Free Markets, Free People

Oil production as a weapon

Just an interesting thought.

Saudi Arabia, among others in the middle east, have been getting rich off oil for decades.  So has Russia.  The Saudis, for one, have used these riches to spread a radical version of Islam through  out the world.  Russia has used its money to begin to rebuild its empire (and military) again and bully its neighbors.

What if the flow of oil money could be cut to a fraction of what it once was?  Wouldn’t that have the effect of at least slowing the ability of these nations to act as they are now?  While I have no idea the level of the effect, it can’t help but have some.

So why aren’t we, as a country, exploiting this?

Oil production in the United States will reach a record high by 2021 as efficiency gains help domestic producers to combat the low prices that are likely to force hefty output cuts this year and next, the International Energy Agency (IEA) said on Monday.

After an initial dip this year and next, U.S. output is expected to climb to 14.2 million barrels per day (bpd), the IEA said in its medium-term outlook, citing the “free-for-all” that has come to characterize today’s oil market.

Because, let’s face it, this is good news for the US and especially for the US consumer.  For one thing it seems to be breaking the OPEC cartel’s stranglehold on pricing.

An agreement this month between major OPEC and non-OPEC producers to freeze output at January’s levels to bolster the oil price was viewed as unlikely to have any significant short-term impact.

Again, a positive.  The day of sheiks dictating how much oil you’ll get and how much you’ll pay seem, if this report is true, to be over.

The pain of oil prices falling to about $30 a barrel — their lowest since 2003 — has been widespread, but it has hit OPEC countries particularly hard.

At current crude prices the IEA estimates that oil export revenue for OPEC as a whole will drop this year to $320 billion from a peak of $1.2 trillion in 2012 and $500 billion last year.

So good old American know-how and efficiency developed in the private sector has made it worthwhile to pump shale oil at a profit.  And that is having a fantastic effect for the consumer in the market as well as helping to cut funds to those who would use them to act aggressively in the world.

Seems to be a win-win to me.

But then, if we had a government that actually was on the ball and saw the advantage to this, we wouldn’t have a president who is proposing a $10 a barrel tax on oil would we?

~McQ

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2 Responses to Oil production as a weapon

  • Apparently, frackers are still drilling wells but are waiting for prices to rebound before finishing the wells and beginning fracking again.

  • SA production is at a match to its historic max. They are trying to defund Iran and possibly Russia. SA has reserves of low cost oil and can still make money at $15 or even less. Neither Russia nor Iran can go that low.

    I figure there’s a motivation to get into the Middle East again so we end up providing security for Saudi Arabia and they don’t feel the need to defund Iran by driving down oil prices.