Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on October 18, 2014
Sorry, Mr. Putin: $75 Oil Is Coming
Russian President Vladimir Putin has become the world’s most unlikely environmentalist. According to NATO head Anders Fogh Rasmussen, Putin has been “actively” supporting environmental groups in Europe that oppose hydraulic fracturing, or fracking, that would tap Europe’s supplies of oil and natural gas. These supplies would threaten the cash earned by the Russian economy from oil and gas exports.
Putin, however, seems unable to stop the U.S. fracking revolution. The recent plunge in the price of oil, resulting from increased supply, has done more to undermine Russia’s aggressive stance in the world than all the economic sanctions combined. According to Amy Jaffe, executive director of energy and sustainability at the University of California, Davis, “No one knows better that this is bad news for Russia than the Saudis.”
Oil fell to $80 a barrel last week before rebounding to $83, but geopolitical forces could send prices as low as $75.
That is one key reason, says Jaffe, why the Saudis have apparently decided to sell into the energy bear market, rather than trying to fight it by cutting supply. For Saudi Arabia, the world’s largest oil-exporting nation, an economically weakened Russia is welcome news, given Russian support of Iran and Syria.
Oil rebounded late last week to $83 a barrel from $80, but geopolitical developments could push it to $75, as a Barron’s cover story predicted earlier this year (“Here Comes $75 Oil,” March 31).
Our story focused on the gradual shift of demand and supply that could weigh on the oil price long-term. As the chart shows, the price trended upward in the months immediately following publication, reflecting a widening of the “terror premium” as global turmoil stoked fears that supplies might be cut off from parts of the world. While that is always a risk, the current bear market seems likely to persist.
Much of the recent plunge in oil coincided with a selloff in the stock market, causing a tendency to confuse the lower oil price with fears of an economic slowdown. But while declining demand in Europe might have helped trigger the oil-price decline, the main drivers still are the underlying fundamentals that specifically apply to oil. Far from signaling a weakening U.S. economy, lower oil prices can only contribute to the domestic expansion.
Will a $75 oil price hurt frackers’ profits enough to curtail production, as Putin hopes? In a detailed analysis released late last week, Citigroup’s global head of commodity research, Edward Morse, estimates that “to take out enough new production to flatten production growth might require prices in the $50 range.” A $75 price “may only be a soft floor.”
BASED ON THE updated Commitments of Traders report released Friday afternoon, Steve Briese, publisher and writer of the Bullish Review of Commodity Insiders newsletter, finds that trend-following hedge funds have been “a prime factor in the oil-price plunge.” These funds have been liquidating their huge long position, and if they keep liquidating the position they still hold, the selling pressure could be “enough to push the price below $70.”
According to Jaffe, the Saudis at one point tried to get cooperation from the Russians to back off in the Middle East in return for support of the oil price. But, she says, “the Russians believed their own nonsense about peak oil”—the myth exposed in the Barron’s story that global oil production has permanently leveled off—and snubbed the offer.
Putin might regret that decision, especially if oil falls even further.
28 Comments on "Sorry, Mr. Putin: $75 Oil Is Coming"
Makati1 on Sat, 18th Oct 2014 6:42 am
More BS from the propaganda machine in Washington. Russia is not hurting. The tar sands and fraking industry is. $75 oil will shut down a lot of alternate oil sources if it lasts long enough.
Whereas, Russia has a $400+ billion reserve cushion to use if necessary to wait out the Western games. At $25/bbl price dofference, they can go 4 years without any pain. The US will collapse long before that time from fraking bankruptcy and the effects on Wall Street. And, by that time, China will make up the difference in gas and oil purchases.
Davy on Sat, 18th Oct 2014 7:00 am
More marketing from the den of thieves in DC/NY and more ideologue propaganda in the comment above.
Boat on Sat, 18th Oct 2014 7:30 am
So why is Putin claiming economic blackmail and mentioning nuclear weapons if Russia is so strong and are not effected?
shortonoil on Sat, 18th Oct 2014 7:41 am
The most deceitful, biggest pile of falsehoods, and obfuscating batch of statements that have ever come out of Barrons. There are so many untruths in this article that it is hard to start. Apparently, the new cold war with Russia is not going well, and the Washington planners (for lack of a better term) are finding themselves strung up by their own petards. Like the 2001 Peak that didn’t show up until 2005, and perpetuated the Iraq war, the brain surgeons around 1600 Pennsylvania Ave have missed calculated again. When one is approaching the end of the oil age, oil is the last weapon you want to employ. The combined knowledge of oil held by these people could be written on the back of a postage stamp with a crayon. We not only find it embarrassing, its pitiful!
http://www.thehillsgroup.org/
dissident on Sat, 18th Oct 2014 7:51 am
Russia exported $550 billion dollars worth of goods and services in 2013. About $300 billion were oil and natural gas. Gas accounted for $55 billion. A $75 dollar oil price translates into a 25% drop in Russia revenues from oil, so Russia loses 0.25*245=61.25 billion dollars.
But the idiot who wrote this piece has no clue about economics. Russia’s currency exchange rate is falling also. This has the effect of offsetting the dollar loss in the oil price and also reducing imports. So there is no indication of Russia’s economy hurting.
Makati1 on Sat, 18th Oct 2014 7:52 am
Davy, big words don’t impress anyone but the uneducated. If you don’t like the truth, don’t read it. lol
shortonoil, we agree.
Davy on Sat, 18th Oct 2014 8:05 am
Mak, sir, where is the disagreement other than with your tone? Short I am in agreement. Diss, if you think war does not hurt both sides then cozy up to Mak.
rockman on Sat, 18th Oct 2014 8:09 am
And a few words that just paint the reality of the situation:
“Actually, oil prices have been at an extraordinary high level in the last four years and it is not surprising that they should drop to a level closer to the historical norm,” Edward Chow, senior fellow of the Energy and National Security Program. “Since 2011, we have experienced the highest annual prices in the entire history of the petroleum industry in both nominal and inflation-adjusted terms.”
Chow argues that even if oil prices fall to $80 per barrel, it would be a high price by historical standards and only mark a return to the level of 2010, before the big increase in price.”
Which explains, as Mak points out, how Russia developed that big reserve cushion. And the other obvious point the article doesn’t being out: Russia has other export revenue sources, such as from NG which is about to see its annual uptick.
Davy on Sat, 18th Oct 2014 8:37 am
A Russian mention before I head to breakfast. Russia is systematically critical. This is a fact and cannot be argues away. The attempt to remove Russia from this vital position is the equivalent to global civil war. Civil wars are not one sided they are an unholy marriage of destruction. This trade and finance war with Russia and the west is not something you can a pick winner from. This type of civil war has no winners if the prize is BAU. There may be a winner and a loser when the dust clears in a new reality. Personally I see no winning this battle and no winners at the highest levels. It is those highest levels that cannot be sustained. When the dust settles complexity will be lost and with it BAU. The winners will be those regional and locals that have the necessary resilience and sustainability in tandem with luck. Luck is positive randomness. Descent is shaped by chaos. Chaos is the randomness of decay. What is readily apparent now is those areas that have comparative advantages in a descent and those that are grossly exposed to the dangers of decay. We can argue all day long on who is right but reality is not concerned with right or wrong. Reality is not dualistic.
Kenz300 on Sat, 18th Oct 2014 8:48 am
Any drop in oil prices should be used as an opportunity to diversify away from oil.
In the long run the price of oil is going higher.
Oil use in China and India is still growing and they will be driving higher demand for oil.
The Saudi’s want to put pressure on any competition and bankrupt those that need higher oil prices to survive. Risky and expensive deep water, shale or tar sand plays will get postponed or cancelled.
The world needs to look at this as an opportunity to transition to safer, cleaner and cheaper alternative energy sources.
If you can walk, ride a bicycle or take mass transit. It will save you money on your transportation costs and it is better for the environment.
If you need a car consider an electric, flex-fuel, hybrid, biofuel, CNG, LNG or hydrogen fueled vehicle. End the oil monopoly on transportation fuels.
Plantagenet on Sat, 18th Oct 2014 8:56 am
Obama’s sanctions and Merkel’s support for Ukraine is starting to really make Putin.angry. Now throw in $75 oil and Putin may flip out and invade somebody else
shortonoil on Sat, 18th Oct 2014 9:08 am
“Citigroup’s global head of commodity research, Edward Morse, estimates that “to take out enough new production to flatten production growth might require prices in the $50 range.” A $75 price “may only be a soft floor.”
Our study of 4598 Bakken wells, which we consider the best of the best in shale plays, put drilling costs at $53/barrel. Not including an average of 15% in royalty payments, $6/barrel in OP costs, $3.85/barrel in state taxes, and $2.00/barrel in well head to terminal transport cost. Mr. Morse is coming up a little short. Maybe, Citi is planning on picking up the balance?
It smells like a very big, widely orchestrated rat feast in this entire argument. Either they are out right lying, or their brains have been removed, and replaced with a turnip. Someone is in very big trouble, and his name isn’t Ivan!
Boat on Sat, 18th Oct 2014 9:10 am
Supply finally caught up with demand for whatever the reason. Just as nat gas demand will catch up someday with the huge oversaturated market. A good time for consumers. So much for the demise of humanity in the US.
Several articles have suggested $75 oil price is a point for fracking to be in trouble but not the tech using multiple horizontal fracking tech. If this is true the last few years of $90 oil and up should have made billions not a huge bubble ready to pop as many on this site have suggested. So whats up. You tell me
steve on Sat, 18th Oct 2014 9:49 am
people who run these false stories should be held accountable. When oil prices are down they run these stories about how peak oil is dead etc..but the reverse is never true…The main meme in the media is that technology is saving us…
Northwest Resident on Sat, 18th Oct 2014 10:27 am
“Putin, however, seems unable to stop the U.S. fracking revolution.”
LMAO. As if he even tried. And why would America’s current top-dog bogeyman even want to try to stop the “fracking revolution” when all he has to do is wait a little longer and that “fracking revolution” will die in a pile of its own debt and failure to turn a decent profit?
I just can’t help thinking that the whole US-versus-Russia canard is nothing more than a magnificently staged PR event. The fear mongering and threat of war gives both sides an excuse to enact measures and do things that they would rather not have to explain to their populations.
The lies and the propaganda and the false narratives are flying thicker than ever these days, which means that behind all the bullshit there are some very, very serious issues that TPTB are trying to cover up and obscure from the masses. Most of us here know exactly what those issues are, but the rest of the world just sucks this crap up and their attitudes are adjusted based on what they have been lead to believe is true.
Major bullshit is on the move — the audacity and the intensity with which the lies and propaganda are being pumped out PROVE it.
bobinget on Sat, 18th Oct 2014 1:16 pm
(It was just a ‘stray bullet’)
1) Attack on Saudi police in Awamiya sets oil pipeline on fire
Security forces extinguished the fire caused by a stray bullet that had hit a nearby pipeline.
By Staff writer | Al Arabiya News
Saturday, 18 October 2014
An oil pipeline was set alight after unknown assailants fired at a Saudi police patrol in the eastern Qatif district, the Saudi Press Agency reported Saturday.
The fire broke out in the early hours of Saturday after shots were fired at security forces patrolling the oil-rich village of Awamiya, SPA said.
Security forces extinguished the fire caused by a stray bullet that had hit a nearby pipeline.
(‘Stray bullets’ mentioned twice in the above piece, gee, nowadays ya can’t even trust the KSA press!)
2)http://news.yahoo.com/sectarian-clashes-yemen-leave-16-dead-100837683.html
#3 should re title the above piece to
“Pressure on KSA, Kuwait, Cuts Production”
or… “Who Blinked First?”
3)Saudi, Kuwait Seen Curbing Oil Output, halt production Khafj field & Japan sold oil from reserves
Saudi, Kuwait Seen Curbing Oil Output – halt production Khafj field
Saudi, Kuwait Seen Curbing Oil Output at ’Opportune Time’
By Wael Mahdi, Lynn Doan and Dan Murtaugh Oct 17, 2014 6:20 PM PT
Saudi Arabia and Kuwait halted production at a jointly run oil field late this week, a move that could help ease a supply glut that has pushed global prices down 25 percent.
The 300,000-barrel-a-day Khafji field, located in the neutral zone between the two countries, was being shut because of environmental concerns, a person familiar with Saudi Arabian oil policy said yesterday, who asked not to be identified because the information isn’t public.
The shutdown comes as Saudi Arabia and other OPEC members face increasing pressure to scale back production while supply expands from the U.S. and other countries and demand growth slows. Asia’s oil market has become particularly flooded as the U.S. imports fewer cargoes.
“This shutdown comes at an opportune time for Kuwait and Saudi Arabia given the current perception of an oversupplied market,”Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone yesterday. Cutting Khafji’s production is more advantageous for the countries because the oil generates less revenue for them than their light crude supplies, he said.
The countries’ Khafji Joint Operations venture started gradually curtailing output Oct. 16, an internal memo signed by company chairman Abdullah al-Helal and obtained by Bloomberg shows. The field will resume operations once it’s in compliance with emissions standards issued by the Saudi Presidency of Meteorology and Environment, according to the memo.
The state-owned Saudi Arabian Oil Co. and Kuwait Oil Co. didn’t immediately respond to e-mailed requests for comment sent after business hours.
Offshore Field
The joint venture runs the offshore area of a partitioned neutral zone between Saudi Arabia and Kuwait, a region that the U.S. government estimates to have a total capacity of 600,000 barrels a day.
Khafji crude has an API gravity of 28.5 and a 2.9 percent sulfur content, making it a medium, sour oil, the Energy Information Administration, the U.S. Energy Department’s statistical arm, said in a January 2013 report.
North Sea Brent crude, the global oil benchmark, settled at $86.16 a barrel yesterday on the London-based ICE Futures Europe exchange after slipping a day earlier to $82.60, the lowest level since November 2010.
(Japan needs money more then reserve oil)
Japan sold 300,000 kiloliters (1.9 million barrels) of Khafji crude from reserves that was scheduled to load July 20 to Sept. 30 from the Shibushi terminal in the Kagoshima prefecture, an official from the Ministry of Economy, Trade and Industry said June 23, while asking not to be identified citing internal policy.
Posted note:
I’ve been ‘in the oil markets’ for two decades. Long enough to sharpen my bullshit detection devices.
Attention will slowly shift from the Iraq/Syrian/Iranian/Libyan/IS disaster
to organized Shiite resistance to Sunni agression.
(translation) Yemeni fighters will attempt to attack KSA
oil infrastructure.
Who cares about two million war refugees if gasoline prices double?
JuanP on Sat, 18th Oct 2014 2:39 pm
I woke up this morning, read the news, and I am now convinced that we must hate Russia because Putin is evil and he wants to take away my chocolate pudding.
GregT on Sat, 18th Oct 2014 3:02 pm
Plant said:
“Obama’s sanctions and Merkel’s support for Ukraine is starting to really make Putin.angry. Now throw in $75 oil and Putin may flip out and invade somebody else”
Either a complete moron, or as someone else said a while back;”Planted Agent”. I highly suspect the latter. Nobody could really be this stupid.
steve on Sat, 18th Oct 2014 6:11 pm
Greg…while I don’t agree with plant I think you are way off base….if you want to be angry and “attack” people personally get off your ass and start attacking the people who are writing these false stories…it is one thing to disagree but to attack people here is stupid….otherwise just shut the fu4k up….
Makati1 on Sat, 18th Oct 2014 8:40 pm
Interesting group of comments…
Which one approaches the truth?
We will have to wait and find out.
I think insanity is rampant in the leadership of our world today. Does that resemble the situation in 1914?
frankthetank on Sat, 18th Oct 2014 10:27 pm
When you read what the Russians have been through the last 100 years… I doubt $75 oil is that big of an issue.
Makati1 on Sun, 19th Oct 2014 12:30 am
frankthetank, you know more than 90% of those here do. I have just watched two series on the World Wars and I have seen the resilience and durability of Russians as they lost millions of their troops in the beginning only to come back and win in the end.
Add in the FACT that Russia is still the only self-contained, independent country left on the earth with both land and resources good for many decades, and you have a tough job defeating them. Especially if you are just the opposite in ALL of those areas, as the West is today.
Davy on Sun, 19th Oct 2014 7:56 am
There are those here who fail to see the totality of the hijacking of nations by the global. The hijacking is even more disturbing at our delocalized locals each of us live in. We are dangerously exposed and naked in codependence to an unsustainable global system. My fellow commenters here you know my spiel so I won’t bore you. My comment point is Russia. Russia is no different than much of the rest of the globe. They are a great people, with an amazing history, amazing culture, and live in a huge country spanning half the globe. This delocalization and national hijacking has occurred in Russia as complete as anywhere else. The integration of Russia into the global system through its natural resources has been profound. Moscow is one of the most expensive cities in the world to live in. A hug boom is happening throughout Russia. Some of the richest men in the world are in Russia. It is said Czar Putt is the richest. I am not being derogatory to Putt. He is an exceptional leader in a Machiavellian sense. He is no one to belittle. Those here who claim todays Russians are the Russians of the past are deceiving themselves with fantasy and sentimentality. They are confusing the truth for historical nostalgia. Are we going to say the same of the Confederate South? Russian’s have taken the plunge as all other nations into the false progress and prosperity of globalism. Globalism is a drug that once taken cannot be removed. Globalism and QE are an example of good ideas that have been applied dangerously. We would be more accurate and less subjective to use science instead of selective history to compare peoples and nations. We need to look at the basics. Can a people feed themselves? How exposed are a people to dangerous urbanization? How is a people’s water stress? Can a people shelter from the extremes of bitter cold or heat? Ideologues on this board like to paint their bright horses exceptional colors and hues. It is petty human nature to play the game of diminishment then aggrandizement in comparing peoples and nations. Let us stick to the facts here we are above petty.
Boat on Sun, 19th Oct 2014 8:11 am
The global system/ability to trade/ is necessary to water feed the people and house them. You can’t have it both ways. It requires cooperation and a sense of fairness to do business. The US is the main cop and leader of this system which many readers don’t like but is just a fact. They also don’t like it when the US has to get involved to keep global trade flowing. They can gripe all they want but the current system is the best thing going since man came on the scene.
shallowsand on Sun, 19th Oct 2014 8:16 am
Short. Are the Bakken expenses you use actual or adjusted to WTI. As Bakken oil sells at a large discount to WTI, this to me seems to be very critical as the oil price drops. I realize large producers are able to attract significant bonuses but I rarely see mentions of basis differences in the shale and tar sand basins when break even levels are mentioned.
JuanP on Sun, 19th Oct 2014 8:37 am
Boat “They can gripe all they want but the current system is the best thing going since man came on the scene.”
Allow me to gripe some more then. The current system is an unmitigated disaster and it will only benefit cockroaches, algae, and rats. But if you think it is so wonderful, by all means, don’t let my thoughts bother you. Enjoy it while you can.
I, personally, consider all hunter gatherer tribal cultures superior to ours. But, to each their own.
People like you, Boat, who think this crap is wonderful are the main reason I had a Vasectomy instead of children. I hope your kids enjoy the world you will leave behind for them as much as you do.
Boat on Sun, 19th Oct 2014 9:27 am
Juan, unplug then and join the 18% of the world without electricity. I try not to be a hypocrite. And don’t eat anything shipped. That would be cheating in your world.
Boat on Sun, 19th Oct 2014 9:29 am
I am in my late 50’s with no children. I can control my lust without being snipped tk you.