Historic moment: Saudi Arabia sees End of Oil Age coming and opens valves on the carbon bubble

[RV_]

"In 2000, Sheikh Ahmed Zaki Yamani, former oil minister of Saudi Arabia, gave an interview in which he said:

“Thirty years from now there will be a huge amount of oil – and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.”

 

My excerpt is maybe a third of the article, but it might be something to consider. Things change and when that happens there is a lot of FUD (Fear Uncertainty Doubt) that gets generated from those opposed to changes because they are vested, literally, in their beliefs. I have no positions in Oil of any kind, so have no dog in the fight of proving or disproving, but it is interesting reading to see what each of us thinks. Burying our heads in the sand and avoiding what we would prefer NOT to believe is the kiss of death when Paradigms shift..

 

Excerpt:

 

"Understanding Why

The widely held conventional theory is that the Saudis want to shake the weak production out of the market. This strategy would undermine the economic viability of a meaningful amount of global production. The theory assumes that this can be done in some kind of orderly bring-down of prices where the Saudis can find an ideal price below the production cost of this marginal oil production but still high enough to maintain significant profits for the Kingdom while this market correction plays out. The assumption is that following the correction there will be a return to business as usual along with higher prices, but with Saudi Arabia commanding a relatively larger share of that market. An alternative rationale is that Saudi Arabia is fighting an economic war with oil; a strategy designed to economically and in turn politically cripple rival producers Iran and Russia because the governments of these countries that depend on oil exports cannot withstand sustained low prices and will be significantly weakened.

 

While there may be some truth to both of these theories, the real motivation lies somewhere closer to Sheikh Yamani’s 2000 prediction. Saudi Arabia has embarked on an absolute quest for dominant market share in the global oil market. The near-term cost of grabbing that market share is immense, with the Saudis sacrificing potentially hundreds of billions of dollars if low prices persist. In a world of endless consumption, this risk would be hard to justify merely in exchange for a temporary expansion of global market share – the current lost revenue would take years to recover with a marginally higher share of global supply.

 

But in a world where a producer sees the end of its market on the horizon, then every barrel sold at a profit is more valuable than a barrel that will never be sold. Current Saudi oil minister Ali al-Naimi had this to say about production cuts in late December: “it is not in the interest of OPEC to cut their production whatever the price is,” adding that even if prices fell to $20 “it is irrelevant.” Implied, if not explicitly stated, is that Saudi Arabia wants its oil out of the ground, regardless of how thin its profit margin per barrel becomes.

 

Saudi Arabia is seeing a new and massively changing energy landscape. The U.S. and China have agreed to bilateral carbon reduction targets. 2014 is now officially the hottest year recorded in human history, a record set almost impossibly without the presence of El Nino. And on January 7 a report released in Nature lays bare the fossil fuel climate change equation by concluding that to achieve anything better than a 50/50 shot at keeping global warming under 2 degrees centigrade (the most widely accepted threshold for avoiding catastrophic climate change) 82% of fossil reserves must remain in the ground. That report puts hard numbers on the percentages of fossil fuels that must “stay in the ground” and calls for 38% of proven Mideast oil reserves to never to be pumped from the ground. That 38% represents some 260 billion barrels of oil – worth tens of trillions of dollars – much of that not held in Saudi reserves.

Saudi Arabia no longer needs OPEC. Global action on carbon dioxide emissions is gaining global acceptance and technological advances are creating foreseeable and viable alternatives to the world’s oil dependence.

 

All of these threats to oil use are occurring against a backdrop where the acceleration of costs-effective alternative technologies expands the potential of viable alternatives to our current fossil fuel-based energy economy. Yamani’s prediction no longer seems a fantasy where no one outside of science fiction writers could envision an alternative to the age of oil, but rather a stunningly prescient analysis of the future risk to the value the largest oil reserve on the planet by a man who once managed that reserve."

 

The whole article is here: http://www.energypost.eu/historic-moment-saudi-arabia-sees-end-oil-age-coming-opens-valves-carbon-bubble/

[Five Wood]

I think the future will show us a very interesting story as to what is happening in today's oil markets. There are some who feel it's a conspiracy between Saudi Arabia and the US to contain Russia and Iran. Myself. . . I have no idea, but I find it fascinating to watch it unfold.

 

Lower oil prices are a good thing for most Americans and American business. I know we have some members here who work in the oil patch and for them it's not a good thing and in that respect I'm sorry.

 

The other unintended consequence of lower oil prices is that it shifts the focus away from alternative energy sources. Something we cannot afford to do. With oil north of $100 per barrel it was economically feasible to work on alternative sources of energy. And as more resources were directed there the cost of these sources began to drop.

 

Westerner's have very short memories. We are already seeing an increase in sales of gas guzzler auto's. And there's going to become a shift away from conservation and the technology that supports it.

 

I'm not a fan of "big government" but in this instance I would like to see some sort of temporary marginal tax placed on fuel to finance further development of "green energy", while the prices remain low.

[RV_]

An interesting note is that the Keystone pipeline wasn't to bring that oil to us here in the US to use and further reduce our prices. It was to transfer to ships and sell to other countries with higher prices for crude. I live her on top of a large, if not the largest, gas reserve in the world. Our gas bills have not gone down one cent since the fracking started. And now they say it won't go down because the price is too low to work the wells. Now the frackers pay us to use our substrate minerals and gas. Very little and it is like watching our personal US natural resources being sold off to foreign governments at our expense. It appears that our own Oil companies are doing exactly what Saudi is doing. But there the king owns it all, here it belongs to the American people. Funny, we get the pollution and all the other downsides like the Gulf and Alaska spills, and the BC spills from Keystone all over their wilderness.

 

I agree. The very people who fight renewable here haven't even looked at the lessons learned from German Electric utilities there. A few went belly up but several became renewable producers. Energy is energy. People forget that. The end users don't care where you get it as long as it is cheaper and cleaner. And ours.

[bigjim]

I agree for the most part RV. Pragmatically speaking once the pipeline is done the the construction jobs will be gone and the maint. and operations jobs will be less than significant in the US. In the meantime with more oil hitting the market it will help reduce the number of people in exploration and production in the US.

 

On a side note I have read somewhere a couple of times that they are going to use Imminent Domain against almost 100 US citizens to be able to acess passage through their land.

[Vladimir]

An interesting note is that the Keystone pipeline wasn't to bring that oil to us here in the US to use and further reduce our prices. It was to transfer to ships and sell to other countries with higher prices for crude. I live her on top of a large, if not the largest, gas reserve in the world. Our gas bills have not gone down one cent since the fracking started.........

 

 

I feel your pain. We live in the "Apple Capital of the World" and we pay the same price for apples at the grocery store as the rest of the United States!!!!

 

Here is a book well worth reading....

 

The Quest: Energy, Security, and the Remaking of the Modern World by Daniel Yergin.

 

Oil is pretty special stuff from a chemical point of view. I suspect that Alternative Energy sources of today......will remain Alternative Energy sources of tomorrow for that reason.

[RV_]

Got it Vlad! http://www.bing.com/videos/search?q=The+Quest%3a+Energy%2c+Security%2c+and+the+Remaking+of+the+Modern+World+by+Daniel+Yergin.&FORM=HDRSC3

I'll check out some videos, looks intrigueing.

[bigjim]

Vlad, with all the citrus in Fla. I have in the past commonly found oranges and other citrus from California on the shelf. Lots of oil to get it there.

[justRich]

Plug-in vehicle scores lowest in "cost to own" over five year period: http://www.marketwatch.com/story/these-22-cars-are-the-most-economical-to-own-2015-02-12

[RV_]

And it only gets 60 to a max of 82 miles per charge. Just wait two years and watch the Bolt and others now that they can use Tesla's patents! Musk is a genius in creating demand for the Gigafactory batteries which will reduce the time to realize economies of scale exponentially for Tesla's cars.

 

Two years is all the time the naysayers have left until their outright lies and "spin" can no longer be spun.