During President Donald Trump’s summit in Helsinki with Russian President Vladimir Putin, both leaders made controversial statements leading to accusations of treason. USA TODAY
The opposition in Congress wants to see a transcript of what President Donald Trump and Russian President Vladimir Putin talked about for two hours alone. No doubt some of that time was spent discussing OPEC and the price of oil.
This is above all an issue now for the first time in world petroleum history because Russia has become part of OPEC in the agreement to manage world supply of oil and, indirectly, its price.
OPEC and Russia produce almost half of the supply of world oil. At full capacity, and spare capacity added in, they would be slightly over 50 percent. For now, OPEC plus Russia is the world price-setter for oil.
Shale and tight oil, mainly from the Southwest and North Dakota, along with conventional oil production in the United States, should account for 12 percent later this year if prices stabilize.
This was the reality of talk between Putin and Trump.
Trump-Putin summit kicks off in Helsinki
Russian President Vladimir Putin and U.S. President Donald Trump shake hands before a meeting in Helsinki. Brendan Smialowski, AFP/Getty Images
Putin, with OPEC, controls the price of world oil. America is not the price-setter: it is the price-taker.
But President Trump is the first U.S. President to take on OPEC. He has said that OPEC prices are “artificial” and as such violate free trade in oil.
This was true under the Obama presidency in 2014 when OPEC, following Saudi Arabia, set out to destroy shale oil producers in America in a price war against high-cost American producers by increasing production at a time of world-wide oversupply.
Recall, the downturn in the San Juan and Permian basins.
Trump and Interior Secretary Ryan Zinke have made an energy policy of domination which now includes having an edge in price-setting. They want more oil even if it means lower prices as supply challenges demand.
No doubt, Trump explained this to Putin and inferred that Russia might leave its de facto membership in OPEC.
How would Putin reply, if asked by Trump? His reputation is such that he sees an opening and prompts Trump to consider ending some sanctions against Russia in oil exploration and production. Why not allow Russian oil companies to borrow to finance capital projects in Western banks? Why not re-open Exxon-Mobil Arctic oil joint projects? Is more Russian production of oil another way to lower oil prices at the pump and upend OPEC?
News of the Trump administration’s invitation to Russian President Vladimir Putin to meet with the president in Washington appeared to catch Dan Coats, the Director of National Intelligence, off guard as he attended a security forum in Colorado. (July 19) AP
Trump could sense a deal but one which would rattle Republicans back in Washington. His official domestic political opposition no doubt would block any such deal unless Trump is out of office either through impeachment or in 2020.
There is a Congressional process in Washington to place OPEC under American Anti-Trust laws. The Administration would sue the sellers of OPEC oil in U.S courts.
Sounds easy, but similar to 1973 it failed in the embargo crisis by OPEC of oil exports to the United States. Apart from the legal process, how would OPEC oil be treated if it were re-exported from Mexico or Nigeria, for example.
If imports from OPEC-Russia were to stop, American self-sufficiency together with Canadian imports and other non-OPEC producers with slightly higher prices would replace OPEC oil.
However, if OPEC itself dissolves there would be individual producers prepared to sell their oil as former members of OPEC. This would resemble a free market in world oil and Trump would have an American First triumph in which the price oil is more likely to be real than artificial, that is, market-derived from free-flowing supply and demand.
Dr. Daniel Fine is the associate director of New Mexico Tech’s Center for Energy Policy and is the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own. Find more columns by Dr. Fine at www-daily-times.com or read Energy Magazine back issues in our Special Publications
The article can be found here-> https://www.daily-times.com/story/opinion/columnists/2018/06/24/fine-oil-before-and-after-november-election/699460002/ The Trump Administration is moving towards less royalty rates on Federal land leases, less Bureau of Land Management discretion on Environmental Protection Act obstruction on the Application for Petroleum Drilling process, less coal and nuclear power generation decline, and less oil supply confidence in OPEC-Russia world price management.
This is the thrust of the signature world energy domination policy of Secretary Ryan Zinke for the last 16 months. It accounts for the action of OPEC-Russia 10 days ago. Saudi Arabia led OPEC to increase oil production to respond to President Donald Trump, but averted a price shock with gradualism. More output from OPEC offers increased revenue in the very short term.
It now faces an election to decide majority party control of Congress. Should the Democratic Party win at least in the House of Representatives, President Donald Trump will be set back on energy policy and its action realization. He will be forced to use executive power narrowly.
The Democratic Party will prepare for 2020 and the foreclosure of Trump-Zinke on world energy domination through an American petroleum system and public land dispensation.
What will the Democratic Party control of energy in Washington and Santa Fe look like?
Imported oil is consistent with a resumption of climate change energy policy which is less carbon in the economy and more renewables as the alternative.
World investment flows are putting solar and wind ahead of oil and gas for the first time. Electric cars are now one to every six in sales in California and soon in Europe, displacing diesel engines.
The Democratic Party in Washington in 2020 will no doubt align with the European Union in Climate Change with a roll-back of the Trump Administration regulatory reform.
Methane, public land access, a return of BLM dominance, along with tax and infrastructure incentives can be expected. Battery charging technology and its placement capacity expansion on the Interstates will promote the market for electric vehicles. New issues restricting unitization, spacing and density of oil and gas wells should appear on state and Federal land.
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In Santa Fe, the current Martinez energy policy and plan (2015) would be rejected in favor of a new Democratic Governor’s choice to start over in 2019. It should be like Colorado’s energy policy but with strong regulatory hydraulic fracturing intervention and fresh water use conservation emphasis.
The oil and gas industry concentration on the Delaware, Permian, Williston (along with the Bakken Formation), Eagle Ford basins along with the Marcellus in natural gas will double up at heavier entry cost and consolidation.
This process, however, promises San Juan Basin natural gas higher prices. New exploration and production on public land would be minimal and legally challenged.
New off-shore U.S oil would be closed with “national monument” type public law.
The Democratic Party has no conservative business Democratic faction to offset the impact on American oil and gas as an industry.
In New Mexico, county leaders from San Juan, Eddy and Lea will continue to argue on the basis of statewide revenue. The Democratic Party in Santa Fe must demonstrate economic development through diversity while oil and gas is politically isolated.
With Canadian imports and even Russian gas in Boston harbor in very cold and snow-storm winters, the East Coast can return to the way it was before Trump on foreign oil imports – America no longer “First.”
The West Coast without refineries and wired power from natural gas is already there in Democratic Party dominance and declining combustion engines.
Dr. Daniel Fine is the associate director of New Mexico Tech’s Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.
Link to the article American oil production is poised to reach upward to 11 million barrels of oil per day if the price of West Texas Crude reaches $75 a barrel.
Saudi Arabia or Saudi Aramco believes it will, and commodity speculators are following. It is similar to 2008 in June when Goldman Sachs forecast $250 per barrel as the price approached $150.
What events are running through computer modelling to trigger speculative buying? First, the effort of Saudi Arabia to sell shares in Saudi Aramco to the world – at least 5 percent.
The price of oil is the key for the price per share at an initial public offering. It must be high enough to overcome doubts about the company in terms of ultimate economic value and size of its reserves as well as potential legal action based on the 9/11 Saudi Arabian operatives in the destruction of the World Trade Centers and the death of nearly 3,000 and related family injuries.
Second, chemical warfare in Syria and Western military reaction. This is a momentary reflux in trading behavior which dates back to 1973. After 2010 and the appearance of shale and tight oil, buying oil as commodity tight on supply is self-initiated by speculators with no basis in reality. America’s three oil basins now supply oil to replace Middle East shortages in world export flows. Continental North American production adds to a self-sufficient mix.
This event can no longer deprive the United States of physical barrels resulting in shortage of supply. Prices outside of trading pits or online bids and asks are now determined by West Texas Intermediate, which reflects self-sufficiency against non-North American sourced oil. The Persian Gulf against the Permian Basin?
Demand for oil in producer estimates, such as, Saudi Aramco or total range between 1.2 percent and less than 1.0 percent growth per year. Supply of oil from American unconventional sources is increasing, with high prices at 8 percent.
The two year low of downturn prices did not create conditions for a supply crunch. Super-giant oil fields are few and far between even at higher prices. Supply shortage talk on the social and commercial media is promoted by Saudi Arabian interest in higher oil prices to support its potential IPO share price. Offshore Norway has applied shale recovery technology from New Mexico, Texas and North Dakota and can be profitable at $35 per barrel against $80 breakeven in 2013.
Third, reaction to OPEC-Russia announcements of production reductions – oil off the world market — are not likely signals for commodity traders to buy. How much oil can OPEC members and Russia take off the market? How long can they lower production in terms of fiscal requirements?
One last event in production denial would be the imposition of sanctions against Iranian oil exports, which would follow the decision to void the nuclear weapons treaty by President Trump. The North American market for Iranian is almost non-existent.
As before, this Energy Magazine column warns of a downturn next year. How bad? If the buzz around the Permian is that its “health” no longer depends on the price of oil has been taken seriously, the downturn will be serious.
Exxon-Mobil/XTO is preparing to enter the world market of LNG (liquid natural gas) with a plant in Louisiana. Its natural gas feedstock would be from its Delaware Basin production (New Mexico’s Permian).
The scale and size of its LNG facility will place American production and export as a world leader next to Qatar, which is reacting to Saudi Arabian hostility by expanding investment in American oil and gas.
Turning to Europe, the opportunity of geopolitical deployment of American gas to Europe to offset Russian supply promoted by the State Departments of Bush through Obama and now of Trump has been set back.
Germany has approved the Russian natural gas pipeline under the North Sea despite efforts to isolate Russia because of the Crimea annexation.
This means ongoing European natural gas dependence on Russia without transit pipelines through the Ukraine. And indirectly it keeps demand and prices for San Juan natural gas lower.
As long as Marcellus natural gas is semi-stranded by New England’s opposition to building pipelines for its markets, based on environmentalist politics, American natural gas is unable to replace residential reliance on heating oil imported from high-risk Venezuela.
Russian LNG appeared in Boston harbor during the worst of a New England winter as an alternative to low- cost pipeline gas from Pennsylvania. This partially keeps San Juan Basin gas at low prices.
Dr. Daniel Fine is the associate director of New Mexico Tech’s Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.
“For a week in March, Houston was the site of a world assembly of oil producers engaged in an OPEC-Russia dialogue with American shale or light tight oil producers on supply and — indirectly — price.
OPEC and Saudi Arabia pitched a market information offensive.
Put simply, American oil producers should cut-back or stabilize output in a “family” arrangement to avoid an expansion of supply that threatens the price of world oil.
But there is no U.S. Oil Company (government owned) in America, unlike all members plus Russia which are state companies. Russia is a mix. OPEC members are a price-setting cartel. So, a restaurant in Houston was selected as the site for an elite dinner of OPEC and American shale oil operators.
Platitudes and generalizations dominated the American-initiated conversation, because anything more would be in violation of U.S. anti-trust laws.
Saudi Arabia, consistent with its effort to sell shares in itself in an Initial Public Offering (forthcoming), emphasized there was enough future world demand to satisfy the Americans as well as OPEC.
This was 1.5 percent growth per year for the next decade or two. Almost silence, however, on Saudi Aramco’s capacity expansion of another l.5 million barrels per day as “spare capacity.”
Does the future demand short term or long term offer support for an unspeakable and unenforceable supply agreement that involves enough for all? Will American shale producers in the Permian exclude themselves from capturing any growth of demand?
Devon, no longer in the San Juan Basin, but dominant in Oklahoma, is going for double-digit production increases yearly and is increasing its dividend to shareholders who might otherwise be attracted to the idea of drilling and completing less to prop up the price per barrel.
The Houston dinner failed, as a half a dozen companies did not show up in compliance with legal restrictions. It failed to persuade the America shale industry to act with OPEC’s oil supply and price management as a “family” and not as a law-breaking cartel.
Less than a week later, Iran signaled that it would not renew the production cut that has removed 1.8 million OPEC barrels of oil from the world and increased prices.
Saudi Arabia was projecting a forecast that a tight market for oil is ahead this year or next as oil projects will not replace wells while demand is strong.
Few were sold on this forecast since shale oil well completions are effectively responsive to price signals with well completions compared to conventional replacement-based on prior oil field investment.
Oil traders are largely unconvinced or agnostic listening in to the Houston contradictions. Most will watch Iran in late May as a sell signal in the making of algorithms.
The Trump Administration on steel tariffs takes the Obama Administration’s failure to do so as a starting point. It was Secretary of the Treasury Lew under Obama who made the case for tariffs during his many visits to Beijing. He would accuse China of promoting an overcapacity of steel production for export and consequent flooding of the American market and the United States with cheap steel.
The Chinese no doubt listened politely to the words but did not anticipate action. They followed a strategy of export price advantage for driving American-owned and operated steel out of business.
Action was taken last month by President Donald Trump. And yet nothing in the customary reaction against Trump recalled that President George W. Bush declared sanctions against Chinese Steel export dumping over 10 years ago, which lasted 18 months, and is credited for an American steel innovation-led comeback.
National security requires American made high-quality steel not only for defense and defense-industrial capability, but also for the complex steel in San Juan and Permian natural gas and steel pipelines.
What is needed is metallurgy for manufacturing and equipment for continuous casting, cooling, rolling and welding. There is only one plant left in the United States that has some capacity for high strength pipeline steel (API X70 and X80).
The oil and gas industry in the San Juan Basin should not depend on imports from a non-continental foreign source as a matter of national security.
China already dominates the American market (oil and gas) for steel valves. There is vulnerability if China follows its rare earth history.
First, it lowered prices via exports. Second, with this weapon, American rare earth domestic production failed and China bought the technology and transferred it to China. Third, China raises prices for American users of rare earths.
The North American Trade Agreement (NAFTA) negotiations continue with more confidence that fuels (natural gas) will be exempt from negative outcomes. The exemption for Canada and Mexico from steel and aluminum tariffs based on a no-threat-to-national-security finding and continental sources, suggests understanding that trade in fuels will not be restricted.
Daniel Fine is the associate director of New Mexico Tech’s Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.
For a week in March, Houston was the site of a world assembly of oil producers engaged in an OPEC-Russia dialogue with American shale or light tight oil producers on supply and — indirectly — price.
OPEC and Saudi Arabia pitched a market information offensive.
Put simply, American oil producers should cut-back or stabilize output in a “family” arrangement to avoid an expansion of supply that threatens the price of world oil.
But there is no U.S. Oil Company (government owned) in America, unlike all members plus Russia which are state companies. Russia is a mix. OPEC members are a price-setting cartel. So, a restaurant in Houston was selected as the site for an elite dinner of OPEC and American shale oil operators.
Platitudes and generalizations dominated the American-initiated conversation, because anything more would be in violation of U.S. anti-trust laws.
Saudi Arabia, consistent with its effort to sell shares in itself in an Initial Public Offering (forthcoming), emphasized there was enough future world demand to satisfy the Americans as well as OPEC.
This was 1.5 percent growth per year for the next decade or two. Almost silence, however, on Saudi Aramco’s capacity expansion of another l.5 million barrels per day as “spare capacity.”
Does the future demand short term or long term offer support for an unspeakable and unenforceable supply agreement that involves enough for all? Will American shale producers in the Permian exclude themselves from capturing any growth of demand?
Devon, no longer in the San Juan Basin, but dominant in Oklahoma, is going for double-digit production increases yearly and is increasing its dividend to shareholders who might otherwise be attracted to the idea of drilling and completing less to prop up the price per barrel.
The Houston dinner failed, as a half a dozen companies did not show up in compliance with legal restrictions. It failed to persuade the America shale industry to act with OPEC’s oil supply and price management as a “family” and not as a law-breaking cartel.
Less than a week later, Iran signaled that it would not renew the production cut that has removed 1.8 million OPEC barrels of oil from the world and increased prices.
Saudi Arabia was projecting a forecast that a tight market for oil is ahead this year or next as oil projects will not replace wells while demand is strong.
Few were sold on this forecast since shale oil well completions are effectively responsive to price signals with well completions compared to conventional replacement-based on prior oil field investment.
Oil traders are largely unconvinced or agnostic listening in to the Houston contradictions. Most will watch Iran in late May as a sell signal in the making of algorithms.
The Trump Administration on steel tariffs takes the Obama Administration’s failure to do so as a starting point. It was Secretary of the Treasury Lew under Obama who made the case for tariffs during his many visits to Beijing. He would accuse China of promoting an overcapacity of steel production for export and consequent flooding of the American market and the United States with cheap steel.
The Chinese no doubt listened politely to the words but did not anticipate action. They followed a strategy of export price advantage for driving American-owned and operated steel out of business.
Action was taken last month by President Donald Trump. And yet nothing in the customary reaction against Trump recalled that President George W. Bush declared sanctions against Chinese Steel export dumping over 10 years ago, which lasted 18 months, and is credited for an American steel innovation-led comeback.
National security requires American made high-quality steel not only for defense and defense-industrial capability, but also for the complex steel in San Juan and Permian natural gas and steel pipelines.
What is needed is metallurgy for manufacturing and equipment for continuous casting, cooling, rolling and welding. There is only one plant left in the United States that has some capacity for high strength pipeline steel (API X70 and X80).
The oil and gas industry in the San Juan Basin should not depend on imports from a non-continental foreign source as a matter of national security.
China already dominates the American market (oil and gas) for steel valves. There is vulnerability if China follows its rare earth history.
First, it lowered prices via exports. Second, with this weapon, American rare earth domestic production failed and China bought the technology and transferred it to China. Third, China raises prices for American users of rare earths.
The North American Trade Agreement (NAFTA) negotiations continue with more confidence that fuels (natural gas) will be exempt from negative outcomes. The exemption for Canada and Mexico from steel and aluminum tariffs based on a no-threat-to-national-security finding and continental sources, suggests understanding that trade in fuels will not be restricted.”
Daniel Fine is the associate director of New Mexico Tech’s Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.
“The price of oil in 2018 will be volatile with commodity market traders selling on signals of OPEC-Russia “cheating” or members producing more oil than the extended Algiers Agreement output quotas. This should be expected as U.S. shale producers push past 10 million barrels per day and exceed 1970 as the all-time high for the United States.
At 10.4 million bpd (barrels per day), American oil production will surpass Saudi Arabia and Russia. Herein lies the price range: 2015 all over again.
Real OPEC and Russian output will break Algiers (1.8 million barrels off the world market until September). Price range to $62.50 WTI high in the first half of the year and $38.65 at end of the second half or one year from today; 2019 would resemble most of 2015.
There is a second threat to price and production in the Southwest and Dakota. Hedge funds invested in public or listed companies want share buy-backs or dividends. In short, they want to make money now as opposed to operators sinking more cashflow into new production projects. The conflict inside Hess is the first example.
Traditional oil operators are 5-year business planners for returns on investment while the new private equity owners or investors are quarterly or payback pressure points for higher stock market share prices and distribution. OPEC/Russia is the external market threat leading to the lower price range alongside an internal investor/owner threat of less cash flow plow back for future production projects and more for short-term return on investment.
Oil price and production will also reflect Saudi Arabian domestic instability over its simultaneous offensive against Iranian influence in the Middle East and social and economic modernization against traditionalism. The plan is for less dependence on oil exports with technology and manufacturing in the national economy: social change and the status of women in the “revolution.”
It has been 70 years since a President of the United States has considered domestic oil and gas as a “power” in world affairs. With Secretary of the Interior Ryan Zinke charting a new course, the Trump Administration is considering a transfer of Federal Land management with natural resources to the Western States.
Coupled with Zinke’s proclamation of American energy world domination, a revolution on how to think about oil and gas in the San Juan Basin is taking place.
The Four Corners BLM management could move across Farmington to the New Mexico state office. The Bureau of Land Management’s Washington control might move to Denver.
It is more than speeding up Applications for Petroleum Drilling (APD): it is who decides and implements Trump-Zinke. How is San Juan natural gas to advance American oil and gas first in a redesign of domestic resources on a world stage?
Farmington and Carlsbad would control, as New Mexico State offices of oil and gas, new rules with national and global meaning. The San Juan Basin future would have natural gas reserves managed for strategic and economic purposes in the Baltic and Black Seas. Management would be drawn from New Mexico.
What is the cost for this historic transfer of power from Washington or a non-oil and gas Potomac?
The State of New Mexico must legislate expansion budgets to overcome the limitations of Santa Fe staff in numbers and expertise. Under State Oil and Gas Law, inspectors are needed to inspect wells (62,000).
Inspection of Federal oil and gas wells (transfer from Washington BLM) requires a budgetary alignment with the strategy and vision of Secretary Zinke.
There is a return to the economic development history of America. San Juan Basin natural gas does not depend on localized manufacturing alternatives into natural gas in the Four Corners. Pipelines take care of markets. The expansion to ultimate economic recovery is in the new policy of this Administration.
I was the lunch keynote speaker at the Jicarilla Apache Energy Conference in Dulce. Indian nation natural gas must not be outside American oil and gas first. Investment and production is now a different opportunity. Deals with conventional oil and gas companies were part of the excitement.
Readers of this column in the Energy Magazine have followed a forecast made 11 months ago, in which I have seen warning signs of oversupply of world oil in 2019.
The Initial Public Offering (IPO) shares in Saudi Aramco is doubtful. China or BP could buy non-controlling blocks of shares as an alternative. If this IPO fails, Saudi Aramco will have little reason to throttle OPEC production downward.
This would open the way for a trend-line similar to 2014. Saudi Arabia is in the first phase of instability. What happens to Mohammed bin Salmon, the Crown Prince, lies in Qatar, and with the Kurds.
It is important to recognize that the IPO process called for the right of women to obtain driving permits. Underwriters were on notice that such discrimination would distract buyers of Saudi Aramco shares.
Hilcorp’s female staff at Dulce added that they (women in Saudi Arabia) must be 30 years of age and will not be able to drive at night.
“How can Saudi Arabia and OPEC behind them strike a second blow against shale oil producers in the Southwest? The first was the 2014-2017 price and market share war in which they raised production to put the higher cost Americans out of business.
This was partially abandoned at Algiers in a reversal to opt for a higher price for crude oil from $26 to the high $40 range. The marketing tool is lowering their production by 1,800,000 barrels per day.
The second blow is process.
The Saudi Arabian Oil Ministry and its state company, Saudi Aramco, negotiated in London with Glencore (world’s largest trading combined with mining), banks and hedge funds to see if they could reduce the liquidity necessary for American oil and gas shale producers to hedge forward to obtain a higher price.
Without access at only financial transactions costs to the “strip” or the forward price of oil at at least 10 percent higher than current prices “spot,” WPX and all the Permian-Delaware significant producers would not have survived the recent downturn in their current form.
If there is no difference between the price oil today and September 2018, which is called the “contango,” this would be a problem of liquidity – no entity taking the other side against the oil and gas producer on a contract. No cash would be bet against the oil and gas producer who sells forward one year. One side, for example, sells 70 percent of 2018 oil production at June 2018 prices in the present while the other side buys or covers, as the counterpart, the contract.
Saudi Arabia correctly followed data which demonstrated that despite the decline in the price of oil from $100 in 2014 to a low of $26 per barrel, oil producers hedged against the fall and largely survived. Without hedging the producers would have negative cash flows and serious problems of debt to keep going.”
