Analysis by the father of American Geopolitics Dr. Daniel Fine, MIT.

Posts tagged ‘Russia’

ENERGY DOMINANCE NEEDS NAFTA 1/16/18 Heritage Foundation


Last year, U.S. Trade Representative Robert Lighthizer notified Congress of the Trump Administration’s intent to modernize the North American Free Trade Agreement (NAFTA). After several rounds of negotiation among the United States, Canada, and Mexico, many critical issues remain unresolved.

Opportunities abound for negotiating a better NAFTA. As the Trump Administration pushes for modernization, one commonsense policy area that should be preserved and improved is energy. Canada and Mexico are two of America’s most important trade partners in energy markets. The Trump Administration should build off that success. Strengthening the integration of energy markets among the three countries will unleash the massive amount of energy abundance in North America.

Join us as we hear from experts on how enhancing energy trade with Canada and Mexico will result in more jobs and affordable power for American households and help achieve the Trump Administration’s goal of energy dominance.


Dr. Daniel Fine: Oil and gas: A look at what 2018 may bring

by Daniel Fine, Energy Magazine – Daily Times USA TODAY

Trump leads mass deregulation effort; comeback seen for San Juan Basin

For more of the article go here->

“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.”


Hedging threat and Venezuela Oil By Dr. Daniel Fine

The full article is here->

“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.”


Overcapacity and the price of oil Dr. Daniel Fine, New Mexico Center for Energy Policy

The full article is here->

“With the Saudi Arabian-American strategy of removing ISIS and terror roots in Middle East societies and governments, the global oil and gas service companies have new projects to expand oil capacity of Saudi Arabia. This moves Saudi Aramco into overcapacity production range and a Second Downturn in early 2019 as forecast in this column six months ago.

Saudi oil production capacity should increase to 13 million barrels per day with Haliburton and others working on projects to increase reserves. This is prepared to flow into export markets to deprive Occidental of its short- term export of domestic oil which the production cut-back under the 1,800,000 barrels per day OPEC and Russian “deal” provided as a temporary marketing opportunity.  The price of de-terrorism in the Middle East is more Saudi Arabian oil and lower world prices.  Saudi Arabian demand forecasts are no more than 1 percent per annum growth:  its new capacity addition could reach 4 percent per annum in the next five years following the service company projects signed weeks ago.

OPEC production and imports to the U.S are up as this column is prepared for publication. The Commodity Market, which determines the price of world oil, would have a trading range breakout if Iranian gunboats break the isolation of Qatar and engage the U.S. Persian Gulf naval capability. However, such incidents would move traders for hours only.

Natural gas prices should continue to move upward as risk hedging begins to focus on buying gas and selling crude.  This is a contract which oil price risk is hedged
A laying of the risk of crude oil price declines with a simultaneous buying of natural gas.

Natural gas storage favors San Juan natural gas producers in the winter months ahead. This stimulates a regional Texas offset with new Eagle Ford dry gas promotion.
Lithium prices have sharply declined mainly because of South Korean mining production and investments. This explains the stock market and Tesla Motors. Tesla may not need its mining investment in Nevada to lower the cost of the battery pack.
This shift to downstream concentration which will re-start statewide competition for expanded facilities to relieve its Fremont, California plant. New Mexico economic development competed with three states to capture the giga-factory in Nevada. A second chance for Santa Fe to win in a second round? “


Oil producers want U.S. to restrict imports

By Kevin Robinson-Avila / ABQ Journal Staff Writer

The full story is here->

“ALBUQUERQUE, N.M. — New Mexico and West Texas oil producers are gearing up for a national effort to draw all major U.S. oil basins into a grassroots movement to restrict crude imports from overseas.

Leaders of the Panhandle Import Reduction Initiative, which launched in April in the Permian Basin, are seeking public meetings and rallies in other oil-producing zones to convert what’s now a regional initiative into a national movement, said Daniel Fine, associate director of the New Mexico Center for Energy Policy, who is working with local producers.

Those efforts will kick off in September with a presentation at the fourth Southeastern New Mexico Energy Summit in Carlsbad. After that, initiative leaders expect to hold public meetings in other shale oil basins, including the Bakken in Montana and the Dakotas and the Eagle Ford in South Texas.

“We’ll take it to Carlsbad first, and then it goes national,” Fine said. “We want to organize public rallies with producers and field workers whose jobs are at stake. This is a grassroots effort in the basins where the oil bust has taken place.”

The initiative is a reaction to the Organization of Petroleum Exporting Countries’ aggressive oil-pumping policies since mid-2014, which have helped drive global oil prices to ten-year lows and thrust domestic U.S. production into crisis. Initiative leaders say those policies were a deliberate effort by the mid-Eastern members of OPEC, particularly Saudi Arabia, to drive U.S. producers out of business.

Banning crude imports from overseas would undercut OPEC’s ability to manipulate prices, they say, and allow U.S. producers to ramp up domestic production to supply the U.S. market.”





For Immediate Release Farmington, New Mexico
Contact: Dr. Daniel Fine 505-771-1865
Christa Rommé 505-566-3618
The Panhandle of West Texas, a center of American oil since early in the 20th century, answers OPEC and Saudi Arabia with a call for a Presidential Proclamation to establish quotas on imports of foreign oil. And they have asked the San Juan Basin to join this call. Presenters from Texas and New Mexico will be leading a local discussion about what measures can be taken to reduce our national dependency on foreign oil. Similar to “buy local” campaigns across the nation encouraging retail consumers to spend their dollars at home, this proclamation would have Americans buy oil produced in America. Demand for US production would then go up, putting recently laid-off workers back in the field. The United States should no longer allow Saudi Arabia and the middle east to manipulate our economy by crippling our ability to produce and use our own natural resources. We have been forced to comply with the consequences of decisions made by a country whose intent was to take over a “market share” that was ours and make it theirs. The results were oil prices plummeting to $26 a barrel.

The “bust” in oil exploration and production has left families, companies, both large and small, with bankruptcy and hundreds of thousands out of work. Since Thanksgiving of 2014, Saudi Arabia has increased its production to lower prices to shut-in unconventional oil in all areas of the US. It is a price war which has suspended the prospect of American energy self-sufficiency.

The Panhandle Import Reduction Initiative for oil import quotas on foreign oil is nothing new. It aims to revive the 1959 quota system of President Eisenhower who acted to sustain a healthy oil industry and middle class communities which it employs for reasons of national security. And it worked for 14 years to keep domestic oil from going out business because of foreign imports.

Import quotas on light tight oil will be 100% — no more imports within the first 60 days of the new American President’s term next year. Light tight oil or oil from shale is an American technology triumph and the pathway to abundance and security against foreign oil supply cut-off threats. Southwest and Dakota oil will be unbound. North American oil will avoid the risk of dependence on the world ocean as the transportation for imports. Oil from shale has so far supported national income savings in the balance of payments of over 500 billion dollars in the last five years.

President Eisenhower’s import quotas limited heavy sour oil to 10-12% of yearly American oil demand — enough to take care of Canada’s current exports to the United States.
The lower the oil price goes and the longer it stays there because of the Saudis flooding the market, the higher it will go and the longer it will stay there when demand gets greater than supply but it could be too late for the US because the US operators and other international companies are not investing in exploration, the oil that we will need in 5 to 10 years is not being discovered and developed today. OPEC cannot supply all the world’s needs. When demand outpaces supply, the price will skyrocket and stay there until the oil operations that are now curtailed can ramp back up. That may take years due to all the layoffs taking place today. All consumers will be hurt by the high prices. That would not happen if we had reasonable prices today to let us keep exploring for and developing new oil reserves for our future needs.

We are at a cross road and its time we take a stand. Imported oil is rapidly increasing and could or will return our country into the same dependency which began in the late 1970s and lasted to 2010; therefore, risking our national security. American investment in major oil projects has been stopped by the price war. So far OPEC and Saudi Arabia are over-producing in world conditions of over-supply to lower prices enough to prevent required replacement of shale reserves. This is the Panhandle Import Reduction Initiative’s answer to Doha and later OPEC in June and beyond:
Import Quotas will start a new cycle.

The presentation, featuring Dr. Daniel Fine with New Mexico Tech and New Mexico State Energy Policy, T. Greg Merrion and other industry experts will take place on Tuesday, June 14th from 11:00am – 12:45pm in the Merrion Room at the School of Energy at San Juan College, 5301 College Boulevard, Farmington. This event is free and open to the public.


Our View: Limiting oil imports would help to protect American producers

By A-J Editorial Board

The full article is here->

“When the price of oil drops, so does the cost of gasoline. But while people are enjoying paying lower prices at gasoline pumps, plunges in oil prices can cause economic damage in Texas.

And it can put American oil producers out of business when the price of foreign oil imports gets cheaper than the costs of extracting oil from the ground in the U.S.

Oil producers in the Panhandle recently announced the Panhandle Import Reduction Initiative. Their hope is to limit the amount of oil that can be imported from other countries.

We wish them success in getting sympathetic ears to hear their initiative and gathering like-minded people to help further it.

They are right that a limitation should be set on the amount of oil imports from the Organization of Petroleum Exporting Countries.

Representatives of OPEC’s 18 nations recently met in Doha, Qatar. Among their topics of discussion was whether to freeze oil production levels.

The nations didn’t reach an agreement on the subject.

“OPEC and Russia and various countries met and decided they weren’t going to freeze oil and, in fact, OPEC said they will increase production again. This will drive the price down to $26 (a barrel) again,” said oil producer Tom Cambridge.”


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