Why oil prices are likely to remain low for the foreseeable future – Shale 2.0

Shale Revolution Changes Everything

How the Shale Revolution Has Reduced Geopolitical and Price Risk

shale2-0

Opec was on the verge of claiming victory over its North American rivals last night after its strategy of squeezing out the shale industry by flooding the markets with oil appeared to be vindicated. The oil producers’ cartel said that falling prices would force lower production from its rivals by the end of this year, with American and Canadian producers particularly affected. –Marcus Leroux, The Times, 19 January 2016

When oil prices tick up, thousands of profit-seeking investors make individual decisions to turn each shale factory’s switch to “on.” That’s how the U.S. so rapidly achieved, from 2009 to 2015, the record-breaking rise in production of four million barrels a day. Shale 2.0, when it comes, will be even better. The technology is advancing at a speed usually associated with Silicon Valley. Just as a new Internet ecosystem rose from the ashes of the dot-com crash, Shale 2.0 will emerge—and for the same structural reasons. –Mark P Mills, The Wall Street Journal, 19 January 2016

Even as the U.S. rig count has retreated like Napoleon from Russia, shale remains the key to understanding the global oil landscape. Consider that despite all of the turmoil in key oil-producing regions, namely the Middle East, oil prices have not spiked. Nothing — not Russian intervention in Syria, not ISIS attacks on Libyan oil infrastructure, not the torching of the Saudi Embassy in Tehran — has been able to stop the oil price collapse. What is going on here? Does turmoil in the Middle East suddenly no longer matter? The American shale oil model has changed the world oil marketplace for the foreseeable future. Shale producers’ ability to quickly throttle down or ramp up upstream investment spending, drilling and production, as oil prices change, is viewed as an effective shock absorber against any potential oil price spikes. Mark J Perry, Investor’s Business Daily, 15 January 2016

The full measure of the shale oil model’s impact will be tested when the current crude glut clears and geopolitical risk returns, which is a near certainty. As oil prices eventually rise, will production from America’s shale oil fields rise in tandem and absorb the shock? The next president is likely to find out, and the answer will almost certainly be “yes.” And maybe that president will do something President Obama has never done — acknowledge the game-changing shale revolution as the most extraordinary energy success story in U.S. history. Mark J Perry, Investor’s Business Daily, 15 January 2016

h/t to Dr. Benny Peiser of the GWPF

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January 19, 2016 1:31 pm

In the battle between natural gas, oil, shale oil, and coal, the Greenies are just useful idiots funded by Big Oil. Fortunately the arrival of natural gas and shale oil has loosened the death grip that the nutty Arabs had on World Energy. Shiite Iran is ramping up production and they want to hammer the Sunni Saudis.
Dr. Thomas Gold contends that oil is not a limited resource, and that oil, natural gas and coal, are not so-called “fossil fuels.” He explains that dinosaurs, and plants are not the origin of oil and natural gas, but rather it is generated from chemical substances in the crust of the Earth. Ong empty oil fields slowly refill in an inexplicable way.
Dr. Gold: “Astronomers have been able to find that hydrocarbons, as oil, gas and coal are called, occur on many other planetary bodies. They are a common substance in the universe. You find it in the kind of gas clouds that made systems like our solar system. You find large quantities of hydrocarbons in them. Is it reasonable to think that our little Earth, one of the planets, contains oil and gas for reasons that are all its own and that these other bodies have it because it was built into them when they were born? That question makes a lot of sense. After all, they didn’t have dinosaurs and ferns on Jupiter to produce oil and gas?”
If Dr. Gold is right, we already have renewable Gas, Oil and Coal too.

Guy
Reply to  ntesdorf
January 19, 2016 4:00 pm

I would doubt Dr. Gold would put coal on the list. The oil and gas argument is interesting. Water, carbon, and a heat source such as high pressure might do it.

Reply to  Guy
January 19, 2016 6:08 pm

Abiotic natural gas, yes, in small quantities. Framm Strait methane hydrates. Abiotic oil, nope. Read up, please.

SteveT
Reply to  Guy
January 20, 2016 3:49 pm

Guy
January 19, 2016 at 4:00 pm
I would doubt Dr. Gold would put coal on the list. The oil and gas argument is interesting. Water, carbon, and a heat source such as high pressure might do it.
*******************************************************************************************************
Natural spontaneous generation of the suite of hydrocarbons called fossil fuel oils is already proven experimentally. If I remember right about 2000 atmospheres and 1500C, similar to pressures and temps at the Earth’s mantle.
See article and the contained links for all the details
http://web.archive.org/web/20110718094621/http://www.gasresources.net/index.htm
The problem, as I see it, is how to drill deep enough. This may be what Ristvan is referring to as disproven ( I think he means failed to find – a different thing altogether)
SteveT

Dawtgtomis
Reply to  ntesdorf
January 19, 2016 5:49 pm

Coal is made of carbon too, but under different conditions? Sounds like scenarios I learned in the 60’s. If it is an internal geochemical process, then it might conceivably be variable in its manifestations due to the local substrata. Are there any studies of this?

Dawtgtomis
Reply to  Dawtgtomis
January 19, 2016 6:00 pm

If we find oil on Mars down the road, will that prove there was once life there, or that it is coming from inside?

Dawtgtomis
Reply to  Dawtgtomis
January 19, 2016 6:16 pm

If CH4 can happen on Pluto, why can’t complex carbon molecules exist under much more energetic conditions here?

Reply to  Dawtgtomis
January 20, 2016 3:10 pm

Real simple short answer. Because rocky inner planets are not like gaseous/frozen gaseous outer planets. Formation mechanics are different. And good luck with your natural gas bill if the source is Titan. Gold is a crackpot.

January 19, 2016 1:56 pm

I authored an industry report ”Frac Sands & Proppants North America Industry, Markets & Outlook, 2015” (available at http://www.roskill.com – it’s a bit pricey unless you are an oil and gas company) published a few months ago, forecasts to 2020, and interestingly I came to the same conclusion as Mark Mills, author of this article. After oil prices dropped to half ($45/bbl by early 2015):
”. A few major petroleum companies are already advanced going forward in selection of drill targets to minimize cost for optimum production based on their knowledge of the individual units in the best basins. Also, shallower plays will be targeted where these meet criteria. Re-entry into older wells for secondary hydraulic fracturing treatments and improvements in resource recovery are a made to measure strategy for difficult economic times. According to industry spokespersons, some 50,000 such wells exist of which only about 1,000 have been re-fractured at modern frac stage spacing and loading. Re-entry costs are only about 25% of the cost of a new well and encouraging results were obtained where this was done.
The fine tuning of drilling and hydraulic fracturing techniques over just the past two years has also prepared the industry for greatly increased efficiency and productivity per dollar invested in future wells drilled. EOG Resources cites the following example for the Eagle Ford shale play: a) average days to drill a well was 14.2 in 2012 and 8.9 in 2014, b) cost per well was $6.1M in 2014 and presently is $5.4 million. They note that the return on investment in 2012 at $95 oil was lower than that achievable today at $65 oil.”
Also, when the oil price dropped, a number operators switched to drilling in well known plays without fracking the well. An inventory of unfracked good wells are there to turn on pretty quickly when economics permits. This tech has made oil and gas into inventory in a manner usually thought of in manufacturing. I note some commenters quoting initial production decline rates and expected ultimate recovery rates that were usual in 2012. These are changing, ultimate recovery for EOG and Conoco Philips in the Eagle Ford play increased 40% in 2013 and more again in 2014 as they went to more closely spaced and intensely fracked stages. This is what makes the older 50,000 wells waiting to to be refracked for return to profitable production.
All the conventional wisdom that seems to have jelled on people here on the production characteristics and ultimate recoveries of oil and gas are about 2012 vintage when much was being made of it. Look at EOG Resources Q3 2015 presentation. Example, slide No. 25 for example: average days to complete a well 2012 was 20.8days in Q3 2015 it was 7 days and the record was 5.6 days. Look at all the slides – they just completed a well in the Irish Sea, UK with estimated daily production of 20,000 bbl/day – they aren’t letting low prices get to them yet!!!

Reply to  Gary Pearse
January 19, 2016 2:00 pm
JustSteve
Reply to  Gary Pearse
January 19, 2016 2:21 pm

I know the frac crews we serviced doubled their proppant use in the Eagle Ford in the last year I was there. I hauled sand (proppant), and we were stretched really thin when they did that. According to a frac engineer I talked to on a regular basis, they were getting much better initial flow rates and the decline rate curve flattened out, more than paying for the increased input cost. In fact, when the increases took hold, a lot of the sand transloading facilities would run out of product, the rails couldn’t get the cars in fast enough. We wound up going 150 extra miles to Corpus Christi or Victoria to load because they could bring it in on barges.
Last I heard, between the 3 biggest oil plays (Bakken, Permian, Eagle Ford ) there were approximately 4,000 wells ready to frac, not including potential re-fracs.

Brian H
Reply to  Gary Pearse
January 20, 2016 12:57 am

Sounds like the Saudi Squeeze is turning into an effective and profitable learning curve experience for fraccers…

Tom Crozier
January 19, 2016 2:37 pm

A little off topic, but does anyone know why it’s taking so long for SoCal Gas to drill a relief well at Porter Ranch?
https://en.m.wikipedia.org/wiki/Aliso_Canyon_gas_leak

Tom Crozier
Reply to  Tom Crozier
January 19, 2016 2:38 pm

To a little over 8,000 feet?

freedserf
Reply to  Tom Crozier
January 19, 2016 11:01 pm

They have to do an Environmental Impact Statement for the relief well first, and get it approved by the California DEQ. Can be a time intensive project…….Ya think????

Stephen Reilly
January 19, 2016 2:48 pm

“Peak Oil” has been around for 140 years. History shows that experts are almost always wrong.

Reply to  Stephen Reilly
January 19, 2016 5:39 pm

Nope. Was first hypothesized for the US by Hubbert (Shell geologist) in 1955. Predicted ~1970. peak was 1971. Predicted in 1971 a global conventional peak ~2000. Actual was 2007. Your facts fail.

Reply to  ristvan
January 19, 2016 8:11 pm

“Petroleum has been used for less than 50 years, and it is estimated that the supply will last about 25 or 30 years longer. If production is curtailed and waste stopped it may last till the end of the century. The most important effects of its disappearance will be in the lack of illuminants. Animal and vegetable oils will not begin to supply its place. This being the case, the reckless exploitation of oil fields and the consumption of oil for fuel should be checked.”
— July 19, 1909 Titusville Herald (Titusville, PA)
“In meeting the world’s needs, however, the oil from the United States will continue to occupy a less and less dominant position, because within the next two to five years the oil fields of this country will reach their maximum production and from that on we will face an ever increasing decline.”
— October 23, 1919 Oil and Gas News
Capt. H. A. Stuart, director of the naval petroleum reserves, told the Senate Naval Affairs Committee today the oil supply of this country will last only about 15 years.
“We have been making estimates for the last 15 years,’ Stuart said. ‘We always underestimate because of the possibility of discovering new oil fields. The best information is that the present supply will last only 15 years. That is a conservative estimate.'”
— March 9, 1937 Brooklyn Daily Eagle
“There is a growing opinion that the United States has reached its peak oil production, the Oil and Gas Journal pointed out in its current issue. Since 1938, discoveries of new oil have not equaled withdrawals, in any single year, although there is a very good chance that 1943 will see enough new Ellenburger oil in West Texas to provide an excess.”
— June 7, 1943 Bradford Evening Star (Bradford, PA)
“Faced with the threat that our nation’s petroleum reserves may last only thirteen years, geologists are striving to tap the almost limitless supply of oil located beneath the seas off our coastline. The first attempt to get oil from the depths of the Atlantic Ocean was begun this month near Cape Hatteras, North Carolina, and Secretary of the Interior Harold L. Ickes revealed that the scientists are making progress in their efforts to reach the underwater oil.”
— December 10, 1945 Times Recorder (Zanesville, Ohio)
While it generally wasn’t termed, “Peak Oil,” the predictions are as old as oil production itself.
In all cases the theory assumes no changes in knowledge, a common failure in economic forecasting.
{For better symmetry, the mods were hoping you were going to cite a “oil is dead” quote from 1909, 1919, 1929, 1939, 1949, 1959, 1969, 1979 (well, it was dead then actually), 1989 … 8<) .mod]

Stephen Reilly
Reply to  ristvan
January 20, 2016 1:52 am

Someone, I believe it was a US government geologist (haven’t got time to look it up right now) came out with a report in the mid 1870s claiming some sort of Peak Oil prediction. But I did find this:
Economist and oil analyst Daniel Yergin notes that the first predictions of imminent oil peaks go back to the 1880s, when some American experts believed that exhaustion of the Pennsylvania oil fields would kill the US oil industry. Another wave of peak predictions occurred after World War I.
“… the peak of production will soon be passed, possibly within 3 years. … There are many well-informed geologists and engineers who believe that the peak in the production of natural petroleum in this country will be reached by 1921 and who present impressive evidence that it may come even before 1920.”
– David White, chief geologist, United States Geological Survey (1919)
“The average middle-aged man of today will live to see the virtual exhaustion of the world’s supply of oil from wells,”
– Victor C. Anderson, president of the Colorado School of Mines (1921)
Check out The Oil Drum, Drumbeat: July 18, 2009. Here is a detailed claim, back up by all sorts of numbers, to ‘prove’ that, and I quote; “the era of cheap oil is definitely over”. I wonder what the author of that piece is saying now.
I repeat, experts are almost always wrong.

Kalifornia Kook
Reply to  ristvan
January 22, 2016 1:28 pm

And first hypothesized again in 1919 by David White, chief geologist of the United States Geological Survey. He predicted peak oil as early as 1922. Another first hypothesizer was Eugene Ayers, a researcher for Gulf Oil, who projected in 1953 that peak oil would occur no later than 1960.
Sorry ristvan – wander around the internet a bit. i got a hit on my first look.

Richard G
Reply to  ristvan
January 23, 2016 7:16 am

According to the EIA, U.S. field production of crude oil peaked in 1970 at 9.637 mm/bpd. The monthly number was Nov 1970 at 10.044 mm/bpd. So if Dr. Hubbert predicted 1970, it looks like he was correct.
While we have passed global peak conventional oil production, we have continued to produce oil in record amounts from conventional and non-conventional extraction methods.
The MSM has always portrayed peak oil as inability of production to keep up with demand. In that sense it has failed, as we have the resources and ability to produce far in excess of demand.
Every year since 2010 production and demand have set new records. I estimate the 2015 numbers to be production at 94 mm/bpd and demand at 92.1 mm/bpd.

Dobes
January 19, 2016 2:53 pm

Whatever used to be “Unconventional” is now “Conventional”. Shale oil is not an unconventional resource anymore. The definitions just keep changing as the technology changes. You cant even call it ‘hard to get oil’. If it was the U.S. wouldn’t have ramped up by 4 million barrels a day so quickly. Peak oil just keeps moving the goal posts down the road.

Reply to  Dobes
January 19, 2016 5:49 pm

Dobes, wrong. There has always been a fairly precise delineation between conventional and unconventional oil, defined by three parameters: viscosity, porosity, permeability. Noted elsewhere in comments this thread. Educate yourself, rather than displaying abject geophysical ignorance. Please also familiarize yourself with the annual oil production volumes implied by those three parameters. Then you will finally be learning the hard facts of geophysics.
Please educate yourself using Google. A faster way would be to read some of my footnoted essays in the energy section of Blowing Smoke. Especially the footnotes, since you should never trust me. Your call. But please do something to educate yourself on these matters.

Reply to  ristvan
January 19, 2016 7:25 pm

The oil produced from the Bakken, Eagle Ford and other shale plays is conventional oil. These plays essentially produce from the source rocks. The oil is conventional, the reservoir rock and extraction methods are unconventional.
Shale oil is conventional oil.
Oil shales, like the Green River, and tar sands are unconventional oils.

Reply to  ristvan
January 19, 2016 8:12 pm

DM, you forget catagenesis. Green Rover formation ‘oil shales’ are kerogen, not oil or gas. Admittedly confusing terminology. But not geology.

Reply to  ristvan
January 19, 2016 8:22 pm

Further to DM, my definition of unconventional also specified porosity<5%, and permeability <10 Darcies. That defines all shales, tight oil, gas, whatever. Never confuse 'oil shale' Green River formation kerogen shales with 'tight oil' Bakken type shales. The oil catagenesis window.

freedserf
Reply to  ristvan
January 19, 2016 11:15 pm

10 Darcies seems quite high as a demarcation for unconventional. I would expect you to use something in the 0.1 to 1 mD range.

freedserf
Reply to  ristvan
January 19, 2016 11:28 pm

OK, the tar sands can get up there.

Jerry Henson
January 19, 2016 3:01 pm

ntesdorf and Bill Taylor
Dr Thomas Gold expounded on Mendeleev’s theory and explained it well. The Russians
taught this to their hydrocarbon geologists since the 1870’s, They produce natural gas
from wells more than 40,000 ft deep.
The first oil “shortage” was in the 1850’s. There have been many since then, and the
pronouncements have always been wrong. The Saudis and the Gulf of Mexico wells
seem to be refilling faster than other locations, but no one is sure of the rate, unless
they are just not telling.
For people to believe that the hydrocarbons on Titan, for example or a high percentage
of the cloud seen on the Hubble screensaver “horse head nebulae” are abiotic but
the hydrocarbons on earth are “fossils” defies logic.
The massive fields of methane hydrates stored in the deep oceans and under the
tundra are huge reserves and can very effective be converted to diesel of ethanol.
The North Slope equipment is powered by a small cracking unit converting natural
gas to diesel.
There is a quiet competition to produce the smallest, most efficient cracking unit to
convert natural gas to a more portable and safer fuel.

Stewart Pid
Reply to  Jerry Henson
January 19, 2016 8:19 pm

Jerry you would be well served to get a degree in petroleum geology and stop spouting nonsense. I love you guys that never found a barrel of oil or ever took a geology course & are experts on oil’s provenance.

Alan Robertson
Reply to  Stewart Pid
January 20, 2016 9:52 am

I just love how with any topic, the self- congratulatory experts unfailingly appear and attack the man while offering no rebuttal of the message.

Resourceguy
Reply to  Stewart Pid
January 20, 2016 12:06 pm

Yes. But Thomas Gold was notable for one thing. He managed to leverage millions of public dollars for a monumental outlier of a project and failed. It even got a straight faced expose in a Nova episode. This was all with taxpayer funds and not risk taking for anyone involved. Chalk it up as another risk free prediction sent to the dustbin of history like the 100 years of peak oil predictions.

Doug
Reply to  Stewart Pid
January 20, 2016 3:04 pm

I’ve been to many conferences, worked on many projects with the Russians, , even those where we discussed the oil in the basement rocks of Viet Nam, and every Russian I’ve worked with believes the oil to be of biologic origin. I love all these people speaking on behalf of Russian petroleum geologist who have never had contact with them

Jerry Henson
January 19, 2016 4:02 pm
Reply to  Jerry Henson
January 19, 2016 6:13 pm

The better bet is nat gas to ethane, then a second transformation of ethane to liquid transport fuels. Siluria technologies catalysts. Read up. Now, if they actually work at scale…

Reply to  Jerry Henson
January 19, 2016 6:38 pm

No to ethanol, Makes world food prices for the poor too expensive and ruins auto engines…
My cornflakes are too expensive now!

Reply to  J. Philip Peterson
January 19, 2016 8:40 pm

Even that heartfelt sentiment is reality crapola. Facts. About 41% of US corn ( by weight) is used for ethanol. Another fact. About 27% of that is returned as protein enriched (yeast), fiber enhanced distillars grain. On my dairy farm, we now send all our corn for ethanol, in return for freebe distillers grain returns. Which also means we can grow more corn and less protein/ fiber rich alfalfa on the field contours. Since dairy cow nitrition depends on their ruminant multi stomach total calory intake.
Learn agronomics before spouting warmunist politics.

Reply to  J. Philip Peterson
January 19, 2016 9:34 pm

ristvan:
I worked on (one of) the first ethanol plants in Saskatchewan. Our experience was that the ethanol was just a byproduct of producing cattle feed for the cattle feed lot next door. One with out the other was uneconomic, and at the time, it required a government subsidy on ethanol production to make it work. But that was over 25 years ago so I assume things have gotten more efficient by now.

Reply to  J. Philip Peterson
January 19, 2016 9:44 pm

WD, nothing has changed in the years since. My farm economics (concept posted above) tend to show it.

TCE
January 19, 2016 9:17 pm

This was a very interesting thread. I leaned much, including several questions I need to pursue.
I would be very pleased to talk one on one with ristvan and Middleton about recoverable reserves.
My argument for peak oil has always been less about how much oil is in the ground, and more about the barriers to production, and the ultimate price of consumption.
My analysis shows a probable peak before 2030, and most certainly before 2050….. all of which means the warmers have nothing to worry about … at least from the consumption of oil.

Reply to  TCE
January 19, 2016 9:36 pm

TCE, you can contact me directly via Judith. She has my coordinates, and now has my permission to give them to you in good faith.
As for peak oil, it has always been about maximum production per year, never how much could be eventually be produced.

Dr. J. H. N. Wennekers
January 19, 2016 9:47 pm

Ladies and gentlemen, It all comes down to 1) Who has the most stable money reserves and a stable political structure and 2) The lack in all comments thus far of the statistical classification of data rather then the usual statistical analyses. Here in lies the key to assessing what will happen in the future. Even supply/demand data when statistically classified take on an entirely new and different meaning, so does political impact. Good luck in solving this riddle.

freedserf
Reply to  Dr. J. H. N. Wennekers
January 19, 2016 11:32 pm

Dr. J
The oilfield really is different……….in so many ways!

Reply to  freedserf
January 20, 2016 9:23 am

But, we’re talking world markets (for both supply and demand), as particularly conflicting geopolitics and religion even today affecting directly the ‘decisions’ by various world leaders in this game …

Resourceguy
January 20, 2016 12:19 pm

Thank you to Brian Epps above.
That is a nice collection of quotes. I’m saving those.

Jerry Henson
January 20, 2016 1:04 pm

Stewart Pid
Do you believe that the lakes if hydrocarbons on Titan are “fossils”? How about the
hydrocarbons found in the atmospheres of Saturn, Jupiter, and all the outer planets?
Are you aware that all the extra solar system planets which have had their atmospheres
analysed contain hydrocarbon gases? Only on earth they are “fossils”?
I have discovered that all upland top soils, soils not in a flood plain, in the presence of
adequate moisture, owe their richness to the amount of natural gas which up wells
through it.
Hydrocarbons up well all around the earth but are not evenly distributed.

Craig Loehle
January 20, 2016 1:12 pm

One of the problems with estimating “peak conventional” is that many of the major players (Venezuela, Iran, Libya) have despotic governments that nationalized their oil industries. One must continuously invest in oil infrastructure to keep it pumping, but such countries do not. They ran off western oil companies. They treat oil like a swimming pool that you just drop a hose into and start pumping. So they get declining production. But that doesn’t mean a US company would get declining production from those same areas.

TCE
Reply to  Craig Loehle
January 20, 2016 1:42 pm

Political ambition trumps good management.

Reply to  Craig Loehle
January 20, 2016 3:19 pm

Craig, what you is true. And it injects uncertainty. Doesn’t change the underlying geophysics, which can be extrapolated from places where these additional considerations are not factors.

SteveT
January 20, 2016 4:18 pm

I replied up-thread with the following, which may have been missed as it was a late reply.
Natural spontaneous generation of the suite of hydrocarbons called fossil fuel oils is already proven experimentally. If I remember right about 2000 atmospheres and 1500C, similar to pressures and temps at the Earth’s mantle. Raw materials required being calcium carbonate, iron oxide and water.
See article and the contained links for all the details – warning – lots of reading and scientific explanations as to where oil comes from and also where it doesn’t. Experimentally proven.
http://web.archive.org/web/20110718094621/http://www.gasresources.net/index.htm
The problem, as I see it, is how to drill deep enough.
In answer to Resourceguy
January 20, 2016 at 12:06 pm
Yes Thomas Gold did fail to find any oil but that does not disprove the fact that oil will spontaneously be generated as in the link above. There is a lot of history between him and the Russian theories stretching back to the early fifties. Knowing how it’s made isn’t quite the same as being able to get to it.
SteveT

co2islife
January 20, 2016 7:10 pm

Oil will remain low for an extended period of time because of one simple reason, the House of Saud’s lives depends on it, it is that simple. ISIS/ISIL/IS, Iran/Iraqi/Syria Shiite unity forming a Caliphate, Iran likely to get a nuclear weapon, Russia willing to help them, China backing the opposition to Saudi Arabia, The US Fracking Industry threatening their near monopolistic power on the marginal cost of fuel. Saudi Arabia must prevent its enemies from gaining the revenues with which they will use to destroy Saudi Arabia. It is the same game they played in the 1980s to undermine Russia…and Russia hasn’t forgotten. Russia, Iran, Iraq all benefit from destroying Saudi Arabia, and gaining control of OPEC. Low oil prices is a death sentence to Russia, and really harms Iraq and Iran, and other OPEC Nations. The easiest way for Russia and the Shiites to return to power is to destroy Saudi Arabia, and restore a much higher price of oil.
This script was written 1500 years ago when the Suni Shiite split occured.
http://www.wsj.com/articles/sunni-shiite-conflict-reflects-modern-power-struggle-not-theological-schism-1431611004
Saudi Arabia May Pursue Nuclear Weapons If ‘Nefarious’ Iran Develops Bomb
http://www.breitbart.com/national-security/2016/01/20/saudi-arabia-open-to-nukes-if-nefarious-iran-develops-the-bomb/

co2islife
January 20, 2016 7:24 pm

Does turmoil in the Middle East suddenly no longer matter? The American shale oil model has changed the world oil marketplace for the foreseeable future.

That isn’t even remotely true. Turmoil in the Middle East does matter, further turmoil in the Middle East will force Saudi Arabia to pump more oil to weaken its enemies. Turmoil in the past signaled the threat of US intervention, and oil shocks. With Obama siding with Iran and even giving them nuclear material, the Saudis are alone in a very very very bad wilderness. Oil Markets aren’t markets as we know them, they are controlled by a cartel, OPEC, and in reality they are controlled by the low cost marginal producer of Oil Saudi Arabia. They have a break even point estimated at around $12/bbl. Oil prices are low because everyone in the oil markets knows Saudi Arabia has a knife to their throats and has the keep the price of oil low. It is literally a life or death situation for the House of Saud.

As The Economist notes, Saudi Arabia’s break-even price on oil is a mere $12 a barrel. Iran’s is at nearly $30, and the US is nearly $70. Saudi Arabia has 16% of the world’s proven oil reserves and can raise revenue through selling off relatively insignificant percentages of Saudi Aramco.
Saudi Arabia is better positioned to absorb a protracted price drop than many other oil producers. Prices might be low because the country can afford to keep them low.

http://www.businessinsider.com/saudi-arabias-foreign-minister-just-gave-an-utterly-unconvincing-reason-for-the-plunge-in-global-oil-prices-2016-1

co2islife
January 20, 2016 7:30 pm

Unfortunately Obama wasted the US resources on Wind and Solar with will go bankrupt with lower oil prices, his green agenda will end up being a complete and total waste of money. No one will be buying a Volt in a year, and SUVs will revive the Auto Industry. CO2 will continue unabated. If Obama would have used those resources to develop a commercially viable alternative fuel using processes like the Fischer Tropsch or similar processes, we would be able to cut the cord to the Middle East completely. Instead he allowed promising technology to go bankrupt.
https://youtu.be/ioEQBEBYTH4

Reply to  co2islife
January 20, 2016 8:34 pm

We have no significant cord to the Middle East. Check EIA statistics for the sources of imported oil. Majority of US imported oil is from Saudi and non-OPEC sources. It’s about the world price of oil and gasoline pump prices, not source of supply.

co2islife
Reply to  Nicholas Schroeder
January 21, 2016 4:24 pm

We have no significant cord to the Middle East.

The Middle East is the marginal producer of oil, and easily set the global oil price. They control the oil price, and that is one extremely significant cord.

Jerry Henson
January 21, 2016 7:06 am

There is more coast to a product than production. There is also overhead. Saudi’s
overhead is very high. They are eating assets at a very high rate. The question is
how long can they sustain the current loss?

January 21, 2016 12:58 pm

” _Jim
January 19, 2016 at 2:52 pm
to: ECB
Meanwhile, progress continues on *other* energy fronts, such as detailed here:
https://youtu.be/IQ3S3YMH96s Nota Bena: 1 hr plus video (and ignore the refs to GW)”
I stayed with this video for 29 minutes, and watched the closed captions as well (among the worst I’ve ever seen, BTW), and found the explanation for the unanimous rejection by academics, government, and investors quite inadequate.
Assuming the original experiment was honestly performed and reported, governments and private investors with deep pockets should have been all over it. The fact that they were not leaves me with only two possible explanations:
1. the results were NOT as reported, or
2. there was a global conspiracy among academics, government agencies, and investors to discredit the experiment for social, financial, and military reasons.
Lest anyone dismiss #2 as “conspiracy theory” rearing its ugly head, please consider that this forum provides regular documentation of just such a conspiracy in the realm of “climate change”, and consider your objection noted and answered – far more egregious and much more easily confounded misinformation conspiracies have been successfully perpetrated, including the attribution to the German Army for more than 40 years of the Katyn Wood massacre of the Polish Officer corps, and the reporting of the death toll for the Tang Shan earthquake of 1976 for decades at a mere 10,000.
Historians and journalists re-attributed the Katyn Wood massacre, carried out by soviet troops in plain view of the local villagers (who were NOT transported or imprisoned to keep them quiet) only a few years ago. The Polish President, accompanied by his closest advisers and the chief of the Polish defense staff flew to Russia in part to remonstrate about the massacre shortly after this “revelation”, and his plane crashed on Russian soil, killing everyone aboard.
The Tang Shan death toll was tacitly revised upward to some 250,000 by the Chinese government censors when they allowed a recent mainland movie about the earthquake to display this figure. The more likely figure, given the report of a French delegation visiting the city of 1 million people at that time, that every second building was reduced to rubble in the middle of the night, is half a million dead.
There isn’t much discussion in our mass media about the role of energy distribution systems’ in social control, perhaps because we have become so accustomed to this role as a given.
Providing small communities, families, or individuals with enough locally stored energy to assure a scaleable and uninterruptible supply of electricity for years would reduce the power of central government over the individual dramatically throughout the world. And in many regions, it could well cause or fan conflicts more destructive than the breakup of Yugoslavia.