Glenn linked to a post at the American interest about the price war in oil & the problem for non-Saudi members of the cartel:

The Saudis have the funds to make up for the budget shortfalls cheap oil is foisting upon them, but the rest of OPEC isn’t anywhere near as well prepared. Nigeria, Iran, and Venezuela have all agitated for the cartel to take action, though none have volunteered to be the one to actually make the necessary cuts. 

But there is a key line from that piece that not only explains why the supply & demand plan of the Saudi’s have failed but it also says all you want to know about why America is still destination one for the entire world (emphasis mine:

 Rather, they’ve been hard at work innovating their way to profitability even at $65 per barrel.

Innovating  do tell:

The cost cuts and productivity gains that shale oil producers expect come in three categories…First, there are savings from putting pressure on suppliers of drilling rigs, hydraulic fracturing and other services. Companies have generally been saying they expect reductions of 20 to 30 per cent this year.Second, companies benefit from focusing spending on their most productive assets. “You’re dropping all your worst-performing rigs and worst-performing rig crews and moving the rigs you have to your core areas,” says Randall Collum of Genscape, an energy research firm…Finally, there are productivity gains available from improved techniques.

In other words rather than acting as an Oligarchy that commands & expects to be obeyed would, they make themselves leaner, meaner and smarter to make their rigs profitable even at $65 a barrel.

That is America, that is western civilization it adapts, it innovates, instead of folding.

There is a difference between a culture that simply soaks money from hole in the ground for personal comfort and one made of free men that rewards competition.  That is why America is where the best and brightest go.

That is also why the Obama administration is so dangerous & must be stopped, they would convert us from a culture of doers to a culture of beggars.


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Depending on the estimate, Venezuela needs to sell its oil between $150-$200/barrel. Estimate, because

The precise figure is difficult to determine, because Venezuela doesn’t disclose as much economic data as other countries do.

To say “Venezuela doesn’t disclose as much economic data as other countries do” is an understatement; Venezuela has not submitted economic data to the IMF for over 10 years.

What can be ascertained is that the Venezuelan economy is nealy entirely dependent on oil exports. In 1999, oil accounted for 80% of all exports. Back then the Annual Average Domestic Crude Oil Price (AADCOP) was $16.56. By last year, the number had risen to 95% at an AADCOP of $91.17.

Today’s opening oil price was $66.88. Venezuela’s oil, heavy and of poor quality, trades for much less. Some estimate (again!) that Venezuela gets as little as $24/barrel at this point,

As of yesterday, I discovered that Venezuela is selling its crude oil for $24 per barrel and struggling to deliver with it dilapidated production, processing, pipeline and terminal facilities. No one is interested in any contracts except at such a low price due inability to deliver.

What does that have to do with the U.S., you may ask?

For one,

While U.S. imports of primarily crude oil from Venezuela have been on the decline, U.S. exports of petroleum products to Venezuela have increased largely because of Venezuela’s tight finances that leave it unable to invest and maintain its own domestic refineries. A decade ago, the United States exported 7,000 barrels per day to Venezuela. In 2013, the United States sent Venezuela 84,000 barrels per day of petroleum products, primarily methyl tertiary butyl ether (MTBE), intended for blending in gasoline, motor gasoline, and distillate fuel oil.

Additionally, even when the Obama administration declared the Monroe Doctrine dead, the hemisphere’s politics and economies affect the U.S. – just look at the illegal immigration flood from countries with ruinous policies.

Venezuela, however, is not only a country with ruinous policies; it’s a country ruled by an elite intimately connected and committed to spreading a Marxist revolution which it funds through oil proceeds, and is now propping the Communist regime in Cuba to the tune of 100,000 barrels of oil per day. It also sends oil to a dozen countries in the Caribbean and Latin America at a discounted price, plus it essentially gives Venezuelan drivers free gasoline at a nominal 5 cents/gallon.

So, of course Venezuela is in a bind. So much so, it apparently sold Goldman Sachs the debt that the Dominican Republic has with Venezuela in what may be “the new normal” for old shell games, since it’s possible that the DR may be the end buyer. Jamaica is looking at a similar deal.

Yesterday Venezuelan dictator Maduro

authorized a 20% cut in government spending and plans to modify the country’s complicated foreign-exchange system, opening the door to a possible devaluation.

Clearly, the country’s economy is collapsing as the oil prices drop, and Cuba, dependent on Venezuela, will follow.

Looking at Cuba, will this lead to another Mariel exodus? Would Obama use this as a pretext to end the embargo with Cuba?

Looking at Venezuela, would the ruling elite and the military attempt to remain in power by relying more heavily on the drug trade? Would rioting and looting lead to further oppression? Since Iran and Russia are in the same oil boat, what role will China play? Giving the Chinese an oil field seems out of the question – for now

The next option, which is where Venezuelans think there is some value, is that The Government will simply give the Chinese an oil field in exchange for money. This, in fact, has been tried before, except that Chávez, in his minimal wisdom, created new laws that restrict the control of the foreign partners over the joint ventures. Thus, PDVSA has to contribute part of the money to the JV’s, unless the partner lends the money to PDVSA. Except that the Chinese have not been very amenable to this. They want “joint” to mean joint, not I put up all the money and you control. Some companies have accepted this, but not the Chinese, who, in fact did not participate in one of the Carabobo oil fields, precisely because they were told they had to put up all the money

On the bright side, the changing economic landscape may bring Japan, which

is looking to Latin America as a potential source of energy and other natural resources, and it is eager to import liquified natural gas from the U.S. via an expanded Panama Canal.

Will any of this bring opportunities for democracy and trade in the hemisphere? More importantly, is the U.S. government prepared to recognize them?

Times like this require strong leadership in foreign policy, which is exactly what the U.S. lacks now.

Fausta Rodriguez Wertz writes on U.S. and Latin American news, politics and culture at Fausta’s Blog.

In the first volume of his still incomplete Magnum Opus on Lyndon Johnson The Path to Power on page 735 Robert Caro notes the election day theft of a US Senate Special election that LBJ thought he already had won was to a degree incidental, having little to do with Johnson or the US senate and having everything to do with an upcoming appointment to the Texas Liquor Control Board to be filled by his primary opponent Prohibitionist Governor Pappy O’Daniel:

Ten days before the election, however, O’Daniel had succeeded in pushing through his fifth nominee, another Prohibitionist.  A second vacancy on the board would occur shortly , and if O’Daniel succeeded in filling that, too, with another Prohibitionist, the Board “could just about have ended the liquor and beer business down here.”  Equally important, O’Daniel’s victory reminded Beer, Inc., that a powerful Governor might succeed in winning passage of the bill creating a “dry zone” around military camps.  “There were millions and millions of dollars involved now, ” Lawson says.  “They had to get him out of the Governorship.”

Beer Inc saw a chance to protect their business and jumped at it and Pappy O’Daniel was happy to let them do it for his own purposes.

Right now something similar is happening but the potential beneficiaries of it hasn’t quite figured it out.

Yesterday I wrote that Saudi Arabia was in a Catch-22, the high oil prices that they craved for years not only enabled their foes but created vast markets for alternative oil production that put their oil monopoly, the very source of their power and relevance in jeopardy.

Thus the Saudi’s are pumping up a storm and the price of oil is dropping to levels that we haven’t seen in years.

That puts money in the pocket of every American who owns a car and every american who doesn’t.  Almost every single thing that is delivered in the US comes by truck so the cost of freight goes down.  Most plastic comes from oil so every manufacturer using plastic for their product or their packaging will see a price cut too.

With an administration looking incompetent on Ebola,  at total failure in Iraq & Syria, and dealing with an electorate where they are so unpopular that Obama Delegates won’t admit voting for him they need something ANYTHING to change the subject.

If I was the head of the Democrat party I’d be ready to start a media blitz the moment gas prices go below $3 a gallon,  extolling the virtues of the polices that both reduced Gas prices and while giving us a production reserve ready to go if things go wrong.

Now it’s true that this administration did all it could to stop domestic production and even now their allies are striving to checkmate ever possibility of additional drilling and fracking nationwide.  Furthermore such a public move risks upsetting the environmentalist types who are part of the Democrat base.

But desperate times call for desperate measures.  The Saudi’s for their own reasons have thrown him a lifeline and Obama has to grab it.  After all the low info voter who took him across the finish line in 2012 are unlikely to catch onto a lie taking credit for this price drop,  at least not before election day and the media certainly isn’t going to clue them in.  Furthermore with all the bad news going out day by day a shot of good news that the administration can point to at the very last moment could be game changing.

This might be enough to save the Senate for him,  Why it might even be enough to cause Ms. Grimes to admit to voting for him and make Senator Shaheen willing to be seen with him in New Hampshire!

Well maybe just save the senate, after all there’s a big difference between a longshot and a miracle.

Right now Oil prices are dropping faster than we’ve seen them drop in years.

Oil prices sank again on Monday, giving consumers more of a break and causing a split among OPEC leaders about what action should be taken, if any, to halt the slide.

The price drop has led to a near free fall in gasoline prices in the United States. On Monday, the national average price for regular gasoline was $3.20, 9 cents lower than it was a week ago and 14 cents below the price a year ago, according to the AAA motor club.

This would seem counter intuitive.  Winter is coming for Europe & North America.  ISIS is running amok in the middle east, Iran is still developing their bomb (large explosions not withstanding) and Eastern Europe is still wondering what Putin’s next move is going to be given that situation one would expect the prices of oil to go through the roof.

Except there is a wild card and that card is Saudi Arabia.

Saudi Arabia cut its flagship Arab light selling price by $1 a barrel, versus October’s discount of $1.05 a barrel to the Oman/Dubai average price. Traders expected a cut of about 70 cents, according to Reuters. The Saudis also cut prices to the U.S. and Europe by 40 cents a barrel.

McGillian said Saudi now lowered its selling price below the Oman and Qatar prices.

Why on earth would the Saudis be cutting prices rather than production?  Why aren’t they fighting to get oil prices back up again?

Because they have no choice.

The reality of Saudi Arabia is pretty simple, all their power all their influence comes not only from their oil wealth but from the power to affect oil supplies internationally as soon as that lever disappears their ability to protect what is basically a family kleptocracy disappears.

But the shale oil and oil sands business have thrown things for a loop.

Thanks to increased oil prices oil sources that were once cost prohibitive, suddenly weren’t.  Now it was cost-effective to build the infrastructure necessary to harvest the oil sands of Canada and oil via fracking and as the infrastructure.  Meanwhile the experience as these projects got rolling,  combined with the same western ingenuity that allowed the Saudi’s to develop the fortune underneath their feet caused technological improvements further bringing down the cost of producing that barrel of oil hitherto left untouched.

As Al put it:

Though the Saudi move may seem puzzling in market terms, it becomes less complicated when analyzed within the world of geopolitics which is plagued by competition over strategic markets and where oil is used as political leverage.

Saudi Arabia is threatened physically from Iran to the east, moreover they are threatened economically from a US exports to their customers.

For Saudi Arabia, this may be the right time to increase its market share by lowering oil prices, which would also put pressure on both Iran and the United States.

If prices drop Iran is put on the defensive as they have to satisfy an unhappy population while still supporting their client state in Syria and holding off ISIS gains which could create a rival in the world of Islamic fundamentalism.

Meanwhile on the other end if the price of oil drops far enough the US production from non-traditional sources suddenly is no longer cost-effective:

Even the more expensive drilling operations are still profitable when oil sells for $85 a barrel, and oil closed just below $86 on Monday. In general, oil companies would have to expect oil prices to stay below $80 a barrel for many months to scale back their drilling plans.

What’s even more critical for the Saudi’s is to keep new sources offline.   In areas where fracking etc is already established the primary cost creating the infrastructure to produce and supply the oil is in place so they can handle a price drop better but in spots where development hasn’t begun their only hope to keep them in check is a price that stops those folk in their tracks!

It’s a catch 22.  High oil prices enable all those who are a physical threat to them and create new financial threats while low oil prices while dropping their bottom line preserves their ability to be the boss on the world’s energy stage, a state to be feared, respected and protected.

Thus the Saudi’s are forced to take steps that Hurt Iran, put Putin in check, wreak havoc with Venezuela and cause China to rethink their investment and development of oil allies around the world, while at the same time providing relief to American consumers and drivers.

Check and mate, we’ll see.


Autumn pipes
Next stop Atlantic Ocean?

By John Ruberry

President Obama may soon find out what how it feels to be un-upped by Canada in a hockey-style shootout.

Since his inauguration nearly six years ago, Obama has been dragging his feet in regards to approving the Keystone XL pipeline. The proposed pipeline will bring much-needed petroleum from our friends in Alberta in Canada to the United States, which will lessen our need to import oil from hostile regimes such as Venezuela and Saudi Arabia. I can’t imagine America buying oil from the Islamic State, but more oil on the market means cheaper prices, which will of course harm ISIS and bolster our national security.

The northern segment of Keystone will pass through the Dakotas and Nebraska. There is a smattering of local opposition in the Cornhusker State and some legal obstacles, but let’s be clear: Obama, the man who bragged earlier this year that he doesn’t need Congress to make things happen because, “I’ve got a pen and I’ve got a phone,” would have found a way to break ground for Keystone XL by now if that’s what he wanted.

But Obama is of course more concerned about the needs of his wealthy environmentalist donors, who either believe that the era of fossil fuels is over or that the use of this Canadian oil will contribute to global warming. Obama, who once promised to heal the planet, is on the verge of being outmaneuvered.

TransCanada Corp., the mover behind Keystone, is strongly considering an-all Canada pipeline for the Alberta petroleum, Energy East, the terminus of which will be at St. John, New Brunswick on the Atlantic Ocean. The oil can be shipped from there to America or to western Europe, which will be welcomed with open spigots by countries fed up with buying petroleum from Vladimir Putin’s Russia.Canada

Bloomberg News is reporting that the supporters of Energy East are very confident that it will be built. A proposed western Canadian pipeline could still be constructed, although that route faces opposition from some Canadian First Nations people.

But if Keystone is built, it will mean up to 40,000, good paying–and are you reading this Obama?–union jobs. If the new pipeline from Alberta never crosses American soil, those jobs will taken by Canadians. Meanwhile, we have to go back to the sad Jimmy Carter years to find a time where the American labor participation rate has been lower than it is now.

I can imagine Obama looking north soon, as Jay Gatsby did from West Egg at the green light at the end of Tom and Daisy Buchanan’s pier, at those thousands of new jobs north of the border.

The last words are for the environmentalists: Despite your numerous protests and your arm-twisting of Obama, that oil is going to be pumped from the sands of Alberta whether you like it or not. Your Canadian War is over.

You lost.

John Ruberry regularly blogs at Marathon Pundit.

by Fausta Rodríguez Wertz

Yesterday U.S. District Judge Lewis Kaplan

found that New York lawyer Steven Donziger and his litigation team engaged in coercion, bribery, money laundering and other misconduct aimed at securing a 2011 verdict against the company in Ecuador.

The judge concluded that Mr. Donziger and his team fabricated evidence, promised $500,000 to an Ecuadorean judge to rule in their favor, ghostwrote much of the final verdict in the case and took other actions that “perverted” the course of justice.

In the 2011 lawsuit, Chevron accused Donziger and Ecuadorian plaintiffs of fraud and racketeering in the 2003 Lago Agrio trial that resulted in a US$19billion verdict against Chevron, which had never operated in Ecuador but had inherited an environmental clean-up case when Chevron acquired Texaco in 2001. (The Wall Street Journal has a timeline, and you can read the 500-page Kaplan ruling here.)

Last November Ecuador reduced the $19 billion to $9 billion.

The Aguarico-4 site became a favorite cause among celebrities like Sting, Danny Glover, Cher, Daryl Hannah and Mia Farrow (who on January 27 tweeted that she was “in Equador to check out the toxic #mess left by Texaco-#Chevron” but appears to have deleted that tweet and turned her attention to other matters). These same celebrities have nothing to say about tribal warfare in the Amazon killing hundreds of people, the government’s war against freedom expression, and China’s control of Ecuador’s oil.

The government of Ecuador gives tours to the site, which is actually owned by its own oil company, Petroecuador.

Chevron is right to continue to fight the (now) $9 billion judgement.

I expect that Donziger will appeal: Jack Fowler reported in late January that

Donziger has cobbled a fourth legal defense team, led by Deepak Gupta, who will be assisted by University of Denver Law School professors Justin Marceau and John Campbell.

Judge Kaplan probably expects him to, also, considering his 500-page decision plus 89-page appendix.

Judge Kaplan points out that Donziger is a master at public relations, and Donziger’s strategy of a media campaign “shifting the focus from the fraud on Chevron and the Lago Agrio court to the environmental harm that Donziger [and the plaintiffs] claim was done” will most likely continue.

Over in US, however, the Chevron Case Helped Wreck a Big Law Merger between Patton Boggs of Washington, DC, and Locke Lord of Texas,

Chevron has filed a counterclaim against Patton Boggs in the case, and two sources familiar with the matter told The Am Law Daily that the firm’s potential liabilities on that front contributed to Locke Lord’s decision to call off merger talks.

Last month Locke Lord managing partner Jerry Clements told The Am Law Daily that the potential liabilities and “reputational aspects” of the Chevron matter were a key part of her firm’s due diligence efforts in evaluating a merger with Patton Boggs.

“Reputational aspects” indeed.

Fausta Rodríguez Wertz writes on Latin American and US politics and culture at Fausta’s Blog. You can read her posts on the Chevron case here.


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And now Dueling Joe Kennedys:

Joe Kennedy of Joe for oil fame:

“No one should be left out in the cold”

Joe Kennedy Running in the 4th district

“The cycle that allows cheap oil to trump tough choices has to stop”

News Center 5 on Joe Kennedy providing low cost oil last winter

“Last year 180,000 sought fuel assistance This year 260,00 people need help”

Joe Kennedy running for the seat vacated by Barney Frank this year:

“The cycle that allows cheap oil to trump tough choices has to stop”

People needing help from Joe Kennedy providing cheap or free oil

“The thermostat is set to 62 degrees and the oil money is slim”

Joe Kennedy for congress 2012

“The cycle that allows cheap oil to trump tough choices has to stop”

Joe Kennedy the elder thinks that prices are so high people with incomes up to 200% over the poverty level need help to stay warm, even if that help comes from Hugo Chavez.

Joe Kennedy the younger running for congress thinks a cycles that allows oil cheap enough for people in need to pay is not good for Massachusetts.

He can make try to make that case to the people of the 4th district paying nearly $4 a gallon for gas when at the end of the Bush years they were paying under $2.

He can make that case to the people of the 4th district who will shortly be seeing oil pre-buys costing $4000 or more this fall

And he can make that case to the people in the fourth district who will be forced to go to Joe Kennedy the elder for the oil to keep warm this winter that they can no longer afford to buy.

I have a strange feeling they just might disagree.

Cue the Banjos…

Update: The timing of this video is perfect:

An Exxon-Mobil pipeline in Montana (just outside of Billings, near the Yellowstone River) ruptured yesterday. (NY Times story here.)  Crude oil spilled throughout the river and the land.  One hundred forty people in Laurel, Montana were evacuated; the oil poses a fire hazard.  Other pipelines to Billings were shut down.

First things: I’ve been to that area of Montana and have a soft spot in my heart for it.   I’m trying to picture it covered in crude oil, and it’s… tough.  Second thing: a burst pipeline is an entirely different matter than an exploding well.

That said, this is one of the many reasons why the “environmental” opposition to drilling in ANWR, or near the coast, is so backwards.  By all accounts, Exxon-Mobil was able to contain the spill, shut down the pipeline, and is working to ameliorate the environmental effects.  The damaged pipe is hardly the Deepwaater Horizon oil well: the pipe was shut down in a half-hour, because it was buried all of six feet underground, not six thousand feet under water.  Likewise, even the flooded Yellowstone River is not the Gulf of Mexico; this isn’t going to create an oil slick the size of the state of Delaware or Ohio.  While oil spills always wreck havoc on the environment, they are much easier to shut down, contain, and clean up when on land.  Policies which discourage everything but far-offshore drilling are counterproductive, unless we magically will oil spills, equipment failures, and natural disasters away.

Further, to the extent that “environmental” concerns have discouraged companies from replacing aging infrastructure with new, more environmentally-safe pipes, wells, and nuclear reactors, they do us a disservice.  Now, I can’t find out how old that Exxon-Mobil pipe is – it could be brand-new – but it is likely aging and not being replaced because the onerous regulations create strong disincentives for companies to upgrade.  (We have this problem in America with nuclear reactors that simply cannot be replaced with brand-new structures, so old plants are being permitted and used far beyond their natural lives.)

This is an asinine decision:

The Obama administration will release 30 million barrels of oil from the Strategic Petroleum Reserve in an effort to offset oil supply disruptions in the Middle East, the Energy Department announced Thursday morning.

It’s the strategic equivalent of grinding the seed corn. I didn’t like this talk during the Bush years and I really don’t like this action now. This reserve exists for a time of national emergency, not to prop up re-elect numbers.

Don’t think for a second that it won’t happen again before election day. Anyone who has ever raided their cash reserves knows it’s much easier to justify it the 2nd time around.

Oh and just a reminder to all of those on the left who will dub this move “necessary”. A decade ago you cried out: ” Drilling in ANWAR won’t produce oil for 10 years.” Take a bow idiots, thanks to your short short-sightedness we’ll have this much less when we actually need it.

Jan 20, 2013 can’t come fast enough for me.

Update: What a coincidence

Update 2: Hotair also notes the game being played here:

Oh, yes. We’re doing this in response to an emergency all right. The emergency is that the president’s poll numbers are tanking and angry voters don’t want to continue to lay out 1/4 of their pay check at the pumps. But rather than actually do something to speed up domestic production and make us more energy independent, let’s just flush away some of the reserve we might really need if the you-know-what seriously hits the fan overseas in the next 12 months. Simply fabulous.

Update 3: Joy at the Conservatory notes some figures

This country uses up 30 million barrels of oil in around 36 hours, and that 60 million barrel figure?–the world consumes that in a single day. So, we’re making a dicey move here for no real gain.

There is a gain, a poll gain, at least that’s the plan.

can be:

In the Atlanta area, where I am, gas prices are up $0.77 from where they were a year ago. It is worth noting that Democrats have been politicizing and blocking expanded oil drilling for quite some time. Consider this:

“Critics (of Arctic drilling), including Sen. John F. Kerry, D-Mass., say the drilling plan would violate the nation’s last remaining pristine wilderness. Moreover, they charge, the oil would consist of a 6-month supply for the nation, and would not be ready for use by consumers for up to 10 years.”

That newspaper article was written April 2, 2001. For those of you in Rio Linda, that would be ten years ago.

To those of you who are paying between $3.50 and $5 a gallon this morning for gas do ya think that oil those fields would have produced not to mention the well-paying US jobs that come with it would be kinda handy right now?