Oil Without Saudi
Thursday October 18, 2018
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- What if the United States places sanctions on Saudi Arabia for the brutal killing of Washington Post columnist, Jamal Khashoggi? The Saudis sort of whispered that they could force oil prices back up over $100 per barrel; maybe as high as $200/bbl.
- A little over 10 years ago, July 2008, oilman T. Boone Pickens launched "The Pickens Plan."
- In September 2008, I was hired to be the chief writer.
- The plan was based on reducing America's reliance on Middle Eastern oil generally, and Saudi oil in particular. Which Boone called the "the greatest transfer of wealth in the history of mankind."
- The highest monthly price of imported oil over the past 300 million-or-so years was in May of 2008 when it hit $148 per barrel. Yesterday's mid-afternoon price was about $70/bbl.
- Canada, by the way, is our largest trading partner in many items including oil. In July 2008 we imported about 3.6 million barrels of oil per day from Canada. For comparison, we imported 876,000 barrels from Saudi Arabia - which represented about 10 percent of our imports.
- As an extra bonus data point for a bar bet, Mexico represents our third largest source of imported oil. In that same month they shipped 661,000 barrels to the U.S.
- We use about 20 million barrels of oil a day, mostly as fuel for rolling stock, heating, and as jet fuel. We use very little for the production of electricity. We are not yet "energy independent."
- The rest of the world, according to the International Energy Administration, uses about 78 million barrels per day.
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- According to an article by Samantha Gross published this past January by the Brookings Institution, we could replace Saudi oil. We already produce more oil - due to modern drilling techniques - than Saudi Arabia and more than any country except Russia.
"The shale oil that dominates U.S. production growth delivers oil faster with much lower up-front costs than traditional oil and gas. This allows U.S. production to be very responsive to price swings like the one that OPEC has created in the last year.
"This responsive U.S. production is rapidly counteracting the OPEC production cut. In fact, the IEA forecasts that increasing U.S. oil production alone will nearly make up for the OPEC cut by the end of 2018."
- If the Saudis further reduce their production to raise prices, the Russians (who have almost no other source of income) would turn its oil wells up to 11 to take advantage. So would the Americans. The Saudis also have an economy almost totally dependent on oil, so they need to pay all the government's bills from one source: Oil exports.
- In addition to the oil trapped in shale and in traditional pockets, there are some 657 million barrels stored in the Strategic Petroleum Reserve. According to the U.S. Department of Energy that represents some 143 days - a little less than five months - of replacing oil imports.
- As Boone Pickens has suggested many times, the average price of oil in the SPR is $29.70. If we began selling that off at today's $70/bbl price, it would show a profit of $40.30 per barrel or $26.5 billion.
- Hello, Trump-Kushner Oil Corporation.
- So, let the Saudis rattle their Scimitars. We've got this covered.
- On the Secret Decoder Ring today: Links to the Brookings article, to a FAQ page about the Strategic Petroleum Reserve, to The Pickens Plan, and to the Wikipedia page on the Scimitar.
The Mullfoto is an interesting shot of a flag reflected in an office building window.
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