The Energy Disaster Kicking Into Full Gear

By SRSrocco – Re-Blogged From Gold Eagle

There’s more evidence finally surfacing in the media of the dire energy predicament the world is now facing.  The negative ramifications of peak oil and the falling EROI were going to hit the world economy within the next 2-5 years, but the global contagion has sped up the process considerably.  Unfortunately, the world will never return back to the energy consumption and GDP growth experienced in 2019.  I believe the peak of unconventional oil production has finally arrived… FOREVER.

Here are a few highlights describing the ongoing ENERGY DISASTER taking place

Continue reading

Saudi Arabia Promises Concrete Proof Iran Behind Oil Attack

By Parisa Hafezi, et al of Reuters – Re-Blogged From IJR

Saudi Arabia said it would produce evidence on Wednesday linking regional rival Tehran to an unprecedented attack on its oil industry that Washington believes originated from Iran in a dangerous escalation of Middle East frictions.

But Tehran again denied involvement in the Sept. 14 attacks on oil plants, including the world’s biggest crude processing facility, that initially knocked out half of Saudi production.

Stringer/File Photo/File Photo/Reuters

Continue reading

In the Middle East, Strange Times Make for Strange Bedfellows

Re-Blogged From worldview.stratfor.com

Highlights

  • The Iranian threat is pulling the once-clandestine relationship between Israel and Saudi Arabia into the public eye.
  • But there are other factors encouraging the two countries to work more closely with each other, including their legitimacy at home and abroad.
  • As Israel and Saudi Arabia move into uncharted territory, both risk exposing themselves to pushback and new dangers.  

A map of Saudi Arabia and Israel

(OMERSUKRUGOKSU/iStock)

Continue reading

The OPEC Epoch Is Over – Where Are Oil Prices Headed Now?

By David Haggith – Re-Blogged From Great Recession Blog

The fate of oil companies and nations hangs in the balance of oil prices. Russia could go broke. Some think that’s by US design. Saudi Arabia could experience its Arab Spring if oil prices remain too low too long. And OPEC is dead. That’s the biggest news in this new century for oil.

The House of Saud has stated clearly many times now and again this week in an even more emphatic manner that it intends to move the oil market from decades of OPEC price manipulation to a raw supply-and-demand equation. Rigging the price of oil was the raison d’être of the cartel known as the Organization of Petroleum Exporting Countries, and that function has now ended. But people are slow to get their heads around such big news.

Saudi Arabians enjoyed a tax-free environment as long as oil paid the bills and cheap subsidized fuel. Huge revenue from oil enabled constant pay-offs to the powerful that stabilized the state. All of that has ended or is at risk of ending as the Saudis seek to rebalance their state budget in the face of huge declines in revenue. So, changing the pricing structure of oil is a perilous change of course for the House of Saud, which tells you how serious they are about transforming the market back to a free market.

It’s fraught with peril for all. Among oil companies and banks, it’s not just the little leaguers that are hurting. Royal Dutch Shell reported an 83% decline in profits year on year. Most oil companies reported significant drops in profit for the first quarter of 2016, though many saw their stock values soar upon reporting because investors had feared an even worse hit. Their banks have reported the same.

Continue reading

Oil Fallout: Laid Off Saudi Workers Torch Buses

By Matt Egan – Re-Blogged From CNN-Money

The Saudi Binladin Group, a massive construction company founded by the father of the late al Qaeda leader Osama bin Laden, has laid off at least 50,000 workers, according to local press reports.

The job cuts come as the Saudi government has delayed payment to construction firms and cut spending to grapple with the plunging price of oil, which makes up three-quarters of the government’s revenue.

Saudi-based newspaper al-Watan reported the Binladin Group terminated the contracts of 50,000 workers — mostly foreigners — and has given them permanent exit visas to leave the country. Some workers refused to leave the kingdom because they claim the company has not paid them for months, the paper reported.

The Saudi military confirmed to al-Watan that protesting workers torched seven buses in Mecca — a rare sight in Saudi Arabia, which Human Rights Watch has criticized for cracking down on free speech and imprisoning peaceful dissidents.

The layoffs are on top of the 15,000 workers cut last year after the Binladin Group’s contracts were frozen when a crane collapsed at Mecca’s Grand Mosque last year. The incident killed more than 100 people and the company was involved in the expansion project.

Continue reading

Taking The Petro Out Of The Dollar

By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com

Saudi Arabia has been in the news recently for several interconnected reasons. Underlying it all is a spendthrift country that is rapidly becoming insolvent. While the House of Saud remains strongly resistant to change, a mixture of reality and power-play is likely to dominate domestic politics in the coming years, following the ascendency of King Salman to the Saudi throne. This has important implications for the dollar, given its historic role in the region.

Last year’s collapse in the oil price has forced financial reality upon the House of Saud. The young deputy crown prince, Mohammed bin Salman, possibly inspired by a McKinsey report, aims to diversify the state rapidly from oil dependency into a mixture of industries, healthcare and tourism. The McKinsey report looks like a wish-list, rather than reality, particularly when it comes to tourism. The religious police are unlikely to take kindly to bikinis on the Red Sea’s beeches, or to foreign women in mini-shorts wandering around Jeddah.

Continue reading

More Pressure Builds Against Oil Prices

By David Haggith – Re-Blogged From The Great Recession Blog

Saudi Arabia has moved beyond its original statement that it will only support a production freeze if “other major producing nations” sign on to the agreement. It has now clarified what I believed to be intended by its initial caveat all along, stating that it will only sign on to a production freeze if ALL nations sign on to such a freeze. So, “other” means “every.”

To which, Iran says, “Never!”

The Saudi Deputy Crown Prince went even further than that by stating if ANY nation does not sign on to a production freeze, “then we will not reject any opportunity that knocks on our door,” by which he means any opportunity to ramp up crude oil production and sell more oil.

And here is what that means for the OPEC meeting in Doha this month that has raised hopes that I believed to be absurd in the first place:

OilBarrels-500x375

The actions and intentions of Saudi Arabia and Russia—the two largest oil-producing nations attending the Doha meeting on 17 April—have dashed all hopes of any fruitful outcome. The most important meeting of the last three decades, which has promised to forge new friendships and a new cartel, is turning out to be the biggest farce, even before the curtain is raised.

The recent announcements from Saudi Arabia outlining the plan to create a $2 trillion fund to reduce dependency on oil and reports of austerity plans indicate that the Kingdom is not taking the Doha meeting seriously. It also seems to be sending a message to the others that it will not buckle under any sort of pressure, and it is readying its Plan B.

The Doha meeting will turn out to be a total disaster and the sentiment will be further damaged if the participating members don’t release a common statement. Forget about the production freeze. Listen carefully, Bears can be heard sharpening their claws ahead of the meeting. (OilPrice.com)

Meanwhile, what do Russia’s actions (the other key player in this agreement to talk about an agreement) say about the likelihood of success? Russia’s production has worked its way up since talk about having a talk began to a new thirty-year high!

Oil production in Iraq has also picked up so much that there is standing room only in the Persian Gulf:

Oil tankers are caught in a traffic jam near the Iraqi port of Basra, causing delays in loading. According to Reuters, around 30 very large crude carriers (VLCCs) are sitting in the Persian Gulf, and the backlog could cost ship owners more than $75,000 per day. Some could be waiting for weeks to reach the port…. The culprit is high oil production in Iraq. The port at Basra is struggling to load up all the oil tankers fast enough, forcing some to sit and wait…. And the line of tankers appears to be growing. The gridlock is forcing up the cost of renting an oil tanker. That, combined with the shrinking capacity of available storage in China is pushing up tanker rates in Asia as well. (OilPrice.com)

While oil tankers are stacking up because of increased Iraqi production, they are also stacking up because, once loaded, they have nowhere to go! So, it’s a pile-up at sea.

As storage becomes less available on land and sea, the price of storage goes up (supply and demand again). As ships has become backlogged, the price of shipping has nearly doubled. Increases in the cost of moving and storing crude oil, put additional downward pressure on how much people are willing to pay for crude oil. So, while supply (production) is still rising in many parts of the world, demand for more crude is going to fall, as it gets pricy to have it just sitting around.

In spite of ramping up it’s production, Iraq is one of five OPEC nations on the brink of financial disaster, due in large part to the current low oil prices — the others being Venezuela, Nigeria, Libya, and Algeria. So, these smaller nations talk of hope for the Doha meeting, while the larger nations give no rational basis for hope.

One has to wonder how long it will be before some architect of human chaos decides the way to resolve this crisis for the oil and banking industries is with a Middle-East war that crushes supply lines and knocks out production. Let’s hope not, but history has its example wars that look like they had such motivation.

So far, there is a growing storm of reasons to stay with my prediction that the price of oil is going to go back down. As I published my article yesterday to that effect, the price of oil was going up rapidly; but I look at the fundamentals and see a lot more downside … and stay with that.

Oil, oil everywhere, and almost nowhere left to put it.

CONTINUE READING –>

Hidden Force Behind Oil’s Rise: Sabotage by Terrorists

 

Oil prices have surged on hopes of a freeze in global production. But a more hidden factor is also fueling the price spike: terror attacks on oil facilities.

Sabotage to key oil pipelines have driven global supply outages to “elevated” levels estimated at more than 3 million barrels per day, according to the Royal Bank of Canada.

For instance, last month a critical pipeline in Nigeria was bombed, taking around 250,000 barrels of crude offline until May.

Extremist groups pose a “clear and present danger” to energy facilities, especially those in oil-rich North Africa, RBC wrote in a recent research report.

Oil prices have rallied recently to around $40 today from $26 a barrel in mid-February. The sharp rise has been largely attributed to an effort to “freeze” oil output by Saudi Arabia, Russia and other producers. Investors are also betting U.S. production will decline sharply in 2016.

But geopolitical jitters and supply outages are also playing an important role. That’s a change from much of the past two years when these concerns were overshadowed by the epic supply glut and Iran’s efforts to ramp up production.

“OPEC outages in hotspots like those recently seen in Iraq and Nigeria are a good reminder of how quickly volumes can be sidelined,” RBC wrote. “As the market gradually tightens, we think these hotspots will return to center stage.”

Continue reading

Weekly Climate and Energy News Roundup #212

The Week That Was: January 16, 2016 – Brought to You by ww.SEPP.org

By Ken Haapala, President, Science and Environmental Policy Project

Administration’s Energy Plan: On January 5, Secretary of Interior Sally Jewell announced the latest effort in the administration campaign against fossil fuels and reliable energy. There will be a moratorium on new leases to mine coal on federal lands for at least three years. Supposedly, the purpose is to overhaul the program that permits coal mining on federal lands (to include Indian lands) to make the pricing “fair.” The environmental industry (Big Green) has made the program controversial by objecting to it, claiming it contradicts the Administration’s Energy Plan to reduce carbon dioxide emissions. Big Green has been active in a program to demand that fossil fuels not be used (be kept in the ground). During this Administration, Big Green was successful stopping the use of Yucca Mountain for storage of waste from nuclear power plants. Combined with its opposition to hydropower, Big Green opposes all the major sources of reliable electricity generation, a position that the Administration is adopting in reducing the supply of coal.

If the effort is successful, we can expect future rulings from the Administration on reducing the supply of oil and natural gas, to the extent that the Administration proclaims it has the power to do so – even if the Administration’s perceived power will be highly contested in the courts. It is not a matter of what is moral or ethical; it is a matter of what the Administration believes it can do.

Continue reading

Beware Of The ”Frack-Log”

By Andrew Hoffman – Re-Blogged From http://www.Silver-Phoenix500.com

Why do I spend so much time discussing collapsing oil prices, you ask? Well, for one, because as we wrote back on October 15th – when WTI crude was $83/bbl, compared to $43/bbl this (Monday) morning – “crashing oil prices portend unspeakable horrors.” And this, just a week after October 7th‘s “2008 is back“; as obvious signs of global economic collapse were evident before the price of the world’s most important commodity crashed. As for said “unspeakable horrors,” the political, economic, and social ramifications will be devastating here in the States – where hundreds of high cost, junk-bond financed shale producers face certain bankruptcy, and one-third of S&P 500 capital expenditures dramatic downward revisions. That said, the overseas impact will be still uglier – where everyone from corrupt, inefficient state oil companies

Continue reading

Oil and World Politics

cropped-bob-shapiro.jpg   By Bob Shapiro

Oil prices are falling. Since last summer, when crude oil was selling for $106 a barrel, black gold has fallen almost 40% to $66 and change. Is this good or bad, and what (who) is causing it?

I’ve been reading reports that the Saudis and OPEC have been ramping up production for several months, and they most recently refused to cut production to support the price. The reason being suggested is that they want to kill off competition from the oil sands industry and allow for future monstrous profits.

While there is a certain pizzazz that goes with this reasoning, it defies all economic logic. The Saudi oil costs next to nothing (yes, literally) to produce. If the are forcing the price down, then they and OPEC are foregoing Billions of Dollars of profits now.

OPEC

Their hope would be that the competition would be utterly destroyed. However, if oil sands production stops, what would keep it from restarting once price recovers? Nothing! Yes, the ownership of the wells might change hands due to bankruptcy of some companies, but the new owners already would have functioning wells that would need the figurative switch to be turned back to “ON.”

The Greens and their democratic vassals may be anti-energy, but how would making already cheap fossil fuels (compared to Wind and Solar) even cheaper be good for the Greens. As we’ve seen, when the price goes back up, so does oil sands production.

There are reports that Russia is being devastated by the low oil prices, since they rely so heavily on resource exports, chiefly oil and gas, to earn hard currency to pay for their imports. Again, it sounds plausible.

But, several facts show this is more nonsense. Recently, the Russian Ruble has fallen 35+% since last summer, so in Ruble terms, the Russians are getting the same price for their oil.

The Russians don’t need the “Hard” Dollars anyway; they have $165 Billion in treasuries sitting in their foreign reserves, which they’d like to get rid of. (They tried, and maybe that’s the real reason for US sanctions against Russia, and not Ukraine, which they used to own.)

And again, they don’t need the Dollars because they have been running massive trade surpluses in recent years. Maybe their balance of payments will shift closer to neutral, but things are much different than they were when the Soviet Union was run into bankruptcy over oil.

Russia recently inked a deal with Europe mostly for natural gas to keep the people in the Eurozone from freezing to death this winter, even though Europe is participating in the US declared sanctions. And Russia also inked a deal to send China the oil that they need.

Russia & China

Much of these exports either are being priced in Gold, or the Dollars paid are going for immediate purchase of Gold. Again, Russia hates the Dollar.

China definitely benefits from lower oil prices, since it imports most of the oil it needs. Aside from the Russian oil pact, China has been active making deals for natural resources all over the globe. It’s not unreasonable to think that an agreement with the Saudis included an incentive for them to allow oil prices to fall, damaging the United States.

The Chinese have been buying Gold with both hands for a decade, and various estimates put their holdings at perhaps 10,000 tons, which is 2,000 tons more than the (unaudited since 1954) US stash of Gold. Their recent bilateral agreements on trade specifically have avoided the use of the US Dollar.

The time may be here when the Chinese are ready, willing and able for the Renminbi (yuan) to replace the US Dollar as the world’s premier reserve currency. Explicit Gold backing for their money would improve their credibility, and probably will happen within 5 years.

When US Dollars cease being the reserve currency, and world trade starts to be denominated in Renminbi, Gold, or local currencies, then the $3+ Trillion of US Dollars held as foreign reserves by foreign Central Banks becomes much less (completely?) unnecessary.

A rush to sell Dollars around the world would herald a very difficult situation for the US Dollar and for the domestic US Economy. This appears to be inevitable, and we need to put our country’s economic house in order now, to moderate the bad effects as much as possible. Chief among what the US needs to do is:

  • Bring federal spending into balance (or surplus) with revenues
  • Allow the Free Market to set interest rates so that the real Price of Money can be used in business decisions
  • Stop shooting ourselves in the foot with stupid anti-energy policies and other over-regulation, which hinder US economic growth.

Lower Oil Prices

cropped-bob-shapiro.jpg   By Bob Shapiro

Oil prices have been falling recently. As with so many things, this creates winners and losers. Consumers of oil & oil products, consumers of oil substitutes, and consumers of goods produced using oil all benefit. The steeper the drop (30% off the most recent high) the greater these consumers benefit.

Continue reading