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They are wrong. It is preposterous to say that the world’s largest oil importer is also its swing producer.

There are two types of oil producers in the world: those who have the will and the means to affect market prices, and those who react to them. In other words, the swing producer and everyone else.

A swing producer must meet the following criteria:

• A swing producer must be a net exporter of oil.

• A swing producer must have enough daily production, spare capacity and reserves to influence market prices by balancing supply and demand through increasing or decreasing output.

• A swing producer must be able to act authoritatively and quickly to increase or decrease output.

• In the real world, a swing producer is a euphemism for a cartel. No single producer has enough oil leverage to balance the market and influence prices by itself. That includes Saudi Arabia, Russia, and the United States, the top 3 producers in the world. Obviously, it also includes U.S. tight oil.

• A swing producer must have low production costs and have the financial reserves to withstand reduced cash flow when restricting or increasing supply is necessary to balance the market.

So, let’s go down the list for OPEC and U.S. tight oil.

OPEC’s net exports for 2014 were 23 million barrels per day (mmbpd) (Figure 1). U.S. net exports were -7 mmbpd. In other words, the U.S. is a net importer of crude oil. A net importer of oil cannot be a swing producer.

Figure 1. OPEC and U.S. 2014 net crude oil exports.
Source: OPEC & Labyrinth Consulting Services, Inc.

(Click image to enlarge)

…click on the above link to read the rest of the article…

Peak Oil? What Peak Oil?

January 4, 2016

Peak Oil? What Peak Oil?

It is unbelievable how many times I’ve heard people telling me “the US has become self-sufficient in oil production,” a group that includes some respectable members of the EU parliament. This is probably due to the confusion that the media have made on the fact that the US production has recently surpassed the US imports of oil. It is true, but that tells you nothing of how much oil the US still imports. And that is, actually, much more than it was at the time of the oil crisis and domestic consumption is on the increase (as you see in the figure above, from Art Berman’s blog)

This misperception on the actual dependence of the US on imports is probably one of the reasons that led to the recent lifting of the ban on US exports, that dated from the time of the great oil crisis of the 1970s

Art Berman clarifies the situation and wonders why “consumption has increased by one-third and imports have doubled but we no longer need to think strategically about oil supply because production is a little higher?” Here is an excerpt from his post.
____________________________________________
The Crude Oil Export Ban–What, Me Worry About Peak Oil?

Congress ended the U.S. crude oil export ban last week. There is apparently no longer a strategic reason to conserve oil because shale production has made American great again. At least, that’s narrative that reality-averse politicians and their bases prefer.

The 1975 Energy Policy and Conservation Act (EPCA) that banned crude oil export was the closest thing to an energy policy that the United States has ever had. The law was passed after the price of oil increased in one month (January 1974) from $21 to $51 per barrel (2015 dollars) because of the Arab Oil Embargo.
…click on the above link to read the rest of the article…

“Miracle of American Oil”: Continental Resources Courted Corporate Media to Sell Oil Exports

December 29, 2015

“Miracle of American Oil”: Continental Resources Courted Corporate Media to Sell Oil Exports

A document published by the Public Relations Society of America, discovered by DeSmog, reveals that from the onset of its public relations campaign, the oil industry courted mainstream media reporters to help it sell the idea of lifting the ban on crude oil exports to the American public and policymakers.

Calling its campaign the “Miracle of American Oil,” the successful PR effort to push for Congress and the White House to lift the oil exports ban was spearheaded by Continental Resources, a company known as the “King of the Bakken” shale oil basin and founded by Harold Hamm. Hamm served as energy advisor to 2012 Republican Party presidential candidate Mitt Romney.

Image Credit: Public Relations Society of America

The campaign launched on December 16, 2013, the 40th anniversary of the Organization of the Petroleum Exporting Countries (OPEC) oil embargo, and won the prestigious PRSA Silver Anvil Award.

According to the document, submitted to PRSA to detail the logistics and reach of the PR effort, it was “designed to influence public policy and/or affect legislation, regulations, political activities or candidacies — at the local, state or federal government levels.”

And it all began with a kick-off dinner in Washington, D.C., hosted by Continental Resources and attended by some of the most influential mainstream media energy reporters in the United States.

Regular readers of the Washington oil and gas industry beat will find the names of the dinner attendees, disclosed in the document, familiar.

Image Credit: Public Relations Society of America

“The campaign not only served as a catalyst to correct public misconceptions, but it also propelled crude oil exports to the top of the U.S. Senate’s agenda,” Continental boasted on the PRSA document.

…click on the above link to read the rest of the article…

Four Ticking Global Time-Bombs Few Even Hear

October 19, 2015

Four Ticking Global Time-Bombs Few Even Hear

A few charts help us grasp the magnitude of the four global time-bombs.

The geopolitical and financial risks facing the global economy are well-known.Hot wars and currency meltdowns garner headlines around the world.

But few even hear, much less discuss, four ticking global time-bombs:

1. The demographic time-bomb.

2. The public health time-bomb.

3. The food/water/soil time-bomb.

4. The oil-export time-bomb.

Each is largely self-explanatory:

1. The demographic time-bomb: as the global economy melts down, the realization that the pensions and healthcare promised to hundreds of millions of elderly cannot be funded out of tax revenues will upend the social contract in countries rich and poor.

As the chart below depicts, as the population of elderly rise, so do the non-communicable lifestyle diseases of aging. The costs of treating these lifestyle diseases (metabolic syndrome, heart disease, high blood pressure, etc.) soar as the population and incidence of these diseases both rise.

Global Aging 2010: An Irreversible Truth:

This Standard & Poor’s study warns that “no other force is likely to shape the future of national economic health, public finances, and policymaking as the irreversible rate at which the world’s population is aging… The cost of caring for [the elderly] will profoundly affect growth prospects and dominate public finance policy debates worldwide.”

2. The public health time-bomb: 100 million diabetics and 500 million pre-diabetics in China, 80 million diabetics and hundreds of millions more pre-diabetics in India, and another 100 million diabetics in the developed world will overwhelm a global healthcare system that is already struggling to provide care for an aging population.

Diabetes Is a Major Public-Health Crisis in China

No Answers in Sight for India’s Diabetes Crisis

The Global Diabetes Epidemic (New York Times)

…click on the above link to read the rest of the article…

The Saudi Oil Price War Is Backfiring

August 7, 2015

The Saudi Oil Price War Is Backfiring

Saudi Arabia has long enjoyed the status of being the top crude oil exporter in the world. With record production of 10.564 million barrels per day in June 2015, Saudi Arabia has been one of the major driving forces behind the current oil price slump.

The Saudis have kept their production levels high since last year in order to drive other players (especially U.S. shale drillers) out of business. Equally clear is the fact that this strategy of maintaining the glut and driving out rivals hasn’t worked so far.

Even when we look at the refining sector, we see that the oil kingdom has been following a similar strategy of flooding the markets with refined fuel. The Saudis have already sparked an oil price war with the Asian refiners downstream by offering close to 2.8 million barrels of low sulfur diesel to the European and Asian markets. This has caused Asian refining margins to fall drastically, the effects of which can ironically now be seen on Saudi Arabia itself.

Saudis are now reducing their crude oil price hikes in Asia in order to save their market share

As the refining margins have fallen in Asia, refiners there have been compelled to cut their refining outputs. This could eventually result in refiners cutting their crude oil imports.

Asia has been one of the biggest cash cows for Saudi Arabia and there have already been some cuts in some of the most crucial markets. India, which was earlier importing most of its crude oil from Saudi Arabia, is now changing its strategy and buying more crude oil from Nigeria, Iraq, Mexico and Venezuela.

…click on the above link to read the rest of the article…

Mexico and American Oil Companies Want a Crude Swap to Open Loophole in the Oil Export Ban

June 9, 2015

Mexico and American Oil Companies Want a Crude Swap to Open Loophole in the Oil Export Ban

As politicians from oil-producing states work to draw up bills to end the ban on oil exports, Mexican officials are “confident” that the country will soon be importing American crude through a backdoor loophole in the law.

Back in January, Mexico applied for a crude swap that, if approved, would allow the U.S. to export 100,000 barrels of oil per day to Mexico. This would be unrefined crude — refined products such as diesel and gasoline are not subject to the ban — likely from the Eagle Ford and Permian shale fields, where fracking has produced a glut of light, sweet crude in recent years.

Though the crude oil export ban has been in place for about four decades, it allows for certain exemptions to be permitted. Exports to Canada, for instance, are allowed, so long as the oil will be processed and consumed in Canada. And last year, Commerce Department officials in the Obama administration approved the export of condensate, an extremely light and gassy form of oil that can be minimally processed in the field without any trip to a refinery.

Condensates are already flowing heavily out of Texas shale regions, and since permission was granted last November, there’s been a rush of condensate exports to Mexico.

If the crude swap is approved, it’ll open up another loophole to the export ban for crude to flow through.

Very few exceptions have been made to the ban since it was implemented as a response to the Arab oil embargo in 1973.Exports are allowed to Canada “for consumption or use therein,” and very limited exports are allowed from Alaska.

Last September, Alaska shipped off its first crude export in over a decade.

…click on the above link to read the rest of the article…

Oil Price Crash: Top 5 At-Risk Countries

February 25, 2015

Oil Price Crash: Top 5 At-Risk Countries

Since June 2014, global oil prices have dropped by more than 50%. The drop could strongly affect the economic and political stability of these five oil exporting countries.

Oil prices make winners and losers. In general, oil importers will gain from low prices, while most oil exporters will suffer. Still, there are differences. While the United States, Norway, and the Gulf States can protect themselves with diversified economies and high hard currency reserves, the oil shock could bring some countries to the verge of economic default and political crisis.

Venezuela

Venezuela entered the period of low oil prices with an already frail economy ruined by the more than a decade-long socialist regime of Hugo Chavez and his successor Nicolas Maduro. The oil price slump significantly worsened the country’s already failing economy.

More than 90 percent of Venezuela’s exports and hard currency reserves depend on oil, and with the price of oil 50 percent down, the country is close to a default.

Standard & Poor’s is the last in a line of rating agencies that downgraded Venezuela’s credit rating to junk status and the country’s currency is experiencing a constant devaluation trend. At the same time, inflation is expected to rise to 200 percent this year and the economy to shrink by 7 percent.

…click on the above link to read the rest of the article…

40 % of US petroleum product exports didn’t grow since 2011

January 27, 2015

40 % of US petroleum product exports didn’t grow since 2011

This is another post in the series on how US tight oil has impacted on global oil markets. This time we look at US petroleum product exports.

(1) Destination of US product exports

Fig 1: US petroleum product exports by destination and type of growth

Data source: http://www.eia.gov/dnav/pet/pet_move_expc_a_EP00_EEX_mbblpd_a.htm

Exports started to grow already in 2005, a year which appears in many graphs as a turning point. While the growth looks impressive, around 40% of US exports no longer increased since 2011, a year after the very beginning of the tight oil boom (see 1,500 kb/d grid line in Fig 1)

Note that in all graphs of this post 2014 figures have been estimated with data up to October 2014, without seasonal adjustments.

…click on the above link to read the rest of the article…

Low Prices Driving Record U.S. Crude Oil Exports Despite Crude Oil Export Ban

January 21, 2015

Low Prices Driving Record U.S. Crude Oil Exports Despite Crude Oil Export Ban

“Are you more desperate to get a better deal when you’re poor? I guess you are.”

That was John Auers, executive vice president of oil industry consulting firm Turner Mason & Company, describing the oil industry as being “poor” and “desperate” to Bloomberg.

As the oil industry cries poverty due to low oil prices in an effort to justify its attempts to lift all restrictions on exporting crude oil produced in the U.S., it is helpful to remember that this is an industry that was demanding tax breaks for oil production even when, in 2013, the top 5 companies made a combined $93 billion in profits. In just the second quarter of 2014 alone, a year of poverty and desperation, as the industry tells it, ExxonMobilmade $8.8 billion in profit.

The “better deals” that John Auers was talking about are to be found on the global market, which technically isn’t open to those “poor” U.S. crude oil producers due to the crude oil export ban. Crude oil that is produced in the U.S. is worth more if it is sold on the world market than if it is sold in the United States.

…click on the above link to read the rest of the article…

Exclusive: U.S. agency gives quiet nod to light oil exports – sources | Reuters

December 30, 2014

Exclusive: U.S. agency gives quiet nod to light oil exports – sources | Reuters.

(Reuters) – The main U.S. export authority is telling some oil companies that they should consider exporting a lightly processed form of crude oil called condensate without formal permission, according to people familiar with the discussions.

In conversations that may help clear the way for more overseas sales of U.S. shale oil, the Commerce Department’s Bureau of Industry and Security (BIS) has told companies seeking clarification on the legal status of so-called “processed condensate” that self-classification – whereby companies export their product without any formal authorization – could be a way forward, the people told Reuters.

An official familiar with the law said the agency’s discussions did not represent a change in policy since self-classification is allowed under U.S. export controls and is a routine, common practice for the majority of exports.

Yet the message, though carefully couched as an informal suggestion, marks the first sign that the administration is becoming comfortable about allowing companies to work around the nation’s four-decades-old ban on exporting untreated crude oil.

…click on the above link to read the rest of the article…

oftwominds-Charles Hugh Smith: I Call BS on Projections of a Decade of $20/Barrel Oil

December 24, 2014

oftwominds-Charles Hugh Smith: I Call BS on Projections of a Decade of $20/Barrel Oil.

The ability of oil exporters to trigger a short-term collapse in price does not automatically translate into an ability to control the financial conflagration such a crash ignites.

My BS detector went off when two stories with similar headlines touting $20/barrel oil were published on the same day. Color me skeptical, but it’s almost as if mere $40/barrel oil is no longer enough to get the blood flowing, so both stories blared the more extreme $20/barrel price point.

Ready for $20 Oil?

The reason oil could drop as low as $20 per barrel

Neither story depicted $20/barrel oil as a brief spike–rather, each presented a future of sub-$50/barrel oil that could last for years or even a decade or longer, matching the period of cheap oil that ran from the mid-1980s to the late 1990s.

I have no problem with the idea that geopolitics is driving supply excesses, the goal being to crash the oil revenues of enemies–that’s part of my Oil Head-Fake scenario: The Oil-Drenched Black Swan, Part 4: The Head-Fake Disruption Ahead (December 4, 2014).

The Financialized-Oil Dominoes Are Toppling (December 12, 2014)

The idea that global demand is stagnating is also common sense, given that the global economy is stagnating.

…click on the above link to read the rest of the article…

Saudi Arabia’s Oil Exports Drop Was Sign of Weaker Demand – Bloomberg

December 18, 2014

Saudi Arabia’s Oil Exports Drop Was Sign of Weaker Demand – Bloomberg.

Saudi Arabia shipped 10 percent less oil overseas in October than it did a year earlier, signaling demand was falling even before OPEC decided a month later to hold production unchanged with prices plunging.

Oil exports fell to 6.9 million barrels a day in October from 7.7 million barrels a day a year earlier, according to data from the Joint Organisations Data Initiative today. It was the sixth month in a row that Saudi Arabia produced less than 7 million barrels a day, the level it needs to balance its budget.

Crude slumped 43 percent this year as the Organization of Petroleum Exporting Countries sought to defend market share amid a U.S. shale boom that’s exacerbating a global glut. Saudi Arabia will stick to its policy to maintain output, the country’s oil minister Ali Al-Naimi said, according to state-run Saudi Press Agency.

“Now we can understand the reasons that compelled Saudi Arabia and OPEC to hold onto their market share,” said John Sfakianakis, the head of Middle East at Ashmore Group (ASHM) Plc, the London-based money manager specializing in emerging markets. “The problem is that they want to keep their market share while exporting less oil.”

…click on the above link to read the rest of the article…

Oil-Producing Countries’ Currencies Are Getting Crushed | Zero Hedge

November 15, 2014

Oil-Producing Countries’ Currencies Are Getting Crushed | Zero Hedge.

While most people’s attention has been focused on the demise of the Russian Ruble this year, since the June highs in Crude Oil, the oil-producing nations of the world have seen their currencies devalue rapidly. From Brazil to Nigeria and Algeria, the impact of lower oil revenues is starting to create a vicious circle for many of these nations… and having consequences for the very Petrodollar flows that the US relies upon…

Mission Accomplished – if the goal was crashing Russia’s Ruble – but the consequences of the collapsing Petrodollar flows (as we noted here) may wellcome back to bite…

As we concluded previously,

…click on the above link to read the rest of the article…

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