately I see no permanent fix for our energy predicament that can be applied soon enough to stop us from bleeding out when the clamp (energy prices) fail us.

bobinget on Sun, 15th Jun 2014 11:26 am 



So far higher oil prices are fear, not reality based.
Expect terrific volatility, day to day as this reality sets in.
While attention is being paid to ISIS’s blitz, most of Iraq’s oil is in deeply anti Sunni South.
Remember, we are in a third year of a proxy war in Syria, between Russia, Iran and Iraq vs Saudi Arabia and the US.

What on earth could go wrong? (OPEC)

This coup in Iraq has much to do with President Maliki’s corrupt, exclusive, pro Shea governing .

We paid scant attention THIS YEAR as THOUSANDS of Iraqi civilians were being blown up on an almost daily basis. Now, we are witness to the death of a nation and birth of three new Mideast players.

WE turned our eyes inward as genocide in Sudan
continued.

We are only now learning about Boko Haram’s daily atrocities in LIGHT oil resourced, Nigeria.
We still contemplate bombing Iraqis, Pakistanis,
Syrians, Iranians, soon Nigerians, maybe Venezuelans.

I liken this ‘pinpoint accuracy’ missile work to “taking out” a known terrorist murder suspect in the middle of a Brazilian World Cup match with a drone launched
missile. This behavior would never be countenanced
at Super Bowl because higher valued American Football fans would also become ‘collateral damage’.

As if this strategy is effective in stopping ignorance, superstition, poverty and distrust in science.

Oh yeah, score another one hundred ‘militants’ killed over-night in Pakistan.

NOW.. guess how many relatives and friends of those
unfortunates are today vowing total revenge on USA and their own governments….

Americans were shocked, shocked, when two homemade bombs explode at the Boston Marathon.
I’m not belittling our innocents killed and injured, they deserved safety at a running event. It’s just that in the last year since, there have been no (foreign) follow-up bombing in the US as thousands of Iraqis and Syrians were murdered*.
Twelve car bombs explode weekly in Iraq, getting almost no US notice. (after-all, WE didn’t arm them)

Villige after Nigerian village in recent months, every male is murdered. Women raped and enslaved.
Our main concern, will oil exports will continue unabated?

WE are seeing only “iceberg’s tips” in today’s Iraq, Syria, Nigeria, Libya, Pakistan, Egypt and on and on
reflecting poor attitudes of reluctant locals to give US ‘our’ oil while we repay you with celebrity gossip, pretend money and death by drone for resistance.

Stay tuned, it gets worse.

Happy Father’s day to drone targets everywhere.

* To America’s credit, we did manage to kill off 30 people every day in 2013 just with guns. To be fair,
many of those killings were self or family inflicted.

Feemer on Sun, 15th Jun 2014 1:56 pm 



Maybe higher oil prices in tandem with Tesla releasing its patents will help push the electric car. Obviously that won’t save us but its a step. What we ahoyld really be doing is converting our farm equipment like tractors and plows to electric so food prices are less dependent on oil price

Spec9 on Sun, 15th Jun 2014 4:10 pm 



Sure . . . but it is not like ISIS is going to even get close to Basra.

Markus on Mon, 16th Jun 2014 5:47 am 



“kill demand with price. That’s the only way you can do it, because oil won’t be there….there is plenty of oil around the world”

So, there´s plenty of oil “around the world” somewhere but it can´t really be produced due to geological constraints ?