Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Category Archives: Energy

Another Nail in OPEC’s Coffin: Fracking Old Wells Dropping U.S. Breakeven Points Further

This article appeared online at TheNewAmerican.com on Monday, August 21, 2017:

Ed Morse, Citigroup’s head of commodity research, told a Bloomberg television audience last week that OPEC’s position “is not sustainable over a long period. In the end, the markets are going to win, and [the winner] is going to be shale. If we’re in a $40 to $45 world, we’ll have enough drilling to add to the [world’s] surplus.”

Morse is reiterating the mantra sung for years: OPEC has long since run out of options and has all but lost its monopoly influence over world crude oil prices. If it reduces supply, prices go up, making U.S. frackers more profitable and inviting more capital in to expand production. If it increases supply, the lower prices cut further into each member’s cash flow, forcing them to continue to deficit spend without gaining any advantage over the Americans.

The breakeven point for U.S. frackers has been estimated to be between $40 and $50 a barrel. On Friday U.S. crude oil closed at $49 a barrel on the New York Mercantile Exchange (NYMEX – see floor photo above).

Now OPEC is faced with another challenge from the American oil industry:

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OPEC Members Continue Non-compliance

This article appeared online at TheNewAmerican.com on Friday, August 11, 2017:

English: Flag of the Organization of Petroleum...

The Paris-based International Energy Agency (IEA) noted in its latest report released on Friday that non-compliance among OPEC’s members, and those non-members who also agreed to cut oil production, increased again in July. Non-compliance is the death knell for any cartel, and OPEC is no exception.

Specifically, non-compliance among the cartel’s members rose to 25 percent in July, the highest since the agreement was inked in January. Among non-OPEC members who signed on to that agreement, non-compliance was at 33 percent in July.

Put another way,

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Additional Sanctions by United States Proving of Little Value in Venezuela

This article appeared online at TheNewAmerican.com on Thursday, August 10, 2017:  

Nicolas Maduro

Nicolas Maduro

The U.S. Treasury Department slapped sanctions on another eight Venezuelan government officials on Wednesday, bringing the total now to nearly 30. This is a partial fulfillment of a promise by the Trump administration to sanction everyone involved in the establishment of the fraudulent Venezuelan “constituent assembly” sworn in on Tuesday.

Included among the eight is Adan Chavez, the late Marxist President Hugo Chavez’ elder brother, who now serves in the new assembly as secretary of its presidential commission.

In making the announcement, Treasury Secretary Steven Mnuchin said,

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U.S.-imposed Sanctions to Squeeze Venezuela’s Marxist Dictator

This article appeared online at TheNewAmerican.com on Wednesday, August 2, 2017:

The sanctions imposed by the State Department on Venezuela’s Marxist dictator Nicolas Maduro and his regime are being carefully staged in to maximize the pain inflicted on Maduro and his cronies, while minimizing the impact on the citizens of the country.

Last week State imposed sanctions on 13 of Maduro’s top people, accusing them of various human rights violations and, as a result, freezing any assets they might have within American jurisdiction. Following Sunday’s fraudulent election, State imposed similar sanctions on Maduro himself, freezing any assets he might personally have in the United States.

Although it’s unknown just how much, if any, of Maduro’s personal wealth would be affected by those new sanctions, what is known is that they

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Fracking’s Vicious Cycle Making Bondholders Nervous

This article appeared online at TheNewAmerican.com on Thursday, July 20, 2017:

King Abdullah ibn Abdul Aziz in 2002

King Abdullah ibn Abdul Aziz

Investors in high-yield bonds issued by small fracking companies are getting nervous. Last year those bonds, according to Bloomberg, gained some 38 percent as they rebounded from lows set earlier. In June they slipped two percent. In the bond business, that’s enough to make bond fund managers and individual investors nervous. It’s bad enough that the S&P 500 Energy Sector Index of energy stocks has lost 16 percent so far this year. What’s worse is the vicious cycle that frackers find themselves in.

For instance,

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Crude Oil to Climb to $60 a Barrel, Claim Aramco’s CEO, Citi, and Goldman

This article appeared online at TheNewAmerican.com on Monday, July 10, 2017:  

English: Flag of the Organization of Petroleum...

Claiming that the worldwide demand for crude oil will jump by 20 million barrels of oil per day over the next five years, Amin Nasser, the CEO of Saudi Aramco, said, “Investments in smaller increments such as [U.S.] shale oil will just not cut it.” Speaking at the World Petroleum Congress in Istanbul last week, Nasser said:

If we look at the long-term situation of oil supplies, for example, the picture is becoming increasingly worrying.

 

Financial investors are shying away from making much-needed large investments in oil exploration, long-term development and the related infrastructure….

 

New discoveries are also on a downtrend. The volume of conventional [non-shale] oil discovered around the world over the past four years has more than halved compared with the previous four.

Speaking to his own interest, Nasser is trying to talk up the value of his company, which remains on schedule to sell five percent of itself in what some are calling “the world’s largest IPO [initial public offering].” To stress the point, Nasser said

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Crude Oil’s Bear Market Is Crushing OPEC

This article appeared online at TheNewAmerican.com on Monday, July 3, 2017: 

Map of the territory and area covered by prese...

Map of the territory and area covered by present-day Saudi Arabia.

The world’s price of crude oil fell farther in the first six months of 2017 than in any six-month period in the last 19 years. From its peak in January it dropped by more than 21 percent by the middle of June, qualifying it in Wall Street jargon as a “bear market.”

This isn’t part of OPEC’s plan. The once-influential cartel was sure that by taking 1.8 million barrels a day of crude oil production off the world markets, the world price of oil would shortly hit its target of $60. And it almost made it, rising to $57 a barrel before beginning its long and crushing decline.

OPEC was sabotaged not only by noncompliance among its members and production from those to which it gave a pass (Libya and Nigeria), who produced more than was expected, but also by

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OPEC Continues its Descent into History as an Unlamented Footnote

Embed from Getty Images

This article was published by The McAlvany Intelligence Advisor on Monday, July 3, 2017: 

Two weeks ago, the world price of crude oil officially entered a bear market, down more than 21 percent from its high early in the year. OPEC’s plan appeared to be on track, taking enough production off the market to drive the price to $60 a barrel. That decline has enormous implications for the cartel’s members, as nearly all of them need the revenues to keep their welfare and warfare states fully funded. The decline must be especially painful for Saudi Arabia, the leader of the pack, which announced plans last year to sell part (estimated to be between five and ten percent) of its precious Saudi Aramco oil company. The company, thanks to deliberately opaque disclosures, was estimated to be worth, depending on the price of oil, between $2 trillion and $10 trillion.

That’s the operative word: “depending.” OPEC had big plans for the funds it hoped to raise, encapsulated as its “Vision 2030.” As Mohammad bin Salman bin Abdulaziz Al-Saud, the nation’s Chairman of the Council of Economic and Development Affairs, wrote:

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Enjoying Record Low Gas Prices? Thank a Fracker!

This article appeared online at TheNewAmerican.com on Tuesday, June 27, 2017:  

On November 17, gas prices had dropped to $1.9...

Of the estimated 44 million Americans who will travel over the upcoming Independence Day holiday weekend (a record, by the way), 37.5 million of them will drive to their destinations. Along the way they will not only spend nearly a dollar a gallon less for gas than they have over the last 10 years on average, they will spend less on gas than any Independence Day since AAA has been keeping records. In addition, this will be the first time in nearly two decades that they will be spending less for gas in July than they did in January. On average over the last decade gas prices have been 47 cents a gallon higher on the Fourth of July than on New Year’s Day.

Consumers are always the ultimate beneficiaries of improved technologies, as producers are

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Oil Expert Yardeni: OPEC Should Break Agreement, Produce All It Can

This article appeared online at TheNewAmerican.com on Wednesday, June 21, 2017: 

In Dr. Ed’s Blog, Ed Yardeni, for 25 years one of the industry’s leading energy strategists, proposed on Wednesday that OPEC should consider going back to Plan A to fund members’ treasuries as Plan B clearly isn’t working:

Rather than [attempting to prop] up the price [of crude oil], maybe OPEC should sell as much of their oil as they can at lower prices to slow down the pace of technological innovation that may eventually put them out of business.

Plan A, it will be remembered,

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More OPEC Bad News: Increases in World Oil Supplies Overwhelming Its Cuts

This article appeared online at TheNewAmerican.com on Wednesday, June 14, 2017:  

English: Map of OPEC countries. Dark green = m...

English: Map of OPEC countries. Dark green = member states, Light green = former member states. Light Grey = Prospective members.

In its regular monthly oil market report, the International Energy Agency (IEA) stated that the world’s supply of crude oil increased in April by 18 million barrels just when it was expected to decline. To add to OPEC’s woes —OPEC is unsuccessfully trying to reduce the world’s oil supplies by cutting production so as to raise oil prices enough to fund the countries’ welfare states —  the agency also said it expected U.S. producers to increase their production by 430,000 barrels a day this year over last year, and by 780,000 barrels a day in 2018. The agency added that even this might be too pessimistic: “Such is the dynamism of this extraordinary, very diverse industry it is possible that growth [in crude oil inventories] will be faster [than we estimate].”

Its report makes for sobering reading for OPEC’s 13 members and the other 10 nonmembers who extended a production cut agreement to March 2018:

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What if the Energy Department is Right?

This article was published by The McAlvany Intelligence Advisor on Friday, May 2, 2017:

English: A picture of the National Petroleum R...

A picture of the National Petroleum Reserve–Alaska,

Tom Lombardo appears to be a self-effacing journalist, professor, and armchair philosopher with a certification as a Professional Energy Manager. He calls himself either “an idealistic pragmatist” or a “pragmatic idealist,” but with no discernible ties either to the energy industry or the green movement. That’s what makes his assessment of the Obama Energy Department’s study published last summer on renewable energy remarkable. If he’s correct, then Big Oil is shortly going to have a day of reckoning in Alaska.

Writing at Engineering.com, Lombardo reviewed a report emanating from the Energy Department in August last year titled, “Estimating Renewable Energy Economic Potential in the United States: Methodology and Initial Results.” After looking at various energy scenarios (the Energy Department did no forecasting in its report), Lombardo summed up the study:

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Alaska’s North Slope Oil Reserves Are “Open for Business”

This article appeared online at TheNewAmerican.com on Thursday, June 1, 2017:  

Map of northern Alaska showing location of , A...

Map of northern Alaska showing location of , ANWR-1002 area, and the National Petroleum Reserve-Alaska (NPRA).

Following a six-day trip to northern Alaska, Trump’s Interior Secretary Ryan Zinke signed an order on Wednesday in Anchorage that reverses a 2013 Obama administration executive order. That 2013 order removed half of the immense National Petroleum Reserve-Alaska (NPRA) on Alaska’s North Slope from consideration for energy development. Said Zinke:

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Trump Pressured to Stay in Paris Climate Agreement

This article appeared online at TheNewAmerican.com on Monday, May 29, 2017:

Candidate Donald Trump repeatedly promised that he would, if elected president, withdraw from the Paris Agreement agreed to under the previous administration in 2015. He said, “We are going to cancel the Paris climate agreement [and] stop all payments of the United States tax dollars to U.N. global warming programs.”

Under that agreement (not a treaty which then-President Obama claimed wouldn’t need Senate ratification), so-called global warming would be limited by slashing carbon dioxide and other emissions from the burning of fossil fuels and concentrating instead on green energy development.

One sign that Trump intends to keep his promise followed the official dispatch from the G7 Summit in Sicily on Friday:

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OPEC to Extend Oil Production Cuts Another Nine Months

This article appeared online at TheNewAmerican.com on Wednesday, May 24, 2017: 

Now that “everyone is on board” with a nine-month extension of last November’s agreement to cut production by OPEC, tomorrow’s meeting of the cartel in Vienna is expected to rubber-stamp that extension. Saudi Arabia’s oil minister, Khalid al-Falih, upon returning from Iraq on Monday, said, “We think we have everybody on board. Everybody I’ve talked to indicated that nine months [is] a wise decision.”

Iraq was the most egregious cheater under the November agreement, first complaining that the production numbers upon which its “participation” was based were too high, and then being very slow in implementing those cuts. The slack was picked up by Saudi Arabia, which cut more than it agreed to.

The overall goal of the cuts is to

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North Dakota Oil Production Jumps as Access Pipeline Nears Completion

This article appeared online at TheNewAmerican.com on Monday, May 15, 2017:

The latest report from North Dakota’s state oil and gas division showed that crude oil production for March is back up over a million barrels a day, an increase of nearly nine percent since December and almost double what the state produced five years ago.

The boom is back.

In Bismarck there are hundreds more jobs being offered than takers, according to the Associated Press (AP), with “for hire” signs appearing once again in stores, shops, and restaurants downtown. In Williston there are 500 more job listings today than there were a year ago. Williston Republican state senator Brad Bekkedahl, whose district sits on top of the massive Bakken oil shale deposits, told the AP, “There is a long-term optimism that was not here a year ago.”

In the oil business, “long-term” is measured in months, not years or decades. In March 2012 there were 6,954 oil wells producing 580,000 barrels of crude every day. In March this year 13,632 wells produced 1.025 million barrels daily.

And it’s not all due to the Dakota Access pipeline,

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Russia, Saudi Arabia Release Trial Balloon: Extend Production Cut by a Year

This article appeared online at TheNewAmerican.com on Monday, May 15, 2017: 

In a joint statement released on Monday, oil ministers from Russia and Saudi Arabia said the present crude oil production reduction agreement reached last November should be extended for another year. The original target was a reduction of world crude inventories down to its five-year average. Since the present agreement didn’t come close, it should be extended, said Saudi energy minister Khalid al-Falih:

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Bakken is OPEC’s Elephant in Its Living Room

This article was published by The McAlvany Intelligence Advisor on Monday, May 15, 2017:

Setting the stage for the OPEC meeting on May 25, Saudi Arabias Oil Minister Khalid al-Falih, promised on Friday that OPEC will do whatever it takes to rebalance the global oil market. Whatever that means, and whatever comes out of that meeting, it wont be enough torebalance the oil market (rebalance: raise the price of oil sufficiently to reduce significantly the deficits the cartels members are currently running).

If the cartel repeats and extends the present agreement by six months, its likely to have the same impact: immeasurably small. The last agreement promised to cut 1.8 million barrels per day (bpd) from its overall production. It managed to cut production by less than half that, 800,000 bpd. In the grand scheme of things (world production of oil is just over 80 million bpd), this represents a one percent reduction in global production of crude. Wahoo.

What will be discussed in Vienna will no doubt include who is going to be doing the heavy lifting, and how much. Will there be exceptions to the extension as there is in the present one? Will there be failures to comply, as there were under the present one? Will there be sanctions applied to those who cheat? What about non-members? Will they somehow be persuaded to engage in the farcical extension? From here the meeting has all the makings of Shakespeares comedy “Much Ado About Nothing.”

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OPEC Increasingly Irrelevant as Cartel Seeks to Extend Output-cut Deal

This article appeared online at TheNewAmerican.com on Wednesday, May 3, 2017: 

English: Flag of the Organization of Petroleum...

Gregory Brew’s statement from Oilprice.com on Tuesday was spot on: “OPEC Begins to Unravel.” Except that the unraveling began years ago as entrepreneurs in the United States found a way to tap underground shale profitably.

OPEC faces an essentially insurmountable task. On May 25, oil ministers from all 13 of the cartel’s members will meet in Vienna to decide whether or not its present oil output cut agreement should be extended. Either way, OPEC’s doom as the prime determiner of world crude oil prices is likely sealed.

If they decide not to extend the output cut, the world will know that OPEC is finished. The ministers will depart Vienna and tell their governments that

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Keystone XL Pipeline Granted Approval by State Department

This article appeared online at TheNewAmerican.com on Friday, March 24, 2017: 

Keystone XL demonstration, White House,8-23-20...

With the signing of the cross-border permit by the State Department on Friday, the real work on completing Phase IV of the Keystone Pipeline from Canada to refineries on the U.S. Gulf Coast begins. TransCanada, the owner and operator of the pipeline, still thinks the project is viable economically even though it has been stalled for 16 months by the previous administration. In a press release, TransCanada’s CEO Russ Girling said:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.