We’ve heard TheDonald claim that it’s Saudi Arabia that is keeping oil prices down. Except, it’s the good old USA that’s performing that task.
We are the largest single producer of oil in the world. Thanks to fracking. That’s why prices of oil dropped a few years ago- and while they’ve climbed up a little, they are still WAY below where they were before fracking hit the big time.
(Fracking and tar sands are not new sources of fuel. They were around when I went to grad school. [I actually worked on a project to harvest Athabascan Tar Sands during my first grad school year.] It’s just that they couldn’t yield a reasonable financial return until the price of oil skyrocketed. Once that happened, the capital costs could be recovered quickly, leaving the operational costs in a very profitable position.)
The price of oil- around $ 60 a barrel was creating all sorts of problems for countries around the world. When I first wrote about this (in 2014), most of the world was hurting when the price of oil dropped precipitously (from about $ 140 to about $ 60 a barrel). So, many countries tried to find ways to become profitable closer to the new oil price levels. (The graph above is from the 2014 post.)
So, it shouldn’t surprise you that OPEC (15 nations, including most of the bigger Arab producers) and Russia and its minions (10 FSU- former Soviet Union entities) are meeting on 6 (and 7) December to determine how much oil they plan to pump out next year. (Hmm. I wonder if they will hold the feet of Russia and Saudi Arabia to the fire- they’ve been exceeding their promised production levels by some 1 million barrels a day for a while. Officially, they’ve been doing so to keep Iran from being able to sell its oil.)
Russia has found a way to cut its costs of production by more than half over the past few years, dropping from $ 122 to $ 53 a barrel. (Yet, Russia does claim it needs $ 60/bbl pricing- so there may be a little fudging of their numbers.)
And, since Texas crude’s price is around $ 55 a barrel, there’s a bunch of US producers that are hurting right now, too. We can expect Bakken (North Dakota) and Permian Basin (Texas, New Mexico) frackers to begin cutting back production, should the price not rise.
The oil ministers might really want to push the oil price to around $ 80 a barrel (hello, Saudi Arabia- it needs $ 88 a barrel to break even), but will settle for the $ 70 to $ 80 range, both because of current economic situations and to avoid a battle with TheDonald. There’s that fine line, too- when folks might consider natural gas if the oil gets too high.
Stay tuned.
I don’t really know a huge deal about this, though being that oil is such a huge industry that effects every country in the world it probably should be something I start learning more about. I know that we in Australia source the majority of our oil from the Middle East – I’m interested to research more about the natural gas option you mentioned, it’d be great if there was something that became a mainstream alternative to the world’s dependence on oil. Will have to research more on it so I have a more sound understanding 🙂
Actually, Megan, we need oil/gas for motive power. Everything else should involve things like solar, wind, wave, etc. Because they can fuel our power plants. Unless and until we perfect the motive power for vehicles, we need to rely on easily transportable fuel.