Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Silver Outlook Is 'Excellent' - 23rd July 19
Why The Coming Silver Rally Might Be The Greatest - 23rd July 19
We Are in for Decades of Ultra-Loose Monetary Policy - 23rd July 19
Gold & Gold GDX Stocks Ripping. What’s Next? - 23rd July 19
Stock Market Breadth Warning Signs for the Stock Market’s Rally? - 23rd July 19
U.S. Recession Watch: The Six-Cycle Forecast - 23rd July 19
US Dollar Index tightly wound between: US Bond Yields down on safety flows - 23rd July 19
Stocks Bull or Bear? The Market’s Message - 23rd July 19
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

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