Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

In 2015 the U.S. Will Elbow OPEC Oil to the Sidelines

Commodities / Crude Oil Dec 24, 2014 - 10:42 AM GMT

By: Money_Morning

Commodities

Dr. Kent Moors writes: My recent meetings in Dubai highlighted the profound change that will turn the balance of power in the energy industry on its head.

For years, OPEC was the puppet master, and the U.S. (and the rest of the world) were the puppets. They pulled the strings, and we danced. OPEC set the price of oil. OPEC controlled the supply.


But those days are ending. After dictating the course of oil prices for more than 50 years, OPEC is finding its influence diminished.

OPEC’s oil ministers can read the handwriting on the wall as well as anyone. Not only are they about to lose the largest energy market in the world, but they’ll soon be competing for the markets that used to be theirs for the taking.

Because in 2015 the U.S. will start pulling the strings…

Regardless of Oil Prices, the U.S. will Dominate

U.S. unconventional oil production is poised to set the bar for the next generation.

Only a few years ago, the American economy was dependent upon imports to meet almost 70% of its daily oil requirements. Within the next five to ten years (perhaps even sooner), that figure will drop to about 30%. Most of that will come from Canada.

Coupled with huge reserves of natural gas, energy independence for both the U.S. and North America has arrived.

The difference, of course, is the shale revolution. Actually, this includes both tight and shale oil and gas. Both are hydrocarbons trapped inside rock formations, requiring fracking and horizontal drilling. “Tight” is a broader category including shale and other rock, especially sandstone lenses.

Definitions aside, this is a bigger “game changer” than anything that has come down the pike in the last two generations. It has fundamentally altered the landscape, and turned the U.S. into a net surplus producer.

The current low price of oil won’t change that.

Unconventional Oil Production is Still Profitable

Technical advances have both improved the production and lowered the overall cost of oil drilling. Better drilling techniques and geological mapping have provided additional basins and deeper horizons. Environmental problems have been addressed in some dramatic improvements, lowering or eliminating the need to put dangerous chemicals downhole.

That isn’t to say that fracking should occur everywhere.

There are still places were fracking should not occur – watersheds, seismically sensitive and active areas, and locations abutting population concentrations. Nonetheless, the projected volume of extractable reserves continues to increase, subject to one primary caveat.

The price of production.

Now, I just said that U.S. unconventional oil production can be profitable even at the current low prices.

This is different.

What oil pricing really affects is how oil reserves – that is, how much oil can be extracted – are calculated.

You see, most industry sources base their calculations on technical factors when they estimate how much oil and natural gas can be brought to the surface.

I prefer to expand that a bit and only consider extractable what can both be gained technically and can be sold at a profit.

As a result, my estimates of what is extractable tend to be more conservative than others. Still, even at today’s prices, there are significant reserves available, and they outstrip any projected domestic demand.

The impact of such unconventional resources is clear when one is considering the American picture. That in itself would alter the international trade in oil and even natural gas (with the advent in 2015 of large U.S. exports of liquefied natural gas, or LNG). But the effect is even larger, and with it comes the hastening of OPEC’s decline.

Global Oil Producers are Following the U.S. Lead

Each comprehensive study released of tight/shale oil and gas indicates the vast bulk of available reserves are located outside North America – more than 86% of the oil and 88% of the gas. The energy revolution is truly one that will be worldwide.

Those reserves can be extracted using current technology. In fact, the U.S. and Canada have been providing a “proof of concept” to the rest of the world for almost 10 years now.

It won’t happen overnight. It will take other global areas longer to rev up production, there will be statutory and regulatory delays, additional needed (and costly) infrastructure, and the development of major new delivery networks.

But it is coming and will provide a major export market for U.S. technology and expertise.

This is one of the major concerns facing OPEC. Not only is North America off the map as a target for exports, progressively other parts of the world will be tapping new reserves and meeting more of their domestic demand locally.

Right now, OPEC represents about 40% of global daily production. The organization still has a say in what the energy market looks like.

But for OPEC, oil can no longer be used as either a weapon or as a lever.

There is simply too much production arising beyond the control of the cartel.

Russia, Mexico, and Canada have always been outside the OPEC orbit. And while Moscow has on occasion paralleled OPEC moves, one of the three most dominant oil producers has broken over the Saudi-inspired move to keep prices low. Russia is now fighting to save the ruble as its central budget disintegrates. The current price of oil is driving the Russian economy headlong into recession.

Meanwhile, the U.S. has emerged as a major global energy player. We’re now in a two-horse race with Saudi Arabia for the lead in oil production.

At present, the rise in American unconventional production effects OPEC only in the expected decline of exports it can expect to move to the U.S. That’s because exports of crude oil from the states is prohibited by statute.

But it’s only a matter of time before American producers will be allowed to export excess production. And there is ample room for that without adversely impacting either domestic availability or price.

Not only is OPEC losing the largest market in the world – the U.S. – but the organization will soon have to compete with the U.S. and Canada for the lucrative European and Asian markets.

The cartel may play the game a bit longer of selectively cutting prices to one region or another, but this will only buy a few years. The end of hegemony is coming.

When OPEC decides to hold a wake, we will probably send flowers.

Source : http://oilandenergyinvestor.com/2014/12/2015-u-s-will-elbow-opec-sidelines/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules