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Page added on September 6, 2015
Saudi Arabia Loses the Oil War
The oil war has finally reached its tipping point after 13 long months. This struggle between Saudi Arabia, and its much smaller North American adversaries has recently shifted as the application of innovative extraction technologies is now gaining the upper hand.
The fiscal damage to national budgets is reaching a breaking point as surpluses have become deficits. Once stable nations face the possibility of having to drastically slash spending as this war has raged risking social instability.
Saudi Arabia has figuratively blinked after going eye to eye with the smaller and more nimble players. The question now is how much longer will this war drag on until energy markets once again stabilize, allowing oil-producing nations to balance their budgets.
It would be shortsighted to conclude that record low oil prices would not eventually limit future supply, and impair Petrostate economies. Each future barrel of oil has a production cost that needs to be met in order for supply to keep up with annual demand growth, as well as compensate for annual well depletion. This translates into producers having to find and replace between 4 percent and 6 percent annually in a market that is currently oversupplied between 1-to-2 percent.
Crude production is a capital-intensive undertaking, as well as being highly dependent upon massive amounts of debt-sourced financing. No private company can continue producing oil at a loss for an extended period of time, and no sovereign nation can operate at a loss without eventually destroying its currency and economy—case in point: Venezuela. Last week the market’s dynamics significantly flipped for the first time in over a year.
The public mistakenly believes that worldwide oil consumption has stopped growing through this pricing rout—it has not. Annual growth runs around one million barrels per year. It has been the overall increase in supply, not a demand decrease, which has been primarily responsible for driving prices down over 60 percent during these last twelve months.
OPEC has officially said it would produce at an upper limit of 30 million barrels per day, but is in reality producing 32.1 million bbl per day. This number is just shy of its record high 32.8 million bbl/day set back in the July of 2008. This figure additionally appears to be the group’s production limit without unsanctioned Iran. Every nation is essentially pushing as much oil onto the market a possible in an effort to make up for the lower prices.
Saudi Arabia is the largest member of OPEC and the only producer that can truly curtail production (the other members ALWAYS cheat). It is currently hemorrhaging some $14 billion a month, and has just resorted to borrowing money for the first time in eight years—fighting a price war it cannot win. Their foolish gambit may have slowed, but cannot stop, North American producers.
When 90 percent of your government’s financing is contingent upon prices remaining above $100 to function, it is a huge mistake to go up against American ingenuity, which keeps finding ways to produce at lower and lower prices.
Here are the price levels needed to prevent these Petrostates from running fiscal deficits, given current budgetary constraints, according to the WSJ:
Libya $215.00
Algeria $111.10
Saudi Arabia $103.00
Iran $92.50
Venezuela $89.00
Nigeria $87.90
Russia $78.00
U.A.E. $73.10
Iraq $70.90
Qatar $59.10
Kuwait $47.10
North American producers have responded to the drop in prices by cutting higher-cost production, and preserving capital by slashing future investments. These cutbacks are working, but they are temporarily taking with them many high-paying jobs. This running lean response has been coupled with massive experimentation into production methods that lower overall cost of producing oil at profitable prices. Higher (non-profitable) sources are being mothballed, while technological solutions keep driving the overall cost curve lower allowing firms to survive.
The latest U.S. Energy Information Administration data shows that U.S. production has fallen from a 40-year high of 9.6 million barrels per day back in April, to the 9.27 million barrels per day in June. This declining trend should continue as commercial hedges put in place, back when prices were higher, expire. The current surplus that had been rapidly growing for months is now slowly reversing.
Frackers are innovating their way to lower break-even pricing using disruptive technologies. Some estimates say the fracking cost for some firms has dropped by more than $10 a barrel from a year ago, and will continue to drop even further. These innovations were something the Saudi’s never counted on when they made their decision to not restrict production last November.
The variable in question now is the timeframe in which to once again reach a true equilibrium price where supply and demand are balanced without manipulation. The Saudi’s strategy of not reducing production is finally starting to fail, helped along by the Yemen War, which has now entered the costly boots on the ground stage.
The Saudi’s recent move to borrow money is the canary in the coal mine, signaling their inevitable surrender. They will soon have to cut production on their end to stabilize prices—either by themselves or with the assistance of other OPEC members. Many countries are so heavily dependent on oil revenue that societal collapse is possible for those that can no longer pay their bills. If the current sub-$50 prices prevail, Saudi Arabia will burn through all of their foreign currency reserves in less than four years.
“Drill, baby, drill” has worked, but at the expense of many smaller U.S. firms that have higher costs and larger debts. A painful retracement should now begin as budgeting for the maintenance and upkeep of existing wells has been slashed, and as exploration for new sources of crude has ground to a virtual standstill across the globe.
Surviving the next quarter is the focus for many firms as bankers come knocking, looking for reassurances that they will be paid back on over $550 billion of already highly questionable loans. North American firms, although wounded, are in the better position than Saudi Arabia to ride out the price war.
The additional supply that many were counting on (aside from the lifting of Iranian sanctions) now appears unlikely, as these large debt obligations overwhelm profit margins across the globe. Bankers don’t lend money to businesses that don’t make a profit—and at these price levels, lending is drying up. This should painfully unfold over the next six-to-twelve months.
This breakdown in prices has been painful for the entire sector; it has destabilized many regions around the globe. The lasting legacy of this pricing war will be that in order to make deals that will provide needed new supply, future lenders are going to demand much more stringent and costly terms. This added risk premium will be built into pricing models, and, unfortunately, passed on to consumers in the form of higher prices at the pumps. The days of cheaper trips to the pump will likely be over by next summer, and those who bet against the return to higher prices will soon regret those SUV purchases.
68 Comments on "Saudi Arabia Loses the Oil War"
Makati1 on Sun, 6th Sep 2015 6:39 pm
Fox news clone…
Well, oil prices going up as the market is going down. Sounds like a fun time coming up for car owners. IF it happens.
apneaman on Sun, 6th Sep 2015 7:05 pm
Not again with the Breitbart fucktard bullshit. Why not start putting up Alternet articles so we can read the worst of the left’s rhetoric and cheerleading? Mak, it’s Fox news Jr. I always get all teary eyed reading how these little down home Mom & Pop American frackers had to go up against the BIG GOVERNMENT forces of the KSA. It’s a Breitbart staple.
Truth Has A Liberal Bias on Sun, 6th Sep 2015 7:21 pm
Peak oil.com is all about click bait. It’s a bulkshit article but you clicked on the page and that’s what counts when you’re in the business of selling advertising. In fact the whole main stream media is about selling advertising and the way that they can charge more for ads on their site is if it gets more page views, i.e. mouse clicks. Click bait is what generates traffic and it is traffic that generates ad revenue. That’s why asshats like Trump are so prominent in the media. Trump is awesome click bait. And Americans are fucking retards. That helps too. The media is not here to inform you. They’re mandate is to make money. They do that via advertising revenue. It’s easy to see. Unless you’re a fucking idiot. Which is what most Americans are.
Boat on Sun, 6th Sep 2015 7:24 pm
The world kept growing at $3.50 oil for many years. Last fill up was $2.07. I predict gasoline will stay somewhere in between.
Boat on Sun, 6th Sep 2015 7:27 pm
Truth,
Looks like you been doing some clicking yourself to become so informed. Yet you blame those that do the same thing. Is that hypercritical?
dissident on Sun, 6th Sep 2015 7:50 pm
What is this crap? There 92.40 million barrels per day is all liquids including ethanol and natural gas derived products. Curde and condensate production is under 78 million barrels per day. Those forecasts for 2015 and 2016 are a joke.
The reason why oil prices are low today is not because of any glut but because of a world wide recession that is set to be much worse than the 2008-2009 one. This time around China is not acting like governor pulling the world out of recession but helping to pull the world into one.
Boat on Sun, 6th Sep 2015 9:16 pm
dissident,
Can you read a chart or are you another doomer that ideology stands in the way.
http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=5&pid=53&aid=1
The 93 million figure is oil alone, going up every year. How can so many be wrong yet project problems but can’t prove it.
Davy on Sun, 6th Sep 2015 9:41 pm
Boater, you best learn how to work the controls on that fancy dancy graph you found. I see a different figure.
FloridaGirl on Sun, 6th Sep 2015 10:36 pm
Boat, go to your link again and pull down Product->Crude Oil plus lease condensate and you will see that world oil production for 2014 was 77.8 MB.
BC on Sun, 6th Sep 2015 10:37 pm
Boat, adjust for world consumption by the energy sector to produce oil per capita at the same level as 2004-05, and the demand per capita by the non-energy sector is at the level of 1997-2003. 😀
If it floats your “boat” to believe otherwise, please do, but your behind the wake, and there’s a cresting wave right behind you. 😀
ham kan2 on Mon, 7th Sep 2015 12:17 am
well, Saudi Arabia would run out of funds in 2018. what would happen in the U.S.A during these 3 years. it will never happen anyway. because, the shit will be hitting the fan long before, that punishment will never come to the middle east. it would be nice in the very near future, to get this settled soon or else.
EARL CARROLL on Mon, 7th Sep 2015 12:52 am
so if Saudi Arabia announces tomorrow they are cutting production 5 million barrels a day oil would soar to 60 dollars a barrel quicker than a dog can lick his dick…..then they short a billion barrels a month for each and every month of 2016 at 60 or more…once the shorts are in place they change there mind and announce they will continue at 33 million barrels a day and oil returns to 40…they cover shorts and make 20 billion per month each month of 2016 without delivering one barrel of oil….surely they are smarter than I am
GregT on Mon, 7th Sep 2015 1:07 am
Boat said:
“The 93 million figure is oil alone, going up every year. How can so many be wrong yet project problems but can’t prove it.”
Utter BS again Boat. The real question should be; Are you simply ignorant of reality, or do you have an agenda? Because most of what you post here, is not truthful.
Bud on Mon, 7th Sep 2015 1:30 am
There was sanction on Iran for 11 years so they could not sell but they were producing all these times and storing so that they could sell once the sanctions is lifted which will happen in between oct and dec. Saudi’s announcement to cut production will have no effect once P5+1 officially sign a contract with Iran. The only way oil can go up if Iran knock down some of the oil field of Saudi which Russia’s foreign minister has already warned 6 months ago. He said that Russia will have Iran go to war with Saudi to raise oil prices. Let’s enjoy lower oil prices until 2016 then wait and see
GregT on Mon, 7th Sep 2015 1:59 am
The bankers have been screwing the world over for long before oil became the commodity of choice, and they will in all likelihood be screwing the world over long after the oil age comes to an end.
All Wars are Banker’s Wars:
https://www.youtube.com/watch?v=5hfEBupAeo4
http://www.globalresearch.ca/bankers-hate-peace-all-wars-are-bankers-wars/5438849
http://www.veteranstoday.com/2014/11/20/all-wars-are-bankers-wars/
http://www.washingtonsblog.com/2014/04/wars-bankers-wars.html
Rooboy on Mon, 7th Sep 2015 4:14 am
The usa imported more than they pumped starting in 1957. A good book is. The prize…money oil and power by Daniel yergin.
carlos santiago on Mon, 7th Sep 2015 5:27 am
if the world wouldn’t of been so greedy and reduced prices earlier, we wouldn’t be in this mess.
James Malenfant on Mon, 7th Sep 2015 5:37 am
I thought the article was entertaining, and enlightening. It was well written, and covered a lot of material, that other sources have not. I don’t remember OPEC really caring that high oil price were hurting other economies. They just raked the money in. Kudos to the North American oil workers. How dare these amateurs try to out smart American ingenuity. Very nice article. Have a great day!
Roger Wren on Mon, 7th Sep 2015 6:58 am
If the Saudi government would cut the allowances of the royal family by 30 or 40 percent and get rid of half the “guest workers”, replacing them by putting idle Saudi nationals to work, the budget could be balanced at an oil price point a lot lower than 100 dollars a barrel.
Of course Saudi commoners consider common labor beneath them and the royal family needs money for gambling and drinking trips.
Whatever the outcome of the present situation the future of Saudi Arabia is not a pleasant one. It produces almost nothing other than oil, which eventually will run out.
When I was young it had a population of only 4 million which it had trouble feeding. Now the population is 20 to 30 million and growing rapidly. What happens 50 years from now when the population is say 75 million and the royal family has grown to 200,000? Or a hundred years from now with a population of 200 million and a royal family of two million? Is every member of the royal family entitled to four wives, 12 concubines, and 67 children on into the future forever?
When things can not go on forever sooner or later they don’t.
Danlxyz on Mon, 7th Sep 2015 7:01 am
Boat,
Check out your chart again. Look at the “Product” box. It says “Total oil supply”
then says “Crude oil, NGPL, Other liquids” then “Refinery processing gains”
So, your chart is All Liquids not just crude.
rockman on Mon, 7th Sep 2015 7:49 am
There has been zero innovation in frac’ng for at least several years. Such foolish statements never detail such innovations because they don’t exist. The two actors that have lowered per bbl costs are lower drilling costs due to fewer rigs drilling and thus more competition and dropping poorer prospects from budgets. While this lowers the cost per bbl it also obviousely reduces the amount of oil produced. Reducing the volume is not good news for the consumer…eventually. The US is slowly moving away from that imaginary “energy independence”.
BigD on Mon, 7th Sep 2015 7:53 am
well written, easy to understand , makes sense, makes you think, good job
Dave Conna on Mon, 7th Sep 2015 8:03 am
Wow! Lots of disappointing ‘noise’ from so many posters – along with the telltale insults and name-calling – all of which is VERY revealing.
Peak oil is such a scary prospect that even otherwise intelligent people can’t talk about it. Is it b/c it might be 20 or 40 or 75 years in the future? Then what? – do you give a sh*t about the next generation?
In reality we will solve this problem – a LOT easier than many of society’ s other problems (like lack of fresh water) b/c renewables have reached grid parity in many states and will have in most, if not all, by 2020. Perhaps that is why the price of oil HAS to be kept low – so that it can compete with the renewables, the prices of which have dropped by 40% over the past 5 years.
Let’s not forget energy conservation – the unspoken hero that will save us from the mess we’ve created – b/c we are still so wasteful of energy, despite impresive gains.
Jam on Mon, 7th Sep 2015 8:22 am
As Iran and the Caspian gas and oil floods the market, how can anyone think prices will go up? Not only should their be a drop in prices, but in the value of US Currency by those favoring a different reserved currency.
What we have here is a failure to communicate. It is suppose to be about supply and demand, and it is about markets, cartels, governments and corporations controlling our lives through the global economy.
It is time to give them a piece of their own medicine.. Tic for Tat and take control of our own lives.
Davy on Mon, 7th Sep 2015 8:29 am
Dave C, your just another fake greencopian preaching a world with a happy ending when there is none. You have little show for 10years of AltE effort on all fronts from affordability, grid, storage and social acceptance.
You guys live in a fantasy carbon light world of AltE replicating AltE. The next thing you will tell me there are plans amongst you greenies to produce oil with AltE OOPS that is a sin because oil has carbon. Well Dave all AltE has carbon. It has a dirty high tech waste stream too.
Your fantasy is deceiving the sheeples from the hardships ahead. Yet, as G-man on this board said you guys are doing a good thing for the wrong reasons so I guess that makes you only half slimy. Lying is slimy period. Greencopian lying is lying to yourselves not like the psychopaths on Wall Street who lie for greed and corruption.
Dave C be honest and talk about AltE for what it is not what you want it to be. BTW Dave I have a solar system.
Makati1 on Mon, 7th Sep 2015 8:33 am
Dave C., we have a few here who cannot express themselves without name calling when they cannot make an intelligent, informed rebuttal or prove their statement. Perhaps some deserve it, but it only lowers the name caller’s position in the debate. It is obvious that ignorance, denial, and plain stupidity will surface in the last days as reality cannot be ignored and fear sets in.
Kenz300 on Mon, 7th Sep 2015 8:53 am
Just like Faux Noise……. opinion is substituted for facts and spun as fact…….
Kenz300 on Mon, 7th Sep 2015 8:57 am
The sooner we transition away from OIL and other fossil fuels the better it will be for the planet.
The OIL producers will continue to push their product for as long as they can to keep the money rolling in……. no matter what it does to the planet…. profits come first in their eyes…..
The rest of the world is in transition to a safer, cleaner and cheaper energy future.
ghung on Mon, 7th Sep 2015 9:25 am
Davy said: “….Yet, as G-man on this board said you guys are doing a good thing for the wrong reasons…”
Well, sort of. My take is that there’s a least worst response to where we (using ‘we’ loosely here), unless one decides to check out of madness permanently.
Dave C. said: “In reality we will solve this problem – a LOT easier than many of society’ s other problems (like lack of fresh water) b/c renewables have reached grid parity in many states and will have in most….”
Dave clearly hasn’t noticed that there is no “we”, at least not in terms of any affective, collective, response. If Dave thinks that markets will respond in a less-than-destructive-to-the-biosphere manner, or that those markets can somehow compensate and correct for humans’ remarkable level of overshoot relative to the carrying capacity of their planet, I suggest he ignores much. Things like “grid parity” and “efficiency gains” are industrial age terms that will have no viability as industrial economies and the population overshoot they enable implode under the weight of ever-increasing complexity and waste streams.
Think the millions of refugees streaming into the EU aren’t artefacts of overshoot? Think they give a shit about grid parity or efficiency gains. Indeed, if they successfully transition to life in Europe, their collective consumption will go up significantly; one of many bugs in any ‘transition’ ointment. People don’t do contraction well at all, and will strive, even kill each other, to better their lot in life, and the planet will continue to suffer.
The extreme imbalance between human behaviour and the planet’s ability to support and absorb the consequences of that behaviour will correct itself in planetary terms; not in human terms. We aren’t in control here. Nature doesn’t bargain with its children, and cares not at all for our puny time-frames.
AmishRadio on Mon, 7th Sep 2015 9:43 am
Instant gratification is a fantasy of the treehugging greenies. They want energy utopia NOW when common sense suggests, while their goals are admirable,it will take many, many years for their wishes to become reality.
It takes a loooooooong time for an aircraft carrier to make a 180 degree turn. Think of it that way!
David on Mon, 7th Sep 2015 9:47 am
How sad for the arabs.I don’t care if every last one of the dies from starvation when they run out of money and food. ….. but not to w2orry because their allash will save them ( right )
The American public has been gouged long enough on fuel prices. It’s time for 99c a gallon gas and the thie3ving disgusting oil companies can just have a lower profit margin. Hey ! so Exxon can only make a $4 billion profit per quarter instaad of $40 billion …. poor babies
Robert Kaiser on Mon, 7th Sep 2015 10:18 am
The best part about america is that we don’t let them sell our oil to others. The oil companies will try hard to change this as US production goes up and conservation brings useage down. As America buys less and less foreign oil our money gains more and more value which keeps our prices down. I do not see this trend ending soon.
David Williams on Mon, 7th Sep 2015 10:36 am
WHAT a crock the Saudis get the oil out of the ground for $4/ Barrel WOW made this up OH BOO HOO HOO
Richard on Mon, 7th Sep 2015 10:39 am
More biased propaganda.
george goldberg on Mon, 7th Sep 2015 11:19 am
what a load of wastewater.fracking was supposed to save america by lowering the cost of oil.but as soon as it did we stopped producing.we can now import at a fraction of the cost thanks to saudi arabia proving that the price of oil was always a lie.u.s. producers want $75.a barrel to break even?lmao.
steve blazo on Mon, 7th Sep 2015 11:38 am
The Saudi policy has not really had time enough to see if it would work. The addition of Iran also causes the analysis to delayed. I actually think it is working and world production capacity will start to react to the paucity of development spending sooner rather than later.
Martin on Mon, 7th Sep 2015 11:41 am
BOO HOO…..I don’t want to hear about the Oil Co’s bad time’s and low earning’s. I need a minimun of 100 gallons of fuel a month just to go back and forth to work. That’s not counting when I work 6 or 7 days a week, plus every day errands, shopping, doctor’s, medical prescriptions for my wife and I that I have to drive to pick up every week, checking on my 77 year old MIL every few days, I easily need 200 gallons a month. I was paying nearly $800 a month for fuel early last year. My wife is disabled and I only make $20 an hour. You do the math. All that while the Oil people are making record profit’s. To hell with them, I need cheap fuel,$1 a gal. would be great!!
shortonoil on Mon, 7th Sep 2015 11:50 am
Until June of 2014 OPEC was selling every barrel they could produce for about $100. They then apparently, from what the author notes, started a price war that is costing them $600 billion per year. Would it be fair to say that the heads of OPEC are really, really some of the stupidest people on earth?
Maybe out of the goodness of their hearts they decided to give the poor of the world cheaper petroleum? The poor in this case being North American Rednecks, drinking beer, and driving around in their F250s. Maybe they decided to take a piece out of Goldman’s play book, and start doing God’s work?
Saints, or idiots are the choices the author leaves us. And of course, this could have absolutely nothing, and we mean nothing, to do with that nasty, nasty four letter world – depletion!
http://www.thehillsgroup.org/
Barry Pullen on Mon, 7th Sep 2015 11:55 am
it’s about time the poor man get’s a break from high oil price’s the rich has had it good for a long time. time for the poor man to get his relief.
Martin on Mon, 7th Sep 2015 12:00 pm
I’m 59 years old. Since the time that my parents were kids and learning to drive, (in the 30’s), the American public have been told that we are a mobile society with a “car in every garage and a Chicken in every pot”, as the saying was back then, (according to my parent’s). Cars were made so almost everybody could afford them. But what about the fuel?. Our Dear Government is allowing the oil company’s to rob us blind whenever they feel like it. (My wife uses the word rape instead of rob). Last month a refinery in Indiana went down for unscheduled “repair’s”. While most states saw a decline in fuel prices, our’s went up 60 cents overnite. (I live in S.E. Mich.) Our Governor sent a letter to some OilPeople and they pretty much told his lame ass to “kiss off”. Why can’t our Federal Gov. do something about this? Maybe start up an American Government Oil Company that will guarantee no more than a 5% profit over what it takes to pump and refine this oil for us and that 5% will go back into the oil company for repairs and whatnot. Would you vote for someone that would start an Oil Company strictly to combat high fuel prices for Americans only?
Boat on Mon, 7th Sep 2015 12:12 pm
Short,
from what the author notes, started a price war that is costing them $600 billion per year.
I also read just a couple weeks ago the Saudi’s had lost around 68 billion with over 600 billion left in reserve.
http://money.cnn.com/2015/08/06/news/economy/saudi-arabia-oil-deficit/
Melvin Jackson on Mon, 7th Sep 2015 12:26 pm
I feel NOTHING for the Middle East oil problem. When oil prices were greater than 100 @bbl, they felt nothing for those of us who had to pay higher gas prices at the pumps. I say, if you can’t sell it; EAT IT.
penury on Mon, 7th Sep 2015 12:41 pm
After reading a majority of the comments here I have concluded that cognitive disconnect is one of the major problems that causing hurdles to maintaining any type of civilization in the future. Speculators, greedy oil companies, nations which hate us for our freedoms, greedy elites are destroying our dog given rights to gas under a dollar. How about you go into work tomorrow and insist that your pay be taken back to what it would of been when gas was 25 cents a gallon? Do your part to cut costs. How about the FX trade? Is the dollar worth 8 pisos or 47 piso? you do not know or care you just want what you feel you deserve. I hope you get it soon.
Evan on Mon, 7th Sep 2015 12:49 pm
What a bunch of cowabunga. The Saudi sovereign fund can support the country for ten years without any oil income. When are you idiots going to learn the difference between deficit and debt?? The Saudis will win this one hands down. Now that the banks are going to start calling in the loans in the US (and the Fed is going to raise the interest rate), all of the little US companies are going out of business or are going to be bought up. Stupid bunch of doctors and lawyers never had any business trying to crack the energy industry.
jerry rush on Mon, 7th Sep 2015 1:29 pm
iam buying,tankers,refiners,and pipelines. buy low,sell high
FloridaGirl on Mon, 7th Sep 2015 2:15 pm
Saudi Arabia’s crude oil exports have hovered around the same level for the last 4 years, so effectively, they have taken no action. How does that mean they are waging a price war? The frackers did it to themselves. All in the name of increasing their stock prices and getting more loans. I’ve looked at the SEC filings of the major ND shale oil companies and they were cash flow negative at $100/barrel oil, so I don’t buy this article’s break even prices either.
GregT on Mon, 7th Sep 2015 2:15 pm
“iam buying,tankers,refiners,and pipelines”
Wrong. You are buying paper IOUs. That may, or may not, be paid back.
Ric Moving on Mon, 7th Sep 2015 2:39 pm
The is a theory of “peak oil” production. Is there a converse theory of “peak demand”?
According of financial analyst Harry Dent five years ago, he predicted oil prices would drop to the 35 dollars per barrel range by 2015, and down to 15 dollars range by 2018 based on his “demoagraphics” theory of the aging of most of the Western world like Germany, and the US. Old people who are retired will not be driving their cars to commute to work every work day, and this save a huge amount of oil use. Retired people eat less as they exert less because they are not working. Not working, they by less new cars, new houses, and most other goods requiring less manufacturing of goods, which also saves energy and oil use. High milage car laws slowly replace gas guzzling cars with more fuel efficient cars over time. Old SUV’s get about 15 miles per gallon, while new SUV’s get about 30 miles per gallon.
Can frac technological improvements get down to 30 bucks per barrow? Multi-drill-holes per pad, re-fracking, parallel fracking, robotic drilling rigs, and mass production of rigs, etc can bring down frac costs. There are almost no costs of coming up with dry-holes in fracking, as one defined, the shale layers stretches for miles and miles on end. If the oil people allow the government to help out with development grants, and university research, there could be even more wondrous technological developments that can double and more production at less cost. Now, only about 5 percent of the in ground oil in the shale is able to be extracted versus up to 50 percent extraction in regular oil deposited in pools. There may be a lot of room to grow shale extraction percentages like by using more sand to keep the frac cracks open for long lengths.
The government should make the FRB (Federal Reserve Bank) to keep providing low interest loans to the frac companies. While free money should be handed out willy-nilly, the frac industry has to be supported against short term OPEC attacks by government policy.
Boat on Mon, 7th Sep 2015 3:48 pm
GregT on Mon, 7th Sep 2015 2:15 pm
Wrong. You are buying paper IOUs. That may, or may not, be paid back.
While that may or may not happen the fact is the overwhelming oil money debt (junk bonds) continues to make a higher return on the investment as it has done for decades. You forgot to mention that.
GregT on Mon, 7th Sep 2015 4:01 pm
“You forgot to mention that.”
I didn’t forget to mention anything Boat. What you said does nothing to negate what I said.
Besides, “Past Performance is No Guarantee of Future Results”. But of course being the intellect that you are, you already understood that.