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Page added on December 11, 2015
OPEC cannot kill shale oil
Gulf Cooperation Council (GCC) members including Saudi Arabia are no longer able to afford their abundant welfare and near-zero taxes because of the collapse in oil prices and expensive military campaigns. The six Gulf States have agreed to introduce VAT, to plug the gap. It’s not yet clear how high the tax is going to be, but it will be introduced over the next three years.
Saudi Arabia recently decided not to cut oil production, which would’ve helped drive up prices. RT asked Dr. Mamdouh Salameh whether it is now reaping what it has sowed.
In his words, Riyadh’s policy on the matter is “fluid”.
“They are insisting on not cutting production and also putting pressure on OPEC not to cut production…. They claim they want to defend their market share,” he said. According to Salameh, “that policy was tested and found wanting by Sheikh Ahmed Yamani, the former Saudi Oil Minister, who tried it in the early 80’s when he flooded the oil market with 10 million barrels a day leading to a collapse in the oil price to $10 a barrel.”
“He was forced to withdraw it, and he lost his job afterwards,” he added.
The expert argues that this policy will not work and “Saudi Arabia and the other Arab Gulf producers within OPEC will have to cut production.”
“Their talk about gaining or defending market share is nonsense, because even if Saudi Arabia gets five percent more market share, the value of that five per cent amounts between $6-8 billions,” he told RT. He suggests that Saudi Arabia alone is losing $140 billion.
Salameh cited the International Energy Agency in Paris that said that “the global demand for oil this year, 2015 has been increasing by 1.4 per cent translating into 1.3 million barrels a day or 1.4 million barrels a day. That is a good and positive development.”
“But what is preventing the price from increasing – is that every time the price shows signs of moving up, OPEC and particularly Saudi Arabia introduces more oil thus exacerbating an already existing glut,” he continued.
Salameh argues the Saudis claim that they “will stick to 30 million barrels a day.” However, they are producing 32.2 million. “If you take that 2.2 out of the market, you stop the glut and a price could rise immediately or within a week to 70 or 80 dollars,” he added.
He does not think that Saudi Arabia is driving down oil prices to squeeze out the American shale producers, “because the minute the oil price starts to go up, shale oil will be back.“
He said that it is “true that some shale oil producers have gone out of the market, and the production of US shale oil has declined this year by 600,000 barrels a day.” He went on to say that “it is projected to decline by almost 900,000 barrels next year” if the prices continue to be that low.
“Efficient producers of shale oil will remain in the market, and they are using technology to reduce the breakeven prices from $70 to $85 – now it is $60,” Salameh told RT. “Maybe in few months it could go to $50.”
According to Salameh, we have to accept that shale oil is “a fact of life and we have to deal with it.” But, he added,” the shortcoming of shale oil is their depletion rate.”
“In the first year of production a well of shale oil loses 70 – 90 per cent of its reserves. That means that shale oil producers will have to produce and drill so many thousand, estimated, I think by Bloomberg, to be 9,000 wells every year at a cost of $45 billion that are just to remain where they are to prevent production from declining further. So OPEC cannot kill or slowdown – it can slowdown shale oil, but … the geology will eventually kill shale oil,” the expert said.
OPEC, he noted, cannot kill shale oil production, but can slow it down. However, it is “geology that “will eventually kill shale oil.”
122 Comments on "OPEC cannot kill shale oil"
GregT on Sun, 13th Dec 2015 12:49 pm
“I challenge you posters to back up your man short or drop his prediction like a hot rock. Man up, grow some balls. Make your stand.”
Another idiotic statement by the board moron. You’re either with Short’s analysis, or you’re not. Man up, grow some balls, and make your stand everyone. 🙂
GregT on Sun, 13th Dec 2015 1:03 pm
Thanks for all of your work Short. Much of your analysis is counterintuitive, but makes complete sense. It’s good to see that some are able to think outside of the MSM box.
Boat on Sun, 13th Dec 2015 1:04 pm
apeman,
You sound like a girl with no conviction. Hitch up them panties and make a call. Be a man.
Apneaman on Sun, 13th Dec 2015 1:05 pm
Boat, do you not see what you have been reduced to? Idiotic challenges and constantly telling everyone, “you’ll see”. When you get to the point where you have to claim that you are right, but everyone needs to wait for the future to unfold to prove it, that is an admission of a failed argument. It’s just a glut. Yeah a glut of oil (19 months), a glut of copper, a glut of zinc, a glut of steele, a glut of coal, a glut of consumer products, a glut of mining equipment, a glut of construction equipment, a glut of food stamps, a glut of suicides and addiction, a glut of unemployed – yeah it’s just a glut. It’ll turn around any day now uh uh I’ll show you I’m right!
onlooker on Sun, 13th Dec 2015 1:13 pm
First thank you Short for that expert analysis. Second, Greg yeah we are getting close to the edge over there in Syria. Finally, thanks for the laughs Boat, we all need some comedic release at times.
twocats on Sun, 13th Dec 2015 1:13 pm
Even if I disagree with some of Short’s prediction, his overall concept of the efficiency of local production IS FREAKING SPOT ON. We should be localizing everything possible, and for luxury items making more conscious choices. e.g. If I can’t grew kiwis in my greenhouse, maybe i’m willing to pay a little more to have them shipped up a couple times a year, etc. I don’t have to agree with 100% of everything someone says to realize their efforts are valuable. He’s doing more than I’m doing.
Also, as Ap just pointed out, this economic downturn is just building like a CAT 5 hurricane. When it makes landfall it could tear a hole so big in the world economy it simply doesn’t recover ever. That is a possibility even if not an inevitability.
Boat on Sun, 13th Dec 2015 1:14 pm
Apeman,
I am right every day. There is no immediate crash. Oil consumption world wide is growing. Nat gas consumption is growing. Solar and wind is growing. Energy is growing. Coal use is growing. Energy is the base of all economies and there isn’t any contraction in any of them. World GDP is growing. You doomers think you can fight facts but ya’ll live in a false reality. Your good at names though and get quite cranky when true facts are presented.
onlooker on Sun, 13th Dec 2015 1:18 pm
I think Boat, the only thing growing are your delusions.
Boat on Sun, 13th Dec 2015 1:30 pm
onlooker,
I have been following climate change and oil for over 10 years. My delusions haven to be pretty accurate. Every couple of years we have a new crop of doomers. Most of their information is correct just misread. But some on this particular site are just getting crazy. BC for example claimed the crash was 5 months and 1 week ago. The end of a total, I repeat total crash would be completed in 3 weeks. Well it didn’t happen. He’s a smart guy, gots lots of charts, lot’s of doom, writes real pretty. Brags about his education and what not. But this high school graduate proved him dead wrong. Maybe you’ll be next. What do you predict.
shortonoil on Sun, 13th Dec 2015 1:34 pm
“Short in 2007 the EIA charts say US crude production was at about 5 million barrels per day. If you take the shale out, production would be just over 4 million today. By 2030 not much will be left, so where are you going to find your local 5 to 6 million bpd?”
The US has 500,000 stripper wells that produce 2.5 mb/d. They are not going anywhere. If the efficiency of the entire production system can be raised by 20%, which it can with a regional production system, the other 2.5 can be found in almost every state in the Union.
The problem is not a volumetric restraint, it is an energy constraint. There is still a lot of oil to be used if the energy problem can be overcome. A world wide production/ distribution system can not get around that problem. Scaled down regional systems running extremely efficient processes that can maximize the use of local resources can.
Of course this will mean a complete change in lifestyles for the most of the world. That won’t come easily, but when given the choice between freezing in the dark, or a scaled down lifestyle most people will learn to do with a little less. An empty stomach is a strong incentive to do the right thing.
GregT on Sun, 13th Dec 2015 1:35 pm
Why 2015 Is a Make-or-Break Year for the Global Economy
WASHINGTON — As 2015 begins, policymakers around the world are faced with three fundamental choices: to strive for economic growth or accept stagnation; to work to improve stability or risk succumbing to fragility; and to cooperate or go it alone. The stakes could not be higher; 2015 promises to be a make-or-break year for the global community.
For starters, growth and jobs are needed to support prosperity and social cohesion in the wake of the Great Recession that began in 2008. Six years after the eruption of the financial crisis, the recovery remains weak and uneven. Global growth is projected at just 3.3 percent in 2014 and 3.8 percent in 2015.
Christine Lagarde
Managing Director, IMF
01/20/2015 11:24 am EST
http://www.huffingtonpost.com/christine-lagarde/2015-global-economy_b_6502146.html
According to Scotiabank’s Global Forecast Update on Dec 3/2015, global growth is expected to weigh in at 3.1%, not even meeting the mediocre projections of 3.8% by the IMF. The make or break period has been broken.
http://www.gbm.scotiabank.com/English/bns_econ/forecast.pdf
shortonoil on Sun, 13th Dec 2015 1:53 pm
“Also, as Ap just pointed out, this economic downturn is just building like a CAT 5 hurricane. When it makes landfall it could tear a hole so big in the world economy it simply doesn’t recover ever. That is a possibility even if not an inevitability.”
Yes, we have to admit that is a very distinct possibility. But, pick your spot wisely, even in a complete meltdown some locals will melt down more than others.
onlooker on Sun, 13th Dec 2015 1:54 pm
I predict that next year their will be less cornies on this site than this year.
GregT on Sun, 13th Dec 2015 1:56 pm
“Oil consumption world wide is growing. Nat gas consumption is growing. Solar and wind is growing. Energy is growing. Coal use is growing. Energy is the base of all economies and there isn’t any contraction in any of them. World GDP is growing. You doomers think you can fight facts but ya’ll live in a false reality.”
Infinite exponential growth in a finite environment is a physical and mathematical impossibility. That is our reality Boat, and that is a fact. Whether you believe that you can fight it or not, is irrelevant. There has been a contraction in growth, and there will continue to be a further contraction in growth. The fact that you are unable to comprehend what that means, once again, exposes your level of intelligence. (or lack thereof)
Apneaman on Sun, 13th Dec 2015 2:07 pm
onlooker, that would make two years in a row. Boat is a true believer. King corn
ellsworth on Sun, 13th Dec 2015 2:32 pm
Shortonoil, what might this local, regional possible future of oil production mean for regions without many land reserves like most of Europe? Will they be freezing in the dark?
Also, what do you think this locally produced oil will be used for? I’m guessing it won’t be cars.
Also, isn’t this scenario dependent on the global economy not going to hell in a hand-basket too fast?
Apneaman on Sun, 13th Dec 2015 2:34 pm
Boat, all that growth in energy does not seem to be translating into any real wealth or opportunity. Where is it all going boat? Energy is supposed to be the driver of the economy – not the economy. Of course you continue to completely ignore mounting debt. Also ignore going into the 8th year of ZIRP. How much of the economy is finalization? 30% – 40%? That’s not real wealth and you along with many others seem to forget that the whole criminal finalization enterprise had to be bailed out just a handful of years ago. What’s changed on that front? How about nothing except they are doing more of it and added QE and ZIRP yet people are expecting different results. Hows that work? Why would anyone expect things to improve knowing that? It’s why many ignore it and hope instead. But not all and a growing number in America no longer believe the propaganda like you. Probably because they are hurting.
The “American Dream” is Over–and Voters Know It
“If the American Dream depends on skyrocketing debt built on a weakening foundation of stagnant productivity and income, then it is indeed over.
Despite a ceaseless propaganda campaign declaring all is well with the U.S. economy, the Status Quo is fragile–and voters know it. Not only do they know the economy–and their financial security–is one crisis away from meltdown, they’re also fed up with all the official gerrymandering of data to make the economy appear healthy.
Many econo-gurus lay the blame for the Great Depression on the Federal Reserve tightening too soon, or not loosening credit enough, but this is nonsense: The Great Depression was the result of credit/borrowing (i.e. debt) outrunning the foundation that supports debt: productivity and income.
Piling more debt on a base that isn’t expanding fast enough to support skyrocketing debt leads to a collapse of the feebly supported debt: borrowers default, asset prices crash as buyers vanish and lenders go bankrupt as the assets held as collateral are repriced.”
more
http://charleshughsmith.blogspot.jp/2015/12/the-american-dream-is-over-and-voters.html
GregT on Sun, 13th Dec 2015 2:51 pm
“You sound like a girl with no conviction. Hitch up them panties and make a call. Be a man.”
Boat,
My wife, panties and all, would chew you up and spit you out, big man that you are.
Davy on Sun, 13th Dec 2015 3:00 pm
I am a doomer in search of any kind of optimism. I found the thread today offered some optimism in regards to a descent possibly being pointed more towards a long”ish” emergency instead of a hard crash. Short’s description of a regional oil production, refining, and distribution system offers some hope. Oil is foundational and critical for transition as well as the status quo. A scenario that allows a transition to less is promising.
Shorts regional scenario dovetails with downsizing, simplifying, and localizing. It will force lifestyle changes by restraining energy consumption by force of circumstance. Yet, there is still the possibility of some oil production and distribution in this descent scenario. This is not enough for the status quo but may allow a transition of sorts. The same can be realized by food production being localized. I imagine it will be in combination because food is oil today in a macro sense. As oil depletion intensifies food localization will be necessary.
This is by no means a silver bullet or a broad solution for the status quo. It is more like a possibility for transition. It is one of many possible partial solutions and adjustments vitally needed. It is crisis and forced change that offers our only hope. The hope is that better decisions will be made in crisis. Any reductions in food and fuel will almost certainly force these changes and initiate crisis.
Davy on Sun, 13th Dec 2015 3:16 pm
Ellsworth, regions without energy production potential will undoubtable be in serious trouble. We must remember though some of these areas have food production potential and good water resources. This should offer some hope. If enough alternative energy resources can be assembled this may blunt the drop. There will still be a global system supplying oil albeit in decline and decay.
We are going to see locations without the proper assets in descent become uninhabitable. This includes overpopulated areas and extreme resource dependent areas. Mega cities in harsh climates are an example of unsupportable in descent. Food and energy will have to be closer rather than global. Populations will need to be smaller.
Locally produced oil will be used for oil based economic activities including cars, planes, and trucks. I would suspect these will increasingly not be for the general public and for discretionary use. These will be for emergency services and vital production of food, water, and shelter related needs. Consumerism almost certainly will die quickly. Martial law seems inevitable in these situations when people’s rights and rights to property are affected.
You, make a good point that will make or break any transition and that is a hard fast fall in economic activity. This is why we are in such a critical time. Poor decisions as well as the right decisions will be leveraged up many times making our time right here right now so important. We can make choices now that will pay off handsomely later and vice versa.
We have the infrastructure to make changes but for how long? Once the infrastructure is gone many things that could have been done will be over. Alternative energy at the end user level is one example. Just imagine food production on a farm and how end-user alternative energy could make or break that operation.
shortonoil on Sun, 13th Dec 2015 3:51 pm
“Shortonoil, what might this local, regional possible future of oil production mean for regions without many land reserves like most of Europe? Will they be freezing in the dark?”
Europe is not completely without oil, there is Rumania, Poland, Denmark and of course their off shore fields for as long as they can maintain them. These are not high production fields but some of them like Poland’s have been producing for 200 years. The Europeans already have a head start on North America, in that they only use half of the oil per captia as we do. Cutting that in half again seems very possible. Unless Europe breaks into another one of its wars, it should do all right.
godq3 on Mon, 14th Dec 2015 2:23 am
shortonoil – Poland has almost no oil. We extract something like 20 kbpd, so that’s very little. But it’s true that Poland’s oil extraction history is long and reaches year 1852.
We have coal instead, but it’s bankrupting now, because of low price, and high extraction costs.