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Crude Oil Flow from Saudi Arabia to U.S. Falls to Zero
- darig 6y agoWhat about indirectly through shell companies? Not necessarily Shell shell companies, but you get my point.
- finiteseries 6y agoFrom my layman understanding and someone please chime in here to correct if possible, this has been coming for more than a decade, is almost entirely due to shale, and is unfortunately almost entirely doomed due to the cost of fracking. “Barring something like a war, US tight oil is essentially done for the time being” is the vibe I’m getting at the moment, and IIRC predates COVID by a year or so.
- BlueTemplar 6y agoIt was always expected that the tight oil bonanza would be temporary, a few decades at best, a way for the oil industry to be "scraping the bottom of the barrel" and to have its "retirement party". And of course, if one believes in climate change, it should never having been allowed to proceed. To make matters even worse, AFAIK USA's tight oil industry, taken in aggregate, has never been profitable so far, and at this point it doesn't seem like it will ever be. So this is yet another an example of bad investing, a financial bubble yet to pop, propped up by Wall Street money, which itself comes from the relief money that went up to prop up the "too big to fail" banks after the previous financial bubble popped.
- boringg 6y agoOil and gas is a capital destroying market by its very nature. Always a bad investment in the long run.
- alisonkisk 6y agoWriting off capital as unusable is also capital destroying.
- i_am_proteus 6y agoThe entire global industrialized economy only exists because of petroleum fuels.
- Retric 6y agoThe industrial revolution significantly predates oil. Oil become a huge deal because it’s extremely plentiful and produced a huge range of waste streams people found a use for. Essentially the primary use would drive new extraction which would lower the price of every other output. However, there are drop in replacements for everything oil does outside of arguably aviation.
- newsclues 6y agoThe industrial revolution and the 20th century consumer culture would not have left the mark on the world it did if not for the fuel on the fire of petroleum. Pumping gas is a big deal. It gave us private cars and suburbs and endless roads and parking lots that would not exist if we had to rely on coal.
- i_am_proteus 6y agoThere are drop-in replacements for aviation, too, in the form of biofuels. Nonetheless, the modern industrialized economy was built on the back of shipping that was only initially possible via petroleum fuels.
- Retric 6y agoBefore oil we had coal ships, coal trains, coal steam shovels, coal tractors, etc and even electric trolley from both hydroelectric and coal power plants. Before electricity we had air pressure tools, and before that rotating shaft power from water wheels. I bring that up because IMO people overestimate how much and how quickly things have changed.
- credit_guy 6y ago> and is unfortunately almost entirely doomed due to the cost of fracking. Not sure I'm understanding correctly this. Are you trying to say the cost of fracking is too high, and the US oil production will go down rapidly? I don't think that's the case. The cost of fracking is not constant, it keeps going down due to technological progress. See for example [1]. Also interest rates have come down lately (because Covid and such), and they'll very likely stay down for a while. This stimulates industrial activity, and Oil and Gas Exploration and Production (E&P) is just such an activity. More precisely, lower interest rates means E&P companies have an easier time rolling over their loans, and also their funding cost is lower. That funding cost is a component of the "cost of fracking". To be honest though, there is no such thing as "cost of fracking". Some analysts talk about this, but if you try to get into details you'll see it's a bit of finger in the air. Here's [2] a handbook put together by the OCC (bank regulator) that explains how the lending in this space is done and risk-managed. There's no such thing as "cost of fracking", and you'd think the oil producers bankers and their regulators would know a bit about this topic. [1] https://www.reuters.com/article/us-usa-oil-electric-fracturing-focus/low-cost-fracking-offers-boon-to-oil-producers-headaches-for-suppliers-idUSKCN1VX112 https://www.reuters.com/article/us-usa-oil-electric-fracturi... [2]https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/oil-gas-exploration-prod-lending/index-oil-gas-exploration-production-lending.html https://www.occ.treas.gov/publications-and-resources/publica...
- u678u 6y agoYes without fracking shale this would never have happened. I dont really like pumping toxic chemicals into the ground but politically and economically its great.
- Synaesthesia 6y agoIt's not great it's enabling extraction of fossil fuels which ought to remain in the ground.
- BlueTemplar 6y agoInteresting, I thought that the USA historically imported hardly any oil from Saudi Arabia (the main importers would have been mostly Europe and since a few decades, Asia) (and from the Middle East in general), but it looks like that wasn't quite the case ? https://www.washingtonpost.com/world/2019/09/16/who-buys-saudi-arabias-oil/ https://www.washingtonpost.com/world/2019/09/16/who-buys-sau... EDIT : Right, I have forgotten that even though OPEC is 'only' 44% of production, Middle East (and especially Saudi Arabia) is a much larger share of exports : https://en.wikipedia.org/wiki/List_of_countries_by_oil_exports https://en.wikipedia.org/wiki/List_of_countries_by_oil_expor... And Saudi Arabia is USA's ally, unlike Russia and Iran. (And this doesn't leave a lot of oil where to import from, once you exclude USA, Middle East and Russia...)
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- FpUser 6y ago>"once you exclude USA, Middle East and Russia" Despite all the talk the US actually does import oil from Russia: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTIM_NUS-NRS_1&f=M https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
- yostrovs 6y agoThat's about $1500000 of oil a year. It's miniscule. Probably purchased for some technical reason, to dilute for example, or due to proximity to something or other.
- FpUser 6y agoI just stated the fact. who cares about the reason / amount.
- Dumblydorr 6y agoProportions matter. I've eaten sushi a couple times, but I don't regularly do so. So, talking about my reducing calories in my diet, we'd say I never really eat sushi. It's technically untrue, but the proportion is what matters. I'll find where to cut calories elsewhere in things that I eat more than once a year. If Russia provides a tiny fraction of 1% of us oil, it could be very special edge cases that don't affect the economy much at all. Side note, HN comment guidelines state each comment should enrich discussion. This comment you made is very low effort and snarky.
- JohnJamesRambo 6y ago> as the OPEC+ group sat down to the negotiating table to hatch a plan to react to the oil market and the lack of demand. This is fantastic news. For the earth’s sake, let’s hope the lack of demand for oil continues forever. https://www.npr.org/2020/09/15/913052498/oil-demand-has-collapsed-and-it-wont-come-back-any-time-soon https://www.npr.org/2020/09/15/913052498/oil-demand-has-coll...
- howlgarnish 6y agoThis is a temporary blip due to COVID depressing demand for transportation. That said, it's also a continuation of the long-term trend of the US replacing imported oil with domestic fracking, so it's not saving the Earth as much as you might think.
- boh 6y agoThis trend is likely to diminish in the future. Fracking was never profitable and was completely reliant on capital inflows that were drying up even before COVID. Since COVID the industry is essentially collapsing.
- hajile 6y agoIncreasing prices for an item increases supply. Increases in technology can also increase supply while decreasing prices. Oil sands were long considered unusable, but when oil prices got high enough, it was profitable to start mining them turning Venezuela into an oil rich country. Once they started working, they found more efficient ways to extract the oil, so they could complete up to a point as prices stabilized and later dropped. We see the same thing with fracking. As oil prices increase, it becomes profitable. As they get better at it, the minimum profitable price decreases. Today, subsidized or not, you'll see fracking continue as it's much more efficient than it once was.
- boh 6y agoOil prices are likely to decrease in the next 30 years (this according to the oil industry's own estimates). The capital requirements for fracking are unlikely to change much (since this isn't software). Pushing water through hard rock is expensive and technology isn't magic. They haven't gotten much better at it for the decades they've been doing it. Most of the output from a fracking site is extracted the first year, and then you have to find another site and setup again--this is expensive. The perceived success of fracking is due to private equity being able to fund a non-profitable business and then selling their share of the non-profitable business on the public markets that eat the losses. This trick hasn't been working lately, so unless the price of oil dramatically increases, the fracking industry is going to have a difficult future.
- valuearb 6y agoGreat, let’s pull our troops out of the Middle East and start prosecuting the Saudi Royal family for their crimes, including any involvement in 9/11.
- vmception 6y agoStill not going to happen because they cause at least about one trillion dollars in demand for global dollars, annually. This props up the market for dollars, decreasing the effects of dilution (inflation, in currency contexts) when the money supply is expanded
- valuearb 6y agoUS money supply is over 50 Trillion, 1 trillion is close to a rounding error. And they can try to switch to Yuan or whatever, won’t change Fact they need to accept dollars to sell anything to US, and they need dollars to buy anything from the US, and they need to do both.
- gumby 6y agoI'm surprised that the US imports any crude from Saudi Arabia. Venezuela and Mexico (and even Europe) are much closer and oil is the ultimate of International commodities. I had assumed that the US patrolled the Persian gulf* to maintain price stability (as a commodity, a disruption of supplies there would affect prices globally). * Since the 80s or so at least. I don't know if the US was or was not importing Arabian crude before then.
- curmudgeon22 6y agoThe largest source of 'total petroleum' imports to the US is Canada: "Petroleum imports from Canada increased significantly since the 1990s, and Canada is now the largest single source of U.S. total petroleum and crude oil imports. In 2019, Canada was the source of 49% of U.S. total gross petroleum imports and 56% of gross crude oil imports." By comparison, Mexico was 7% in 2019, which made it the second large source. https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php https://www.eia.gov/energyexplained/oil-and-petroleum-produc...