A turning point in the flow of oil

BW Zambesi loading crude oil in Galveston, TXPhoto Enterprise Products

The Singapore-flagged tanker BW Zambesi set sail with little fanfare from the port of Galveston, Tex., on July 30, loaded with crude oil destined for South Korea. But though it left inauspiciously, the ship’s launch was another critical turning point in what has been a half-decade of tectonic change for the American oil industry.

The 400,000 barrels the tanker carried represented the first unrestricted export of American oil to a country outside of North America in nearly four decades. The Obama administration insisted there was no change in energy trade policy, perhaps concerned about the reaction from environmentalists and liberal members of Congress with midterm elections coming. But many energy experts viewed the launch as the curtain raiser for the United States’ inevitable emergence as a major world oil exporter, an improbable return to a status that helped make the country a great power in the first half of the 20th century…

Like just about everything else in the oil and gas business, petroleum exports are contentious. The oil bounty is thanks to modern production techniques including hydraulic fracturing, or fracking, which involves injecting water and chemicals into the ground to crack oil-saturated shale. Exports would mean more of that. Many environmentalists say fracking operations endanger water supplies or create other hazards, including air pollution. Ramping up exports of fossil fuels, critics will surely note, is inconsistent with the Obama administration’s push for a global climate deal.

Independent refiners argue that exports could mean more expensive domestic oil for them, which they say could mean higher prices for American consumers.

The article goes on from there. I think it’s pretty clear where the TIMES and the rest of our news-as-entertainment, corporate PR reprints, is handling this qualitative change. We the consumers will be screwed. Big oil will lap up increasing profits. Environmental concerns go down the crapper along with everything but the pretense of sensible economic regulation.

Thanks, Mike

5 thoughts on “A turning point in the flow of oil

    • Tippu Tip says:

      12/1/14 U.S. crude exports to Asia stall on flood of Mideast oil http://www.reuters.com/article/2014/12/01/us-usa-asia-crude-idUSKCN0JF2D920141201 “An aggressive strategy by Mideast Gulf producers to exploit the lowest oil prices in five years to defend market share is showing signs of bearing fruit as U.S. crude exports to Asia grind to halt.
      Asian refineries have suspended imports of condensate, a light crude oil produced from the U.S. shale boom, just four months after they began in favour of cheaper Middle East grades, according to trade and industry sources.
      The suspension illustrates how competition between suppliers has heated up following a more than 40 percent decline in oil prices since June.”

  1. Realpolitik says:

    (10/19/14) “Reading the signs behind plummeting oil prices: Saudi-led price war or simple supply and demand?” http://www.albawaba.com/business/signs-behind-plummeting-oil-prices-saudi-led-price-war-or-simple-supply-and-demand-613849
    “The price of the West Texas Intermediate fell on Thursday to below $80 per barrel for the first time in years. What seemed like a sustained collapse in international oil prices led to a flurry of analyses, some of which attributed the trend to a political decision – taken by Washington and executed by Saudi Arabia – to sabotage the economies of Russia and Iran by shrinking their oil revenues. But is there any substance to these allegations?
    The “political” explanation of the oil price crisis has been advanced in a number of Russian and Western reports, which recalled the oil market collapse of 1986 and the role of Saudi Arabia in sabotaging the prices of crude oil by increasing production abruptly. Today, many historians consider that move to have been a US-designed strategy that ultimately succeeded in strangling the Soviet Union into collapse, since oil revenues were the USSR’s primary source of hard currency.”
    “… the cost of extracting one barrel of oil in Saudi Arabia does not exceed $3, stimulating oil stuck in underground rocks or heating tar sands to liquefy them are extremely costly processes that consume a lot of resources and energy. For this reason, a sharp and sustained decline in oil prices could drive these oil types out of the market and lead to the collapse of a large number of energy companies, which usually fund their operations through loans on the basis of a price of over a $100 per barrel.
    According to McKinsey and Company, an energy consulting firm, the majority of shale oil producers in America require a price of over $75 per barrel to maintain their profitability. Sources in the energy industry say that investments would be scaled back, in addition to shutting down wells with low production, as soon as prices drop below the $85 mark. The first to feel the effects of the crisis would be Canadian heavy oil, before the United States. The problem of non-conventional Canadian oil does not just lie in its high production costs, but also the cost of its production: while the cost of transporting oil from the Arabian Gulf does not exceed $3 per barrel, moving oil from western Canada costs between $12 and $15.
    The reason is that production takes place in inland areas far from the coast and export terminals, and also to the fact that Canadian oil extracted from tars and asphalt is heavy and dense, requiring large pumping power to move it through thousands of miles of pipelines to the Gulf of Mexico or the US east coast. Finally, this oil is already sold at a discount – because of its poor quality – which increases greatly whenever the market weakens and supplies increase (the discount reached nearly $20 per barrel last year).
    In this sense, there are certain limits for the decline in prices after which production starts to decrease, starting with the costlier fields and those that are farthest from consumption zones. When this happens, the price dynamics are reversed and pressures on the market are relieved. For this reason, some experts believe Saudi Arabia’s goal is to keep oil prices within suitable levels, which would limit supplies without shaking the markets and threatening energy companies in the West.
    …in the 1980s, Saudi Arabia was telling rivals it was able to crush them through its productive capacity, as the collapse in prices did not affect its overall revenues (price declined to a half almost, but Saudi production had doubled). Saudi’s message to the markets and producers today is that its oil is the most competitive in the world, and that the kingdom would be the last to be affected by slumping prices. Therefore, Saudi Arabia will make sure it will sell its oil first, regardless of the state of the oil markets.”

  2. Meanwhile says:

    “Report: Islamic terrorists reap $800M a year on black market oil sales” http://www.denverpost.com/business/ci_26763358/report-islamic-terrorists-reap-800m-year-black-market “Oil fuels ISIL’s war machine, notably including the military vehicles vital to its movements and fighting capabilities,” the IHS analysis said. “Oil directly finances ISIL’s myriad activities and encourages the activities of middlemen who sell, transport and export the oil and thus have a vested interest in ISIL.” IHS estimates the Islamic group is making about $2 million a day in sales of crude oil from territory it occupies in Iraq and Syria and is selling crude at a steep discount averaging $40 a barrel, compared to prevailing market prices of about $85.

  3. Drill baby says:

    Suncor Energy, Canada’s biggest oilsands player, has posted a net loss of $2 billion for the final three months of 2015 as it was walloped by the steep drop in crude prices. In addition to the oil price collapse, Suncor’s (TSX:SU) bottom line was dragged down by nearly $1.6 billion in impairment charges and a $382 million foreign exchange loss related to its U.S. dollar-denominated debt. A year earlier, it posted a net profit of $84 million. Stripped of unusual items, Suncor’s operating loss amounted to $26 million, compared with profits of $386 million a year earlier. Company-wide output grew to 582,900 barrels of oil equivalent a day during the fourth-quarter from 557,600 barrels during the prior year.

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