opec

Since the beginning of the Arab Spring, Saudi King Abdullah almost doubled his Kingdom’s budget, committing billions in subsidies, pensions and pay raises in an effort to keep his subjects from storming the palaces.

This expensive response effectively raised the price of oil needed for the Saudis to balance their budget from under $70 a barrel before 2011 to at least $110 a barrel by 2015.

Like it or not, the bill for keeping the Persian Gulf monarchies in power is now being footed by every American. Every time we fuel our car we send an extra 35 cents per gallon, or roughly $6 per fill up, to the Save the King Foundation. Since oil goes into everything we buy from food to plastics, this adds about $1,500 annually to the expenditures of the average American family.

Paradoxically, we are forced to fund social programs for other nations at the very same time we are engaged in a heated debate about cutting social services and entitlement programs at home. It is a sad state of affairs that in the 21st century the world’s most strategic commodity is still being controlled by a cartel.

Cartels, by definition, exist to maximize the profits of their members. OPEC members, which last year raked in $1 trillion in oil revenues, are doing that masterfully.

No amount of U.S. drilling or efficiency measures will change that. The cartel’s financial needs will drive it to respond to counter moves by its clients: When we drill more oil at home, OPEC can drill less to return to a tight supply-demand relationship. When we use less, OPEC can drill less.

To change this vexing dynamic, consumers must be able to substitute for petroleum by purchasing competing fuels, like alcohol fuels, biodiesel, natural gas or electricity, if they are less costly on a per mile basis. But as long as our vehicles are able to run on nothing but oil, keeping oil monarchs on their throne will remain our national side job.

Fracking has given the US a chance to break OPEC's stranglehold on gas prices

Gas prices have tumbled in recent months, and while prices still aren’t as low as they could be, it’s a marked improvement on the outrages prices drives have faced at the pumps for the last five years.  Why are gas prices tumbling? One word: fracking.  Fracking has given US oil producers a leg up on the OPEC cartel that has left the US at the mercy of Saudi oil barons for decades. OPEC has recently been forced to increase their production and lower oil prices in order to stay competitive with the oil boom in the United States (which, by the way, has virtually all happened on private land). 

from BBC:

US domestic oil production has boomed due to fracking.

"The growth of oil production in North America, particularly in the US, has been staggering," says Jason Bordoff.

Speaking to BBC World Service’s World Business Report, he says that US oil production levels are at their highest in almost 30 years.

It has been this growth in US energy production, where gas and oil is extracted from shale formations using hydraulic fracturing or fracking, that has been one of the main drivers of lower oil prices.

"Shale has essentially severed the linkage between geopolitical turmoil in the Middle East, and oil price and equities," says Seth Kleinman, head of energy strategy at Citi.

What’s more, the majority of US shale oil is far cheaper to produce than a lot of conventional crude. So in any long term price war, US producers would be likely to win.

"Some 98% of crude oil and condensates from the United States have a break-even price of below $80, and 82% had a break-even price of $60 or lower," Maria van der Hoeven, executive director of the International Energy Agency, told Reuters.

read the rest

Isn’t the free market a beautiful thing?  When there’s competition, the consumer always wins.  However, when government starts to interfere, the consumer always loses.

The world has failed us
— 

President Rafael Correa said Thursday that he has abandoned a unique and ambitious plan to persuade rich countries to pay Ecuador not to drill for oil in a pristine Amazon rainforest preserve.

Environmentalist had hailed the initiative when Correa first proposed it in 2007, saying he was setting a precedent in the fight against global warming by lowering the high cost to poor countries of preserving the environment.

Correa reverses his position, gets ready to drill the Amazon.

He said the global recession was in part responsible but chiefly blamed “the great hypocrisy” of nations who emit most of the world’s greenhouse gases.

“It was not charity that we sought from the international community, but co-responsibility in the face of climate change.”

Correa had sought $3.6 billion in contributions to maintain a moratorium on drilling in the remote Yasuni National Park, which was declared a biosphere reserve by the United Nations in 1989 and is home to two Indian tribes living in voluntary isolation.

But he said Thursday evening that Ecuador had raised just $13 million in actual donations in pledges and that he had an obligation to his people, particularly the poor, to move ahead with drilling. The U.N. and private donors had put up the cash.

Correa said he was proposing to the National Assembly, which his supporters control, oil exploration in Yasuni amounting to less than 1 percent of its 3,800 square miles

His no-drilling plan had envisioned rich countries paying Ecuador half the $7.2 billion in revenues expected to be generated over 10 years from the 846 million barrels of heavy crude estimated to be in Yasuni.

Not drilling in the reserve would keep 410 million metric tons of carbon dioxide from entering the atmosphere, officials had said during their global lobbying campaign that included organizing tours of the reserve for journalists.

But while Correa’s proposal generated interest, there were few takers, in part because he insisted that Ecuador alone would decide how the donations would be spent. European countries expressed the most interest but still balked.

Ecuador is an OPEC member that depends on oil for a third of its national budget. The three oil fields in Yasuni represent 20 percent of its oil reserves. Via

2

Many reasons have been provided for the dramatic plunge in the price of oil to about $60 per barrel (nearly half of what it was a year ago): slowing demand due to global economic stagnation; overproduction at shale fields in the United States; the decision of the Saudis and other Middle Eastern OPEC producers to maintain output at current levels (presumably to punish higher-cost producers in the U.S. and elsewhere); and the increased value of the dollar relative to other currencies. There is, however, one reason that’s not being discussed, and yet it could be the most important of all: the complete collapse of Big Oil’s production-maximizing business model.

Big Oil is done.

Goldman Sachs: US to be Number 1 Oil Producer in the World by 2017

Looks like we’ll reclaim our Number 1 spot for the first time in 40 years. Story is paywalled at The Sunday Time, but a blogger copied the nut, HERE. And here’s Dow Jones’s clip:

LONDON -The U.S. will soon become the world’s top oil producer, The Sunday Times reported Goldman Sachs as forecasting.

U.S. oil production should reach 10.9 million barrels a day by 2017, a third higher than 8.3 million barrels currently, the newspaper reported the investment bank as saying.

Russia, now the top oil producer, should see production increase only 100,000 barrels in the same period, for an output of 10.7 million barrels a day, the report said.

Newspaper: www.thesundaytimes.co.uk

-London Bureau, Dow Jones Newswires; +44 (0)20 7842 9320

Copyright © 2011 Dow Jones Newswires


Read more: http://www.foxbusiness.com/industries/2011/09/11/goldman-sees-us-as-top-oil-producer-in-2017-report/#ixzz1Y7zvPLve
youtube

HOW WE BECAME SLAVES TO THE ELITE

Been enjoying those gas prices?  Saudi Arabia isn’t.  And this is precisely why we need to continue the US march towards energy independence through technological breakthroughs like fracking and the construction of the Keystone pipeline. 

Right now the oil market is totally focused on finding a bottom for oil prices. However, according to OPEC’s Secretary-General Abdulla al-Badri we’ve already hit bottom.
Not only that, but he sees a real possibility that oil prices could explode higher to upwards of $200 per barrel in the future. He’s far from the only one that sees a return of triple-digit oil prices.
Finding a bottom: According to recent comments by the Secretary-General when he was in London, the oil market doesn’t need to look for oil prices to bottom as the market has already bottomed. Instead, he offered quite bullish comments by saying, “Now the prices are around $45-$55, and I think maybe they [have] reached the bottom and we [will] see some rebound very soon.”
Normally that type of remark would be just another layer of noise, but this is coming from OPEC’s Secretary-General so it comes with a lot of weight behind it.