Monday, May 15, 2017

Aw, that's a shame

OPEC has issues, and Walter Russell Mead and friends have noticed:
The oil cartel roped eleven other petrostates into an agreement to curtail production in 2017 and are currently working on extending that deal, but the output cut’s ultimate goal of eating away at the oil market’s glut of crude is being undermined by the actions of suppliers outside of OPEC—U.S. shale producers chief among them. Now, OPEC is revising upwards its estimates of how quickly supplies will grow outside of its membership this year by a whopping 64 percent. 
Why is this happening? Primarily because of the frackers:
By cutting costs and boosting efficiencies, U.S. shale has made itself capable of profitably producing $50 per barrel oil.
The only way cutting production makes sense for OPEC is if they can subsequently get $75 per barrel, or thereabouts, to make up for the lost amount of production. And meanwhile frackers are gearing up elsewhere:
Vaca Muerta, which is Spanish for Dead Cow, is a shale gas and oil formation the size of Belgium in the heart of the region of Patagonia and is essential to Argentina being able to become self sufficient in energy.

President Mauricio Macri hopes a pact he has negotiated with unions and provincial authorities will jumpstart investor interest in developing the field.
Argentina won't be in the game for a while yet, because labor and transportation costs are still obstacles to profitability, but it will be in the game eventually. The price of a barrel of oil was $115 as recently as 2014. It's been less than half that price for a long time now:

Frack you
OPEC cut production last year and while prices rose for a time, they have been essentially stable for over a year. I have paid as much as $4/gallon for gas around this time of year in the past; I have not paid more than $2.50 in a long time, except in places like Chicago where they tax the crap out of gasoline (and everything else). While we worry about bread and circuses in Washington, we don't have to cringe every time we approach a gas pump. I'm grateful for that.


R.A. Crankbait said...

I was thinking a little along these lines this weekend. We burned about three-quarters of tank of gas over the weekend taking some foreign guests around the Twin Cities and down to Red Wing - and scarcely gave it a thought other than to check the gauge from time to time. I was thinking that $2.25/gal seemed pretty obscene when I remembered working at a gas station and pumping it at .34/gallon (back when gas stations also paid people to pump your gas for you), but $2.25 today feels a lot better than $4!

Mr. D said...

If you consider inflation, the gas price is maybe a little more than it was in 1973, but better than it was in 1974 (when OPEC started the first oil crisis). It went from the equivalent of about $1.93 to about $2.53. We are planning another long trip in the summer for more college visits and we expect the costs to be quite reasonable.

Bike Bubba said...

Get the petroleum price low enough, and those countries might have to do the hard work of developing a real economy. God only knows what they'll go through on the way, though.

One thought on the situation in 1973 is that most cars got far lower mileage than even my family's family haulers today, so that hit them harder for the most part.

R.A. Crankbait said...

Good point, Bubba. My '64 Galaxie with a 289 cubic inch V8 got 16 mpg with a tail-wind. Today my 4-door sedan has a 3.6 litre V6 (and just try to give engine measurements in litres back in the day) with plenty of power and gets 28 mpg.

Plus, cup-holders.

Bike Bubba said...

Second point; imagine how much lower prices could be if the left hadn't stonewalled drilling off the coast of California, off the coast of Florida, in ANWR, hadn't stonewalled many Islamic attacks would never have been funded, how much military spending we wouldn't have had to do.....this stuff matters.

Gino said...

My 75 Cordoba was only getting 4Mpg (6 hwy). 400 cid.

They wouldn't let you make a car like today... But damn I loved that thing.

R.A. Crankbait said...

I knew Gino would have been a sucker for that fine Corinthian leather.

Bike Bubba said...

Never had "fine Corinthian leather", but I do miss some of the interior styling of some of those older cars. No dual sourcing of the interior with Fisher-Price back then.

Don't miss the mileage, safety, or exterior styling, though. The 1950s were great, but not much good between then and the 1990s, IMO.