The Triumph of American Oil

If you remember the cold war, America won it when we buckled down, built up the military threatening the Soviets when technological change they couldn’t deal with, and simply outproducing them into bankruptcy and defeat. It was even good for our economy.

In spite of the last administration, we’ve done it again. We have routed OPEC, the middle east, with the exception of Israel, is beginning to recede into the medieval meaninglessness that it had until the Great War. How did we do this? The Spectator knows.

[T]here are a couple of articles, one at the New York Times and the other at Reuters, which are required reading for anyone who isn’t aware of perhaps the greatest American economic victory in recent times.

There was a War for Oil, for the benefit of our friends who remember fondly the protests from the previous decade, and we won — without firing a shot.

We’ll borrow a bit from the Times to offer the gist

A substantial rise in oil prices in recent months has led to a resurgence in American oil production, enabling the country to challenge the dominance of Saudi Arabia and dampen price pressures at the pump.

The success has come in the face of efforts by Saudi Arabia and its oil allies to undercut the shale drilling spree in the United States. Those strategies backfired and ultimately ended up benefiting the oil industry.

Overcoming three years of slumping prices proved the resiliency of the shale boom. Energy companies and their financial backers were able to weather market turmoil — and the maneuvers of the global oil cartel — by adjusting exploration and extraction techniques.

After a painful shakeout in the industry that included scores of bankruptcies and a significant loss of jobs, a steadier shale-drilling industry is arising, anchored by better-financed companies.

With the price of West Texas intermediate crude above $65 a barrel, a level not seen in almost three years, the United States is becoming a dominant producer. It is able to outflank competitors in supplying growing global markets, particularly China and India, while slashing imports from the Middle East and North Africa.

A few years ago, the U.S. oil patch came under attack by OPEC, the international cartel of state-owned Third World oil companies from places like Saudi Arabia, Iran, Venezuela, Iraq, Nigeria, and several others. OPEC decided to ramp up production despite a relatively soft global demand in an attempt to drive the myriad of independent companies which make up a huge chunk of the American shale production sector out of business.

It was a war. There isn’t really a better way to describe it. And there were casualties. Lots of them. Tens of thousands of Americans lost their jobs, and a large number of those independent oil producers got introduced to the bankruptcy laws.

And unlike those cartel companies run by flunkies of the local potentate, the U.S. oil industry couldn’t run to the government for sovereign wealth fund investment or some other bailout. Instead, they had to find a way to survive.

They did. U.S. shale won the great global oil price war, because eventually the Saudis and the others couldn’t afford to lose money on oil they were dumping at garage sale prices when selling that oil was the major means of funding their welfare states.

Production went down. Prices went up — a little. But the old dynamic, in which OPEC could set its own prices by a vote of the oil ministers, was broken. Back to the Times

“OPEC missed the point,” said René Ortiz, a former OPEC secretary general and former Ecuadorean energy minister. “They thought they could recover the U.S. market by bringing the prices down. Now the U.S. has gained the leading position in the world oil market regardless of what OPEC does.”

“This displacement of Saudi oil, Nigerian oil, Libyan oil and Venezuelan oil,” Mr. Ortiz concluded, “was never anticipated.”

A week ago, OPEC leaders met in Oman to discuss a probable extension of production cuts into 2019 to support prices. Their biggest obstacle is the United States.

Shale plays are much different animals to the gigantic prospects which used to dominate the exploration of oil. A relatively small, independent oil company can drill and produce using modern hydraulic fracturing methods in a short period of time and for a lot less initial investment than in the old days. What that means is when the price of oil ticks up, the shale players in places like the Eagle Ford, Permian Basin or Bakken fields can execute very quickly to get production on line. So while the old dynamic used hold that OPEC would turn their spigot on and off at will, this time turning the spigot off ultimately resulted in losing market share to American oil.

This year it’s projected the United States will produce more oil than ever. We’re likely, by the year’s end, to be churning out more than 10 million barrels a day (the Energy Department thinks it’ll be as much as 11 million barrels a day) — which could put us in a position to surpass the Saudis as the second-largest oil producer on earth. The Russians still lead the world, for now, in that number, at about 10.9 million barrels a day.

In 2010, U.S. oil production was 5.5 million barrels a day.

Quite a lot more at the link, but the key thing is. Never, ever bet against free men who want to make a buck, or ten. It’s one of the ways we’ve built the modern world, and also part of the reason it’s more peaceful (overall) than before. Prosperous people tend to not want to break the china in a bar fight.

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

22 Responses to The Triumph of American Oil

  1. Nicholas says:

    Also: America isn’t so foolish as to tax petrol to the roof. By making petrol expensive in our own country, we’ve undermined British hauliers, opening the way for foreign firms that do the bulk of their filling up elsewhere.

    Liked by 2 people

    • NEO says:

      We can’t, or our politicians would. That would be the quick way to start a civil war, not that they don’t talk about it some.

      BTW, did you notice that C has a couple of posts up at AATW? I’m preparing a couple as well, for during the week.

      Liked by 1 person

      • Nicholas says:

        No, I haven’t checked today. Are you considering coming back from exile? I’m still unsure about how much I want to engage with Catholics if they’re going to be snippy. Given my fundamental objection to the structure of Catholicism, I don’t think there is much I can contribute to anything that crosses party lines.

        Liked by 1 person

        • NEO says:

          Yep, I am. And if C hangs around it’ll likely be OK. The Catholic Mafia doesn’t carry much weight with him. My problem last fall was not having any backup, it just got too much. So far, I’m the only commenter, but readership isn’t bad, considering.

          Liked by 1 person

        • Nicholas says:

          Yes, I wanted to come to your aid in those scraps, but I got lost somehow. Perhaps cowardice – not sure. Things got hectic once I started the law course.

          Liked by 1 person

        • NEO says:

          I know, and I usually can handle it, but I was running down. No reason you should sweat it.

          Liked by 1 person

    • the unit says:

      Very interesting. Never would have ever thought about such a situation as planning where to fill up other than local. Made me explore a bit. Read this from express.com dated in June ’17 “If you are driving to France, Belgium or Ireland in a petrol car it will make sense to fill up in the UK as pump prices are lower than in these countries.”
      That’s the other amazingly interesting point to me. I can’t imagine planning to drive from the U.S. to another country and having to be concerned about one fill up before departing. 🙂

      Liked by 2 people

      • Nicholas says:

        Yes, it’s the other way now. But it wasn’t always thus. In any case, it is bad for the economy: it makes the price of everything more expensive, and it puts people off spending their disposable income because it’s expensive to travel. The state’s justification is that it cuts down on carbon emissions and helps to pay for social benefits, like the NHS – but it seems to me we could structure things differently if we thought outside the box.

        Liked by 2 people

        • the unit says:

          We’re very fortunate for sure. Unleaded @$2.58/gal, not liter! Still we’re complaining because that’s up 30 cents since a month or two ago. 🙂

          Liked by 2 people

        • Nicholas says:

          Well, I celebrate the strides you have made to undo the OPEC hegemony and keep advancing technological progress. If only we would do the same. In any event, I don’t think the petro dollar will last forever: times are changing.

          Liked by 1 person

        • NEO says:

          Not that much, it’s really all about energy density. If they can make fuel cells work, then maybe electric, if we build nuclear, otherwise Gasoline/diesel/compressed natural gas is the future in transportation. CNG looks especially good, and we’re swimming in the stuff.

          Liked by 1 person

        • NEO says:

          Bout the same here. I agree but that’s putting a lot of our people back to work, so I guess I can live with it. 🙂 Just wait till we dominate again, like we did in the 30s and cut China off. When we did that to Japan they came along burning Texaco oil and shooting pieces of old Buicks at us. Could happen again in the not too distant future. 🙂

          Liked by 2 people

        • NEO says:

          Someday you guys are going to realize that you can maybe have a welfare state, maybe you can have unlimited immigration, but you sure as hell can’t have both. Particularly immigration of people completely bereft of skills.

          Liked by 1 person

        • Nicholas says:

          I can’t speak to skills (I haven’t read the stats), but I agree that we can’t afford everything the Labour party (and various parts of the Conservative party) seem to think we can. I wish the Lib Dems would divest themselves of the SPD element and rebrand themselves as a libertarian party as they used to be in the 19th and early 20th century. Apart from the Euro-sceptics, the Tories don’t speak for me any more.

          Liked by 1 person

        • NEO says:

          Near as I can tell, the Tories speak for the metropolitan social democratic elite. Kind of like here, the GOP doesn’t really speak to conservatives, the base has been in revolt for years, Trump is better, but not on economics (at least this week).

          Liked by 1 person

        • the unit says:

          Yeah NEO, by fortunate I did mean glad for workers back to work and also realizing our 4 liters is just a little more than our 1 gallon.
          And I’m not complaining about the 30 cents. Just that $2.58/gal is exactly 10 times what I paid when I was 18. 🙂

          Liked by 2 people

        • NEO says:

          Yep, me too, and that was Sunoco 260. Regular leaded at the cheap place was 22.9 cents/gal. I’d like those days back too. 🙂

          Liked by 1 person

        • the unit says:

          “Selfies” for early/mid ’60’s. 🙂

          Liked by 1 person

      • NEO says:

        Long ago, Jess was so proud of her (now ex) husband because he drove a couple of hundred miles straight. I told her that’s two thirds of the way to the airport here. 🙂 In Europe only (the few mobile) Russians have any comparisons to the distances that we cover. Last I knew, pump prices in the UK were about 1 GBP per Liter, and the GBP is worth a bit more than the dollar. It’s no wonder they all drive those sketchy little cars.

        Liked by 2 people

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