Posts Tagged ‘Oil’

Sentences (#83)

Hard to remember last seeing so much geopolitical insight being packed into a single, simple sentence:

The CIA is institutionally quite close with the Saudis right now, and has been in charge of their covert war against Assad.

December 11, 2016admin 26 Comments »
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The Islamic Vortex (Note-10)

According to the geo-economic logic of the dying status quo, the Islamic Vortex supported oil prices by injecting menace into the supply chain. Peaks of turbulence were associated with oil shocks. ‘Middle East peace initiatives’ (or more drastic interventions) were so deeply entwined with oil supply security imperatives as to be scarcely distinguishable.

Not anymore:

Many energy analysts became convinced that Doha would prove the decisive moment when Riyadh … would agree to a formula allowing Iran some [production] increase before a freeze. … But then something happened. According to people familiar with the sequence of events, Saudi Arabia’s Deputy Crown Prince and key oil strategist, Mohammed bin Salman, called the Saudi delegation in Doha at 3:00 a.m. on April 17th and instructed them to spurn a deal that provided leeway of any sort for Iran. When the Iranians — who chose not to attend the meeting — signaled that they had no intention of freezing their output to satisfy their rivals, the Saudis rejected the draft agreement it had helped negotiate and the assembly ended in disarray. […] … Most analysts have since suggested that the Saudi royals simply considered punishing Iran more important than raising oil prices. No matter the cost to them, in other words, they could not bring themselves to help Iran pursue its geopolitical objectives, including giving yet more support to Shiite forces in Iraq, Syria, Yemen, and Lebanon. Already feeling pressured by Tehran and ever less confident of Washington’s support, they were ready to use any means available to weaken the Iranians, whatever the danger to themselves.

With ‘Peak oil demand‘ in prospect, and a brutal zero-sum struggle beginning for shares in a market tending to secular shrinkage, the deepening Sunni-Shia has become an engine of systematic oil price suppression. According to plausible Saudi calculations, the Iranian enemy will simply use oil revenues to pursue their geopolitical objectives more competently than the Saudis can themselves. A higher oil price, therefore, is comparatively advantageous to the Shia bloc (at least in the eyes of the Saudis, whose perceptions in this regard uniquely matter, due to their status as sole swing-producer). Any rise in revenues is overwhelmed by the quantity of additional military challenge it brings with it. This holds true whatever the level of social stress a low price inflicts on the Sunni side.

It’s quite a box the Saudis find themselves in. There’s no way out of it that doesn’t require winning a religious war.

April 30, 2016admin 12 Comments »
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Trough Oil

The oil industry hasn’t even started to go seriously deep and dirty yet. Beneath the Canadian tar sands alone there are 500 billion barrels of bitumen carbonates. It’s way past time for peakers to abandon all hope that hydrocarbon reserves are simply going to peter out from their own finitude.

ADDED: Energy innovation round-up.

April 14, 2015admin 64 Comments »
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Oil War

This contrarian argument, on the resilience of America’s shale industry in the face of the unfolding OPEC “price war”, is the pretext to host a discussion about a topic that is at once too huge to ignore, and too byzantine to elegantly comprehend. The most obvious complication — bypassed entirely by this article — is the harsher oil geopolitics, shaped by a Saudi-Russian proxy war over developments in the Middle East (and Russian backing of the Assad regime in Damascus, most particularly). I’m not expecting people here to be so ready to leave that aside.

Clearly, though, the attempt to strangle the new tight-oil industry in its cradle is a blatantly telegraphed dimension of the present Saudi oil-pricing strategy, and one conforming to a consistent pattern. If Mullaney’s figures can be trusted, things could get intense:

… data from the state of North Dakota says the average cost per barrel in America’s top oil-producing state is only $42 — to make a 10% return for rig owners. In McKenzie County, which boasts 72 of the state’s 188 oil rigs, the average production cost is just $30, the state says. Another 27 rigs are around $29.

If oil-price chicken is going to be exploring these depths, there’s going to be some exceptional pain among the world’s principal producers. Russia is being economically cornered in a way that is disturbingly reminiscent of policy towards Japan pre-WWII, when oil geopolitics was notoriously translated into military desperation. Venezuela will collapse. Iran is also under obvious pressure.

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December 4, 2014admin 47 Comments »
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