OPEC+ announces surprise oil output cuts
reuters.com
reuters.com
Unless the US covers up for it, undercutting OPEC+. Seems unlikely to happen.
The US is just draining itself of a strategic military asset.
Europe though, they need to start building some very deep reserves, because if an export ban happens they're going to be on the receiving end of it.
> The crude oil export ban prohibited most crude oil exports from the United States to other countries. It was implemented in 1975 and lifted in December 2015.
https://www.economist.com/finance-and-economics/2015/12/18/a... ( https://archive.is/BWfNt )
> On December 18th Congress voted to put an end to the problem by lifting the 40-year-old export ban as part of an omnibus budget bill. Republicans championed the proposal, which is backed by the oil industry. Reluctant Democrats supported it because in exchange they were able to negotiate an additional five years of tax credits for wind and solar power, which they are keen on. The deal showed a spirit of compromise often absent on Capitol Hill.
> The move has three potentially positive outcomes. It will increase the market for the light, sweet crude pumped out of America’s shale deposits, which may eventually give the fracking industry a fillip. It will give refineries outside America access to a greater variety of oil, enabling them to operate more efficiently. And it will make West Texas Intermediate (WTI), the reference price in the United States, a global benchmark for light, high-grade crudes to rival Brent, an international benchmark that is based on a mix of heavier crudes. That would make oil trading more efficient.
A better medium/long term strategy seems to reduce oil energy usage or speed up transition on other energy sources and usages. This will also have the strategic advantage of keep on the technological race.
My naïve view would be to priorise the reduce way over transition one because other techs also needs material extracted from earth, refined, transformed, move sub-continent… and that also need a lot of energy. I’m not an expert and would love to be proven wrong, and see a fast enough global transition.
> Washington, D.C. – Today, the U.S. Department of Energy’s (DOE) Office of Petroleum Reserves announced that contracts have been awarded for the purchase of crude oil from the Strategic Petroleum Reserve (SPR) to meet its Congressional obligation to sell 26 million barrels in Fiscal Year 2023. The awards follow the Notice of Sale announced on February 13, 2023. These contract awards complete the mandated sale set forth in section 403 of the Bipartisan Budget Act of 2015 and section 32204 of the Fixing America’s Surface Transportation Act.
In particular, note the mandated sales.
https://www.eia.gov/todayinenergy/detail.php?id=29692
Several recent acts of Congress have authorized sales from the SPR:
The Bipartisan Budget Act (Section 404), enacted in 2015, includes authorization for funding an SPR modernization program to support improvements deemed necessary to preserve the long-term integrity and utility of SPR's infrastructure by selling up to $2 billion worth of SPR crude oil in fiscal years 2017 through 2020. Although the estimated volumes presented in the chart above are based on an assumed oil price of $50 per barrel, the actual final sales volumes will depend on how SPR decides to allocate the sales volumes across those fiscal years and the actual price of crude oil at the time of the sales. For the Section 404 sales, SPR must get an appropriation from Congress to approve its requested sales revenue target.
Another section of the Bipartisan Budget Act (Section 403) mandates SPR crude oil sales for fiscal years 2018 through 2025 on a volumetric basis, rather than on a dollar basis, as specified in Section 404. The revenues from sales authorized under section 403 will be deposited into the general fund of the U.S. Department of the Treasury.
The 21st Century Cures Act, enacted in December 2016, calls for the sale of 25 million barrels of SPR crude oil for fiscal years 2017 through 2019. The first portion of these sales is expected in late spring 2017.
The Fixing America’s Surface Transportation Act, enacted in December 2015, calls for SPR sales totaling 66 million barrels from fiscal years 2023 through 2025.
---
If these are military assets, then that congressional mandate in 2015 was ill advised. https://www.govinfo.gov/content/pkg/COMPS-11720/pdf/COMPS-11...
The US was a founding member of the International Energy Program which has the mission described:
https://www.iea.org/reports/oil-security-toolkit
> The establishment of an emergency oil response system is a core commitment that each IEA Member country has taken when signing the IEA’s founding treaty, the Agreement on an International Energy Program (IEP). This includes ensuring oil stock levels equivalent to no less than 90 days of net imports and to be ready to collectively respond to severe supply disruptions affecting the global oil market.
> IEA Member countries have substantial flexibility in how they meet the stockholding obligation, which allows each country to establish an emergency response system most appropriate to their domestic circumstances, taking into account the country’s oil market structure, political institutions, and overall energy system. Oil security legislation, including regulations and response plans, is one of the primary components of an effective emergency response system. The particular nature of the oil security legislation will vary from one country to another depending on country’s policies and choice of stockholding model.
This is for the stability of the economy - not the military.
https://www.iea.org/articles/united-states-legislation-on-oi...
> In the wake of the 1973-74 oil crisis, the United States (US) Congress enacted the Energy Supply and Environmental Coordination Act of 1974 (ESECA) and the more comprehensive Energy Policy and Conservation Act of 1975 (EPCA) with the specific aims to fulfil the US’s obligations under the International Energy Programme (IEP), to provide for the creation of a Strategic Petroleum Reserve (SPR), to conserve energy supplies, to provide for improved energy efficiency, to provide a means for verification of energy data, and to conserve water by improving water efficiency of certain plumbing products and appliances (EPCA section 2).
> ...
> According to section 3(8)(A-C) of EPCA, a “severe energy supply interruption” exists when there is a national energy supply shortage which the President determines (a) is, or is likely to be, of significant scope and duration, and of an emergency nature, (b) may cause major adverse impact on national safety or the national economy, and (c) results, or is likely to result, from (i) an interruption in the supply of imported petroleum product, (ii) an interruption in the supply of domestic petroleum products, or (iii) sabotage, an act of terrorism, or an act of God.
That's the way to do it!
I think everyone understands that at some point war might be the cheaper option and no one will let it get to that point.
It looks to me OPEC has always been making decisions that negatively affect the US/Western economy? Or maybe only the bad news get the attention?
Anyway, oil and gas should just die out. This is literally monopolistic behaviors.
You seem to forget here that the OPEC countries have their own goals, their own motives, and their own ability to influence world events. They don't exist purely as puppet states to pump cheap oil for America, as much as they are often portrayed that way in the western press.
> Anyway, oil and gas should just die out. This is literally monopolistic behaviors.
Yeah. Well, monopolies gonna monopoly. They're not really a monopoly, but they're a major producer in a globally fungible product with insanely inelastic demand. So, yes, they can swing the prices to their benefit.
"Should just die out," sure, and you're going to replace that energy with what, exactly? Go look at the percentage of global energy supplied by renewables and nuclear, include hydro, it doesn't matter. Apply whatever correction factors you want for the efficiency difference between electric transportation and combustion based (you gain a bunch on the ground, not nearly so much in the air), and then realize just how much of that energy is delivered as thermal energy where you don't get to gain much by going to electric. You can gain some for low grade heat with heat pumps, but process heat and such, not any time soon.
Of course, that nobody is willing to even consider "using radically less energy" as a solution indicates how likely we are to actually find solutions. I deal with renewable energy regularly (my office is a purely standalone, off grid system, I work in there year round), and I very much have to adapt my energy use to that which is locally available - which means, on cold, dark winter days, I'm more than a bit bundled up. And even with 5kW of panels hung for a small space, I still rely on fossil backup energy (a small generator or a propane heater) for some of the winter inversion weeks, because 100W coming in off 5kW of panel (and no wind, either) isn't enough to warm the space and run my limited winter computing needs.
You must differentiate between primary energy usage and what an electrified future entails. An ICE car is 20% efficient and does not have regenerative braking. Coal power plants sit at ~30%, topping out at 40% if using supercritical steam.
For example, electrified transports will increase the grid demand by ~15-30% according to most studies.
Looking at heating with fossil compared to heat pumps, the difference is 1.5 - 5x depending on temperature.
The problem with heat pumps (I have one, I'm quite familiar with how they work) is that they need the most energy at the times it's hardest to come by. During spring and fall, when it's "a bit cool," they work great. As you get deeper into winter, with colder temperatures and shorter days, their efficiency is dropping off, so they use more power, when it's not available. I think mine is rated to a COP of >1 down to -15F or so, but in reality, I'm sure it's not achieving that when we have freezing fog and the coils are iced up inside 10 minutes of operation.
You can't use heat pumps for most high temperature process heating, though.
What will OPEC do when the demand for their product is down 9N%?
Also, you won't get to 9X% with our current industrial society intact. You rather rapidly run into material limits trying to extract all the resources needed to build the amount of energy collecting equipment needed.
Figure out how to live on 10% of your current energy in the winter and a decent fraction of it in the summer, and the problem looks rather radically easier. Just rather radically less like a 24/7 global consumer society.
> Reserves data are dynamic. They may be reduced as ore is mined and (or) the feasibility of extraction diminishes, or more commonly, they may continue to increase as additional deposits (known or recently discovered) are developed, or currently exploited deposits are more thoroughly explored and (or) new technology or economic variables improve their economic feasibility. Reserves may be considered a working inventory of mining companies’ supplies of an economically extractable mineral commodity. As such, the magnitude of that inventory is necessarily limited by many considerations, including cost of drilling, taxes, price of the mineral commodity being mined, and the demand for it. Reserves will be developed to the point of business needs and geologic limitations of economic ore grade and tonnage.
> For example, in 1970, identified and undiscovered world copper resources were estimated to contain 1.6 billion metric tons of copper, with reserves of about 280 million tons of copper. Since then, about 600 million tons of copper have been produced worldwide, but world copper reserves in 2021 were estimated to be 880 million tons of copper, more than triple those in 1970, despite the depletion by mining of much more than the 1970 estimated reserves.
https://pubs.usgs.gov/periodicals/mcs2022/mcs2022-appendixes...
Appendix C to 2022 Lithium Statistics and Information.
https://www.usgs.gov/centers/national-minerals-information-c...
They literally just announced. Markets aren't even open. I highly doubt pump prices have reacted to this.
This is cartel behavior over a limited resource that's in high demand. Oil and gas will die out when demand is reliably met through other sources.
[1] https://en.wikipedia.org/wiki/No_Oil_Producing_and_Exporting...
It's going to take decades for that transition to complete. What do you do when people's pensions aren't enough to live off of (due to inflation) until then? There are generations of people that won't ever get to own property due to economies stagnating.
The best time to start was 20 years ago, the next best time is to start today.
For a great summary of all of this I'd highly recommend reading "how the world really works"
https://www.amazon.co.uk/How-World-Really-Works-Scientists/d...