‘If Russia and Saudi Arabia lead, rest will follow’…

american-oil-producers-must-collaborate-if-oil-prices-are-to-reboundor so says the Saudi energy minister on this historic oil deal. Well, maybe they will. But what if North America doesn’t follow?

Let’s see, he’s talking about

On Saturday, twelve non-OPEC countries, including Azerbaijan, Oman, Mexico, Sudan, South Sudan, Bahrain, Malaysia, Equatorial Guinea, Bolivia, Kazakhstan and Russia, agreed to cut oil production by 558,000 barrels per day (b/d) under the deal with the OPEC members.

OPEC members also confirmed their commitment to the plan to reduce the oil supply by 1.2 million b/d. This, together with the commitments made by non-OPEC states, would lead to the total reduction of oil production by about 1.7-1.8 million b/d, Russian Energy Minister Aleksandr Novak said at the press conference.

They tried this before, of course. The most famous one was in 1973 when they thought they could scare the United States into abandoning Israel. That part didn’t work, but it did rather mess us up, not least as the defense department discovered it had between one day and two weeks of reserves. That’s why, ever since, defense has been burning other people’s oil, mostly. But you know 2017 is not 1973. Here’s some more

He then said that he “does not expect the US government to react to this in any way” to the Saturday deal as it has “not reacted in the past and let the market respond.”

via ‘If Russia & Saudi Arabia lead, rest will follow’: Saudi energy minister on historic oil deal |

He’s probably right about that, one hopes so. Still, I do expect President Trump to open up a bunch of federal land for exploration and/or drilling. That means there are two rather large gorillas in the room here. A lot of American wells are mothballed because their cost of production is not quite profitable, right now. By the way, when I looked last night Crude closed at $51.50 a barrel. Here’s the chart from infomine

American companies, as a rule, don’t do things that don’t make a profit, and they don’t think they will at these prices. Fair enough, I’m sure they know their cost of production and shipping quite well. Bring the price a bit higher, and a bunch of Americans will go back to work.

The other gorilla? Canada is the same story, maybe more so, extracting all that oil in the tar sands is not all that cheap, and unless the pipelines get built which is increasingly likely, they’re a long way from their markets. That too is likely to change with the administration in Washington. So, a lot of North Americans may well be going back to good paying jobs, our balance of payments may well improve, and if we do this right, we can continue to take money out of Saudia Arabia, Russia, Iran, and other not so friendly nations.

Sounds pretty good to me, and you know, if I and my friends are making more money, I could probably afford another 25 or 50¢ a gallon for fuel. And if we get it rolling, we will be.

It’s also a textbook example of why monopolies don’t work

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About NEO
Lineman, Electrician, Industrial Control technician, Staking Engineer, Inspector, Quality Assurance Manager, Chief Operations Officer

7 Responses to ‘If Russia and Saudi Arabia lead, rest will follow’…

  1. the unit says:

    I was going to comment with the following.
    Thought better of it. Then said oh, what the heck…
    …No, bowing down isn’t a reaction. It’s a given. That’s “who we are” last 8 years.
    After all Rummy’s gone. No shock and awe reaction forthcoming he can be sure.
    I know. We can draw a line…that we won’t cross. That’ll teach’em.

    Seriously though I’m with you as you said agreeing with let the market determine outcome. So with my little bit of driving now it’ll costs me a quarter or so more to drive to the P.O., grocery, or pharmacy, all close by. Maybe increased profit will allow frackers to frack, regular drillers to drill, and Saudi and Russia can have salt and pepper on their oil.

    Liked by 1 person

    • NEO says:

      That’s pretty much my thought. We survived (barely) paying nearly $5/gal., if 2.50 or even three will set off boom times again (all through the economy) well, it would be worth it. If we can break Russia (again) and Saudi too, so much the better.

      Liked by 1 person

      • the unit says:

        Heck, I’ll be nice they can have sugar on it too. 🙂

        Liked by 1 person

        • NEO says:

          Indeed, why not? Love that movie, the very first one I saw in a theater, shortly followed by “The Sound of Music”. Doesn’t get much better than Julie Andrews, as far as I’m concerned.

          Liked by 1 person

        • the unit says:

          Yeah. How can you lose when you’re “Downtown.” 🙂

          Like

        • the unit says:

          I remember how you like Petula Clark too.

          Liked by 1 person

        • NEO says:

          Indeed. There is nothing, but nothing, better than a ginger Brit, I don’t even miss my soul! 🙂

          Liked by 1 person

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