Dr. Daniel Fine: When it comes to oil price, Iran is not alone

Discussion in 'Politics' started by bluewill67, Sep 13, 2015.

  1. bluewill67
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    The price of West Texas Crude oil has declined below $50 per barrel as a reaction to the expectation that oil export sanctions against Iran will be lifted within the framework of the "deal" to slow the country's progress toward developing nuclear weapons. The global market is oversupplied and Saudi Arabian production is approaching its highest level since the 1970s.

    San Juan and Delaware basin oil producers have sharply reduced costs through efficiencies. American higher-cost production shows no sign of a decline while OPEC lower-cost production increases in spite of lower prices. Saudi Arabia has decided to fight the Americans for market share.
    American oil refineries are operating flat out as the summer driving season demand remains high. But at the end of next month this changes and the refiners will buy less crude to process into gasoline and diesel. Crude oil stocks, or inventory, are beginning to show this change.
    Yet, the outlook for Iraq places still more production in the global market. Iraq production now at 4 million barrels per day and rising could reach 6 million in two years. The Iranian Oil Company could attract BP and Total to invest capital and technology if sanctions permit. This would drive Iranian production to equal Iraq . In the short-term Iran has the capability of expanding exports by 1.2 million barrels.
    Should the "deal" fail or be changed by Congress to a phase-in of Iranian oil exports over a longer period of time and the White House goes along, the price of oil should recover to $60 per barrel. This is a long-shot scenario, however, as President Obama has threatened a veto and the Iranians could insist on an oil sanction termination without conditions.
    There will be more Middle East production for export than anticipated and its impact on American shale oil production is a three-year, low-price oil regime. On the other hand, the current price war is moving quietly to an old variable. From 2009 to early last year, Saudi Arabia and the Gulf States assumed that American shale technology (horizontal drilling and hydraulic fracturing) was unsustainable. They changed course last year and resorted to the price war for market share.
    The reason for this change in strategy was first, the decline ratio of shale horizontal wells; and second, the regulatory obstacles. Simply put, OPEC perceived the environmental/global warming/climate change political group mobilization as capable of tightening federal regulations (Department of the Interior and the Environmental Protection Agency) that would cause higher costs to the oil industry or stop the "technology play." For the complete article use this link--> Daniel Fine: When it comes to oil price, Iran is not alone
     
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