Can the World Survive without Saudi Oil?

Okay, I know, I know it sounds ridiculous but here's a call to do just that. It's more of a political call than anything else, of course, but it's a interesting idea, nevertheless.

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13 hours ago, Marina Schwarz said:

Okay, I know, I know it sounds ridiculous but here's a call to do just that. It's more of a political call than anything else, of course, but it's a interesting idea, nevertheless.

10,000,000bpd +/-, who is going to make up for the shortfall for even 1-2mil bpd?

Some discussion about the same subject under this other topic page 8

 

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5 hours ago, ceo_energemsier said:

10,000,000bpd +/-, who is going to make up for the shortfall for even 1-2mil bpd?

Today?  The world could handle 1-2MMbpd with behavioral changes and production increases.  Over ten years?  The world could easily replace 10MMbpd through efficiency, electrification, unconventional resources, waste-to-liquids, coal-to-liquids, and fuel switching. 

In the long run, waste-to-liquids alone could replace SA.  WTL is estimated to have 30MMbpd potential globally (I forget the source).  If only a third of that were developed, we'd have our 10MMbpd. 

Coal-to-liquids, however, would be a global game-changer.  We've enough coal in developed nations to replace all of OPEC and then some.  What's stopping CTL?  In China, nothing.  China is building full-size CTL plants right now.  Once the first generation proves itself, they'll expand production at a frightening pace, as is their wont. 

What's stopping CTL in Europe?  Their obsession with carbon emissions and America's willingness to defend their oil.  I wouldn't count on those barriers much longer though.  Germany and China are collaborating to reduce CTL CO2 emissions.  If successful, CTL could have similar carbon intensity as oil w/o the geopolitical risks and OPEC's unreliability.  This research also makes CTL cheaper - possibly to the point of matching the current $70-80/bbl market price of oil.  If that's not enough, America's continued destabilization of the Middle East and rejection of its role as World Police might convince Europeans to embrace CTL, if only because they lack the force projection to defend their supplies.  At the very least, I can see Eastern Europe jumping on CTL; they haven't yet developed Western Europe's delicate sensibilities and are keen on energy independence. 

From a technical point of view, there's nothing stopping the world from replacing OPEC.  The technology is there at manageable prices.  If you figure the true cost of oil - including policing the Middle East, market effects of price uncertainty, price spikes, etc - the technology exists to replace OPEC right now at equal cost.  In a few years, we'll have the tech to replace them at lower cost.  There's nothing stopping us from doing this; we just haven't yet been arsed. 

Why am I so confident of this?  Because we've almost done it on multiple occasions.  If you look at charts of oil consumption, you'll see sudden, massive declines at every price spike.  MMbpd-scale demand destruction limited only by the speed at which we could manufacture, the underlying technologies having already been developed.  If you don't believe that, look at the pace of innovation and manufacture during WW2.  With just a fraction of that focus and determination, the world could end OPEC in a decade. 

OPEC should fear us - not the other way around. 

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2 hours ago, mthebold said:

Today?  The world could handle 1-2MMbpd with behavioral changes and production increases.  Over ten years?  The world could easily replace 10MMbpd through efficiency, electrification, unconventional resources, waste-to-liquids, coal-to-liquids, and fuel switching. 

In the long run, waste-to-liquids alone could replace SA.  WTL is estimated to have 30MMbpd potential globally (I forget the source).  If only a third of that were developed, we'd have our 10MMbpd. 

Coal-to-liquids, however, would be a global game-changer.  We've enough coal in developed nations to replace all of OPEC and then some.  What's stopping CTL?  In China, nothing.  China is building full-size CTL plants right now.  Once the first generation proves itself, they'll expand production at a frightening pace, as is their wont. 

What's stopping CTL in Europe?  Their obsession with carbon emissions and America's willingness to defend their oil.  I wouldn't count on those barriers much longer though.  Germany and China are collaborating to reduce CTL CO2 emissions.  If successful, CTL could have similar carbon intensity as oil w/o the geopolitical risks and OPEC's unreliability.  This research also makes CTL cheaper - possibly to the point of matching the current $70-80/bbl market price of oil.  If that's not enough, America's continued destabilization of the Middle East and rejection of its role as World Police might convince Europeans to embrace CTL, if only because they lack the force projection to defend their supplies.  At the very least, I can see Eastern Europe jumping on CTL; they haven't yet developed Western Europe's delicate sensibilities and are keen on energy independence. 

From a technical point of view, there's nothing stopping the world from replacing OPEC.  The technology is there at manageable prices.  If you figure the true cost of oil - including policing the Middle East, market effects of price uncertainty, price spikes, etc - the technology exists to replace OPEC right now at equal cost.  In a few years, we'll have the tech to replace them at lower cost.  There's nothing stopping us from doing this; we just haven't yet been arsed. 

Why am I so confident of this?  Because we've almost done it on multiple occasions.  If you look at charts of oil consumption, you'll see sudden, massive declines at every price spike.  MMbpd-scale demand destruction limited only by the speed at which we could manufacture, the underlying technologies having already been developed.  If you don't believe that, look at the pace of innovation and manufacture during WW2.  With just a fraction of that focus and determination, the world could end OPEC in a decade. 

OPEC should fear us - not the other way around. 

All sounds great, but the question is the short term, 2months- 12 months.

If in Dec. 2018 or March 2019 Saudi Arabia is put under sanctions and their oil sales are restricted none of the great technologies are going to save the world from an oil supply drop shock say even for a 2mil bpd.

Yes we have plenty of coal in the US alone to extract liquids to replace a significant amount of Saudi Crude. I have invested in several technologies for coal-gas and coal-liquids as well as coal-petchem in addition to upgraded condensed energy coal packets.

We have emerging, evolving and disruptive technologies that are bringing and will be bringing the costs oil oil production down at all levels , in addition to unlocking new oil resources that have not been discovered, bypassed or overlooked reserves and recovery of additional oil from stranded formations and mature fields.

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40 minutes ago, ceo_energemsier said:

All sounds great, but the question is the short term, 2months- 12 months.

If in Dec. 2018 or March 2019 Saudi Arabia is put under sanctions and their oil sales are restricted none of the great technologies are going to save the world from an oil supply drop shock say even for a 2mil bpd.

The world has surmounted far worse - and quickly.  The oil is there, and we have the power to take it if necessary.  We need to stop being fearful children about this. 

 

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Common knowledge in Game Theory may explain why killing the journalist (hardly peace-loving, from what I gather) is causing cancellations of appearance while killing untold thousands if civilians does not warrant a mention.

Author is not serious about loss of KSA supply not should we waste our breath over it.

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It's still interesting as a mental exercise at least. I, too, doubt anyone would go as far as to risk having oil shoot up to $150 and possibly more by boycotting Saudi Arabia but it's nice to hypothesise about alternatives.

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Let's take a look at this question from a different perspective.  A perspective that our young Saudi royal may not have been let in on yet, but one that I'm sure his elders would be able to reflect to him, should he ask.

You know all those wonderful U.S. military bases and assets placed strategically in and around the middle east.  They are there for defensive purposes, right?  OK!  Defense of what and for whom, I ask?  Oil, you say?  Correct.  Saudi Arabia and her oil cousins, you say?  Absolutely!  But not ultimately; ultimately they are there to protect the interests of the United States of America (and her allies, if they so choose to continue being her allies).  If that means the U.S. military (and maybe its allies?) find it necessary to "defend the Kingdom" by taking over the Kingdom "temporarily", so be it.  Oh, didn't they put those plans in the MSM?  Strange that, isn't it? 

The U.S. military is not going anywhere anytime soon.  It has been through all of this posturing before and it will go through it again.  They have been through the real thing as well.  Donald Trump, Congress, U.S. Allies, Human Rights Activists, all chest thumping to the drumbeat of whatever reason any of them want to spew?  Bullshit!  Just forget the question, people.  It will all be sorted out and we will never, never, know what really happens.  National security, don't you know.

Edited by Dan Warnick
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54 minutes ago, Marina Schwarz said:

It's still interesting as a mental exercise at least. I, too, doubt anyone would go as far as to risk having oil shoot up to $150 and possibly more by boycotting Saudi Arabia but it's nice to hypothesize about alternatives.

Marina, you are not being realistic.  The USA under The Donald is quite capable of anything.  If The Donald decides that KSA needs a serious reprimand, he can do so by instituting a tariff on all incoming Saudi Oil in the amount of $50/bbl.  He can also saber-rattle, and he can create blackballs of multiple Saudis, including MbS himself  (and that would be interesting, considering that then you have two narcissistic personalities at direct loggerheads, and neither is going to back down.) 

Now, ask yourself this: does this somehow "punish" the American consumer?  Of course not!  Yes, it blocks all Saudi oil into the US, as a practical matter, as nobody is going to pay the tariff premium.  The US will be buying more oil from others.  The Saudis will continue to sell oil, but I hazard the guess that it would be at a discount, the discount being the amount that would entice a buyer or broker to risk buying the oil only to have it intercepted at sea by the US Navy and impounded, or worse, expropriated  (hey, could happen).  Saudi cargoes would become pariahs and uninsurable. 

Meanwhile, the US consumers will be going to product substitution, including trucking companies reducing speed to increase fleet mpg, and homeowners going to alternative heating fuels, specifically wood pellet stoves, which have achieved a high degree of efficiency. Even cow manure will be reprocessed into boiler fuel. 

The net result, other than product substitution, is a re-shuffling of the deck chairs as to who buys what, and a serious drop in the receipts for the same oil it previously sold to the USA, and now has to discount to find buyers for.  Given the deficit spending of the KSA, it is not realistic for them to withdraw from the oil markets and leave their oil shut in.  They have to sell, the oil is radioactive to traders, and KSA has to discount. Ouch. 

Edited by Jan van Eck
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And I thought I was being as realistic as one possibly can be. :) I like the sound of a tariff, I admit. It's all tariffs and sanctions these days, what's one more. But I was thinking about a complete global boycott. Wrong to use "anyone". I should have said "everyone" since the current U.S. administration has indeed proven it can do anything. That'll never happen. I'd take a Saudi oil discount, too, though.

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The world of energy is always full of surprises.

We were supposed to be talking mainly about  Iranian sanctions theses days and suddenly we are talking about possible sanctions on KSA.

It's difficult to say if the Khashoggi case will be just an other bump on a bumpy road or a turning point in the Middle East. Bu tensions are reaching an unusual level between US and KSA with threats of sanctions on one side and of retaliation to sanctions on the other side.

https://www.bloomberg.com/news/articles/2018-10-14/saudi-arabia-says-it-will-retaliate-against-punitive-measures?utm_source=google&utm_medium=bd&cmpId=google

 

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5 minutes ago, Guillaume Albasini said:

The world of energy is always full of surprises.

We were supposed to be talking mainly about  Iranian sanctions theses days and suddenly we are talking about possible sanctions on KSA.

It's difficult to say if the Khashoggi case will be just an other bump on a bumpy road or a turning point in the Middle East. Bu tensions are reaching an unusual level between US and KSA with threats of sanctions on one side and of retaliation to sanctions on the other side.

https://www.bloomberg.com/news/articles/2018-10-14/saudi-arabia-says-it-will-retaliate-against-punitive-measures?utm_source=google&utm_medium=bd&cmpId=google

 

You are right, Guillaume, and this is potentially a dangerous situation.  The problem here is that U.S. Congressmen/women who oppose Trump (in every conceivable and unconceivable way) are still feeling multiple stings, going all the way back to Trump defeating Hillary through to Trump's nominee for the Supreme Court being approved and critical mid-term elections coming up for those same Congressmen/women.  My point is, Trump is not pushing this political bombshell with the Saudis, Congress is, but in so doing they are trying to say it's all Trump's fault.  The danger is if those people in Congress get their way this could turn into a real issue, and they are probably (rightly?) betting that Trump will not handle it well.  I don't know if Congress can impose sanctions or tariffs without the President but, even if they can't, they will at the very least claim the President is colluding or is weak on human rights or anything else they can spew out to the media.

Does anyone else on here know if Congress can impose sanctions or tariffs without the President?

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1 hour ago, Dan Warnick said:

My point is, Trump is not pushing this political bombshell with the Saudis, Congress is, but in so doing they are trying to say it's all Trump's fault. 

....., and they are probably (rightly?) betting that Trump will not handle it well.  

Does anyone else on here know if Congress can impose sanctions or tariffs without the President?

Dan, I think you are not assessing this situation correctly.  The push is from Trump himself.  He is running solo on saying that there will be terrible consequences - and I believe him.  I think it is apparent that the critic has been murdered inside that embassy  (an amazing situation, without precedent!)  and that his body was dismembered and taken out in pieces, probably through the diplomatic mail bags, in lined cartons.  I have to conclude that the murder was ordered by MbS.   And that is an incredible set of facts. 

Remember that critic Khashoggi is a visa holder in the USA as a permanent resident.  Constitutional rights and guarantees extend to him.  By doing the hit, MbS is directly attacking a protected US person.

Yes, Congress has the ability to impose sanctions.  Congress has special powers,including the power to declare war, which the President cannot do.  Congress can even declare Khashoggi to be an American Citizen  (without his consent, even!) to afford direct intervention and control over the matter.  There is precedent for this:  A Swedish diplomat during WWII,Raoul Wallenberg, was declared a US citizen by Congress after he disappeared into the Russian Gulag when the Russians overran Hungary, and he was eventually murdered in about 1951 in a Russian Gulag camp.  Body was never recovered. 

Edited by Jan van Eck
added paragraph on Wallenberg
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5 minutes ago, Jan van Eck said:

Dan, I think you are not assessing this situation correctly.  The push is from Trump himself.  He is running solo on saying that there will be terrible consequences - and I believe him.  I think it is apparent that the critic has been murdered inside that embassy  (an amazing situation, without precedent!)  and that his body was dismembered and taken out in pieces, probably through the diplomatic mail bags, in lined cartons.  I have to conclude that the murder was ordered by MbS.   And that is an incredible set of facts. 

Remember that critic Khashoggi is a visa holder in the USA as a permanent resident.  Constitutional rights and guarantees extend to him.  By doing the hit, MbS is directly attacking a protected US person.

Yes, Congress has the ability to impose sanctions.  Congress has special powers,including the power to declare war, which the President cannot do.  

Jan, I read a couple of days ago that Congress felt Trump wasn't acting fast or bold enough and that they would act without him if necessary.  Not doubting your perspective at all because I know you keep yourself up to date, better than I do in many cases.  I agree that what is alleged is unprecedented and, well, just plain grisly and inhumane, in peacetime especially but anytime really.

I also read that he held a visa and was a resident; I felt it strange the way it was worded because it did not say permanent resident when I read it.  Did you read permanent resident?  I hold a long term visa and I am a resident of my host country, but I am not on my way to citizenship.  Different things entirely.

What you state about Congress is clear.  I did not remember that, but when you mentioned war powers it made me remember my review of the Iranian Sanctions and how they indicated that Congress more or less wrote them and that the President's function at that point was to enforce them.  Thanks for clarifying and discussing.

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25 minutes ago, Dan Warnick said:

I also read that he held a visa and was a resident; I felt it strange the way it was worded because it did not say permanent resident when I read it.  Did you read permanent resident?  I hold a long term visa and I am a resident of my host country, but I am not on my way to citizenship.  Different things entirely.

 

There is no such thing in America as a "long term resident visa" that is not a permanent residency.  Known as the I-551, or "green card" (although it is not green, the visa is a laminated plastic credit-card size that is white), it is the only residency permit without expiry.  A holder of a green card can, if he wishes, eventually make Application for US citizenship.  The typical time delay is five years.  Interestingly, at least 35% of I-551 visa holders never convert to citizenship, even after fifty years; they simply retain citizenship of another country, and sit on the green card.  Of that 30%,  a good number either eventually move on to yet another country, such as Australia, or return to the "homeland" in old age.  For example, if you emigrated from Poland and speak the language, then your Social Security check goes much farther than it would in the USA, so it makes sense to return to Poland, live comfortably, and be congenial in the Polish language with your neighbors.  Americans do not understand this, they have this chauvinistic idea that everybody with a green card is clamoring to swear Allegiance to the Flag and recite the Pledge of Allegiance.  That is a fantasy.  Plenty, possibly the majority, are content to be residents only and keep fealty to some King. 

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3 minutes ago, Jan van Eck said:

There is no such thing in America as a "long term resident visa" that is not a permanent residency.  Known as the I-551, or "green card" (although it is not green, the visa is a laminated plastic credit-card size that is white), it is the only residency permit without expiry.  A holder of a green card can, if he wishes, eventually make Application for US citizenship.  The typical time delay is five years.  Interestingly, at least 35% of I-551 visa holders never convert to citizenship, even after fifty years; they simply retain citizenship of another country, and sit on the green card.  Of that 30%,  a good number either eventually move on to yet another country, such as Australia, or return to the "homeland" in old age.  For example, if you emigrated from Poland and speak the language, then your Social Security check goes much farther than it would in the USA, so it makes sense to return to Poland, live comfortably, and be congenial in the Polish language with your neighbors.  Americans do not understand this, they have this chauvinistic idea that everybody with a green card is clamoring to swear Allegiance to the Flag and recite the Pledge of Allegiance.  That is a fantasy.  Plenty, possibly the majority, are content to be residents only and keep fealty to some King. 

Thanks for clarifying.  My wife and I discussed getting her a green card but it is so easy for her to get and maintain a 10 year multi-entry visa for the U.S. that we felt she/we just didn't need to in the end.  Are you telling me that it might be better to get a green card?  It never expires unless, I assume, it is revoked for some reason?  Is it as easy as getting a 10 year multi-entry at an Embassy/Consulate?  Thanks for sharing your knowledge on this.

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12 hours ago, Dan Warnick said:

Thanks for clarifying.  My wife and I discussed getting her a green card but it is so easy for her to get and maintain a 10 year multi-entry visa for the U.S. that we felt she/we just didn't need to in the end.  Are you telling me that it might be better to get a green card?  It never expires unless, I assume, it is revoked for some reason?  Is it as easy as getting a 10 year multi-entry at an Embassy/Consulate?  Thanks for sharing your knowledge on this.

OK, but I am not an Immigration Attorney!  Please keep that in mind.

To become a permanent US resident, you need to be "sponsored," easy enough as she is your wife.  Upon doing so, once she enters the USA, she cannot leave until the process is complete, may take some time (possibly a year or more), unless she obtains what is known as "parole."  And that is yet another hurdle.  You have to jump through some hoops, and then to maintain that I-551 the US has to be your actual physical permanent residency, and you have to be consistently inside the USA for big stretches of time, at least 1/2 of the year, and a number of other tests, or you get the unpleasant surprise of returning to the USA with your I-551 and being denied entry.  Since you folks live abroad and you get those 10-year multi-entry, I don't see the advantage of going through the exercise for a permanent residency status unless you are planning to permanently move back.  On a multi-entry there might be some time limits such as three months at a time, I think you are on a B-2, but if you are staying longer simply go to any ICE office and ask nicely for an extension, they cheerfully grant that as she is your wife and as long as it is not her intent to be a permanent resident.  Otherwise, ICE will likely require a I-551 application. 

Anyway, that was the drill some years ago, who knows where it stands today.  Immigration into the USA is a big muddle, always has been.  Cheers.  

Edited by Jan van Eck
typing error

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4 minutes ago, Jan van Eck said:

OK, but I am not an Immigration Attorney!  Please keep that in mind.

To become a permanent US resident, you need to be "sponsored," easy enough as she is your wife.  Upon doing so, once she enters the USA, she cannot leave until the process is complete, may take some time (possibly a year or more), unless she obtains what is known as "parole."  And that is yet another hurdle.  You have to jump through some hoops, and then to maintain that I-551 the US has to be your actual physical permanent residency, and you have to be consistently inside the USA for big stretches of time, at least 1/2 of the year, and a number of other tests, or you get the unpleasant surprise of returning to the USA with your I-551 and being denied entry.  Since you folks live abroad and you get those 10-year multi-entry, I don't see the advantage of going through the exercise for a permanent residency status unless you are planning to permanently move back.  On a multi-entry there might be some time limits such as three months at a time, I think you are on a B-2, but if you are staying longer simply go to any ICE office and ask nicely for an extension, they cheerfully grant that is she is your wife and as long as it is not her intent to be a permanent resident.  Otherwise, ICE will likely require a I-551 application. 

Anyway, that was the drill some years ago, who knows where it stand today.  Immigration into the USA is a big muddle, always has been.  Cheers.  

Ok, thanks.  We've been married for 14 years and never had a problem with the current situation and I even recall now that the immigration folks at the Berlin U.S. Embassy (where we first got a 10 year multi-entry) even told us this was the best way to go if we had no plans to live and work in the U.S. anytime soon.  The second 10 year was also a breeze since she had held the first one with no incidents.

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(edited)

23 hours ago, Marina Schwarz said:

It's still interesting as a mental exercise at least. I, too, doubt anyone would go as far as to risk having oil shoot up to $150 and possibly more by boycotting Saudi Arabia but it's nice to hypothesise about alternatives.

Working in manufacturing, I noticed that industry can accomplish nearly anything at the right price.  When the profit is there, new shifts can be added, overtime offered freely (saw some tradesmen make $250k/year working 7 days/week), equipment sped up (it wears out faster, but that doesn't matter when you're making bank), lines installed with frightening speed, parts flown in from around the world, new employees hired & trained, ground broken on new facilities, risky technologies deployed, better equipment designed & purchased, R&D accelerated - the list of levers to pull is extensive.  What we observe on a daily basis and what's possible are entirely different things; all that's required is the right price. 

Above $100/bbl, interesting possibilities appear in oil.  I'm skeptical that a 2MMbpd disruption in SA would keep oil at $150/bbl for long, assuming it could get that high in the first place.  I've seen too many predictions of doom & gloom that free markets ruthlessly stamped out. 

 

22 hours ago, Dan Warnick said:

Let's take a look at this question from a different perspective.  A perspective that our young Saudi royal may not have been let in on yet, but one that I'm sure his elders would be able to reflect to him, should he ask.

You know all those wonderful U.S. military bases and assets placed strategically in and around the middle east.  They are there for defensive purposes, right?  OK!  Defense of what and for whom, I ask?  Oil, you say?  Correct.  Saudi Arabia and her oil cousins, you say?  Absolutely!  But not ultimately; ultimately they are there to protect the interests of the United States of America (and her allies, if they so choose to continue being her allies).  If that means the U.S. military (and maybe its allies?) find it necessary to "defend the Kingdom" by taking over the Kingdom "temporarily", so be it.  Oh, didn't they put those plans in the MSM?  Strange that, isn't it? 

The U.S. military is not going anywhere anytime soon.  It has been through all of this posturing before and it will go through it again.  They have been through the real thing as well.  Donald Trump, Congress, U.S. Allies, Human Rights Activists, all chest thumping to the drumbeat of whatever reason any of them want to spew?  Bullshit!  Just forget the question, people.  It will all be sorted out and we will never, never, know what really happens.  National security, don't you know.

Interesting corollary to this: the US could slowly bleed SA to death without losing a drop of their oil.  Alternatively, we could cause their oil production to slowly decline as the world is able to replace it, keeping oil prices stably where we'd like the whole time.  If we want that oil to flow, nothing can stop us.  If we don't want it to flow, nothing can stop us.  Provided we're willing to use our power - and we seem to be willing - there's effectively zero risk of an unplanned disruption spiking oil prices.  Why is anyone worried about this?

 

15 hours ago, Jan van Eck said:

Dan, I think you are not assessing this situation correctly.  The push is from Trump himself.  He is running solo on saying that there will be terrible consequences - and I believe him.  I think it is apparent that the critic has been murdered inside that embassy  (an amazing situation, without precedent!)  and that his body was dismembered and taken out in pieces, probably through the diplomatic mail bags, in lined cartons.  I have to conclude that the murder was ordered by MbS.   And that is an incredible set of facts.  

Remember that critic Khashoggi is a visa holder in the USA as a permanent resident.  Constitutional rights and guarantees extend to him.  By doing the hit, MbS is directly attacking a protected US person. 

Yes, Congress has the ability to impose sanctions.  Congress has special powers,including the power to declare war, which the President cannot do.  Congress can even declare Khashoggi to be an American Citizen  (without his consent, even!) to afford direct intervention and control over the matter.  There is precedent for this:  A Swedish diplomat during WWII,Raoul Wallenberg, was declared a US citizen by Congress after he disappeared into the Russian Gulag when the Russians overran Hungary, and he was eventually murdered in about 1951 in a Russian Gulag camp.  Body was never recovered.  

Why do you suppose Trump is pushing this?  Is he afraid MBS's behavior will make him look bad, is it part of a larger game of keeping SA in its place, or am I being a touch too Machiavellian about this? 

 

14 hours ago, Jan van Eck said:

There is no such thing in America as a "long term resident visa" that is not a permanent residency.  Known as the I-551, or "green card" (although it is not green, the visa is a laminated plastic credit-card size that is white), it is the only residency permit without expiry.  A holder of a green card can, if he wishes, eventually make Application for US citizenship.  The typical time delay is five years.  Interestingly, at least 35% of I-551 visa holders never convert to citizenship, even after fifty years; they simply retain citizenship of another country, and sit on the green card.  Of that 30%,  a good number either eventually move on to yet another country, such as Australia, or return to the "homeland" in old age.  For example, if you emigrated from Poland and speak the language, then your Social Security check goes much farther than it would in the USA, so it makes sense to return to Poland, live comfortably, and be congenial in the Polish language with your neighbors.  Americans do not understand this, they have this chauvinistic idea that everybody with a green card is clamoring to swear Allegiance to the Flag and recite the Pledge of Allegiance.  That is a fantasy.  Plenty, possibly the majority, are content to be residents only and keep fealty to some King. 

A cynical way of reading this would be, "Foreigners prefer to collect American money and then return to their homelands."  They're not necessarily committed to building a better America, they've no incentive to fight to defend us, and they're not keeping their money here.  They've no skin in the game.  The outflow of cash and lack of commitment seems like a heavy cost - esp. when it's on a scale of millions, many of whom are here illegally.  Why does America allow this?  Is there a benefit I'm not seeing? 

I'm in favor of immigration.  I've met great immigrants and considered myself privileged to live/work with them.  Still, the way we're conducting immigration seems absurd.  What gives? 

Edited by mthebold
Typo.
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(edited)

On 10/14/2018 at 1:25 PM, ceo_energemsier said:

10,000,000bpd +/-, who is going to make up for the shortfall for even 1-2mil bpd

I gave this a little more thought.  I think the world can make up a total loss of SA's production, and we can do it today.  I'm going to throw out some back-of-envelope, rounded estimates; please call me out where I'm being patently absurd or fill in more accurate data where you have it. 

 

Problem statement:

Given: 

- All of SA's production disappears tomorrow.  No warning, total loss, can't be re-started. 

- Prices spike to a modest $120-150/bbl.  I.e. the market incentive to replace SA's supply is relatively muted. 

- The Global Strategic Petroleum Reserves (GSPR.  sum of government + private reserves) stands at 4 billion barrels. 

Find: a replacement for SA's 10.5MMbpd before the GSPR is empty. 

Solution: 

SA uses most of their domestic consumption for air conditioning and screwing around - not vital industries.  In a crisis, SA's excesses would disappear along with 3MMbpd of their consumption.  We need only replace what they export.  10.5 - 3 = 7.5MMbpd deficit. 

In the first few months, we would:

1)  Tap the world's excess capacity.  At $120/bbl, the world could find an extra 1% on short notice.  7.5 - 1 = 6.5MMbpd deficit.

2)  Change individual driving behavior.  Sudden high prices would put efficiency on everyone's minds - esp. with the media preaching their usual fire and brimstone.  Their minds focused, The People would discover ample opportunity for savings.  To wit: 

  • As @Jan van Eck pointed out, properly inflated tires can save 3-5% on a vehicle.  If I read him correctly and this problem is ubiquitous, underinflated tires alone might account for 1-2% of world oil demand.
  • Vehicle tune-ups.
  • Reduced speeds.
  • More careful acceleration (I'm looking at you, America).
  • Combining trips (You again, America.).
  • Using the more efficient vehicle in a multi-car family (Seriously America, get it together).
  • Less joyriding/fewer road trips (America, the first step is admitting you have a problem). 
  • A shift from brick-and-mortar shopping to eCommerce. 
  • Carpooling.
  • Public transit.
  • Alternative transportation.
  • Etc

I'd estimate the true savings potential at 10+% - more for Americans, less for others.  Figure the average driver can save 5% merely by trying.  Transportation is approx. 2/3rds of oil demand, so 5%*(2/3) = 3.33% of world demand.  Round that down to 3%.  That's a 3MMbpd reduction in global oil demand.  6.5 - 3 = 3.5MMbpd deficit. 

3)  Destroy demand.

  • Business would slow in the developing world, where $120/bbl simply isn't affordable. 
  • In-person meetings would be replaced with remote conferencing
  • Government employees would be instructed to drive less
  • Companies would re-optimize their logistics around higher prices.
  • Oil-price-sensitive projects would be shelved in favor of other projects - possibly demand-reducing efficiency projects. 
  • Etc.

I don't have a good number for this.  To be conservative, let's say high prices destroy 1% of demand, or 1MMbpd.  3.5 - 1 = 2.5MMbpd deficit. 

And there it is: were it a priority, the world could quickly find 5MMbpd, reducing the supply deficit to 2.5MMbpd.  Does this pass the sanity test?  It sounds like a lot, but it's only 5%.  My observation - both in my personal life and working in industrial facilities - is that entities almost never operate within 5% of their potential - or even 10%.  Finding 5MMbpd globally - a mere 5% - should be trivial. 

Now we have a 2.5MMbpd deficit and approximately 4 billion barrels in reserve.  At 2.5MMbpd, 4 billion barrels would last 4.3 years.  Even at a 5MMbpd deficit, reserves would last 2.2 years.  If we assume the deficit shrinks linearly with time, then we have 8.6 and 4.3 years - ample time for a world-wide, all-in, combined public/private effort to find 5MMbpd.  To put this in perspective, the US alone has been adding 1+MMbpd/year at prices under $70/bbl - and demonstrated we can ramp this up-and-down as prices fluctuate.  At $120-150/bbl, the US alone could cover a 5MMbpd deficit in 4.3 years; the world's combined efforts could certainly handle it. We could tweak specific numbers - more/less production here, more/less demand destruction there - but the bottom line is that we have options.  The world won't run out of oil on account of SA. 

More importantly, replacing SA is just the beginning.  With the pall of SA's price manipulations gone and oil prices stably high, free markets would be unleashed:

  • US fracking would accelerate. 
  • Non-US fracking would accelerate where it currently exists and possibly spread to new areas. 
  • Citizens of developed nations, suffering high prices, would be more amenable to pipelines, oil sands, liquefaction and other politically stalled projects.
  • Waste/gas/coal-to-liquids would become economical worldwide, with the potential to produce tens of millions of bpd. 
  • Increased attention would be directed at undeveloped resources, such as Utah's oil shale/sands.
  • American consumers would (once again) shift to efficient vehicles. 
  • Homeowners would replace oil-fired furnaces
  • The auto industry would fast-track deployment of proven technologies. (Once implemented, these already proven technologies will reduce fuel consumption 20-50% over current-generation vehicles)
  • The construction industry would accelerate it's already-rapid shift to hybrid off-road equipment (Current, hybrid designs reduce fuel consumption 50%; customers need only place their orders).
  • Companies would accelerate plans to replace old, inefficient vehicles with newer models (Replacing an old vehicle achieves an immediate 10-50% reduction in fuel consumption)
  • Diesel to NG fuel switching would accelerate.  (NG can be retrofitted, meaning it can be implemented quickly, cheaply, and at scale)
  • EV adoption - esp. among taxis, ride-sharing, and other commercial vehicles driving 30k+ miles/year - would accelerate.
  • Electrification of Class-8 trucking would accelerate.
  • Electrification of ferries, tugs, and other niche applications would accelerate (although that may already be fast-tracked). 
  • Electrification of farm equipment would accelerate. 
  • Electrification of entire industrial operations (E.g. mines) would accelerate. 
  • Deployment of Renewables + storage to islands & remote locations would accelerate.
  • Factories worldwide would add shifts and pay overtime to meet demand for new vehicles & equipment, increasing the pace of demand destruction.**
  • Governments would get serious about fuel-saving infrastructure (tunnels, smoother highways, reducing congestion, roundabouts, etc)
  • Individuals would choose homes closer to work. 
  • Telecommuting would increase.
  • Municipalities would accelerate bicycle lanes & other alternatives*
  • Etc.

All of these happen at some sufficiently high, stable price.  If some items on this list fail, others will take their place; that's the beauty of a dynamic market.  If we can stomach a price spike - and we really have no choice as long as SA is in power - the market can replace SA's production, return prices to reasonable levels within a few years, and initiate a cascade of innovation.  A little pain now builds a much better future; the only thing stopping us is irrational fear.

That being the case, what are we waiting for?  We should make this happen. 

 

*I heard of a town where everyone drove electric golf carts, which turned out to be both practical and entertaining.  Imagine your kids being able to drive themselves around from a young age...

** One might argue that purchasing all these new vehicles will be a financial burden.  One might also argue that we'd only be redirecting money from SA back into our own pockets. 

Edited by mthebold
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Yes, the world could survive without the Saudi oil, albeit in a vastly changed state, but the Saudis could not survive.

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15 minutes ago, William Edwards said:

Yes, the world could survive without the Saudi oil, albeit in a vastly changed state, but the Saudis could not survive.

Honest question, because I'm better with tech than with international relations: in the past, SA has pulled every market lever, showing a clear disregard for other peoples' well being in the process.  If America & Russia decided to end them, would anyone care?  I know no one would come to their aid, that being a fool's errand, but would the world think less of the US and Russia for squashing SA?

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1 hour ago, mthebold said:

Honest question, because I'm better with tech than with international relations: in the past, SA has pulled every market lever, showing a clear disregard for other peoples' well being in the process.  If America & Russia decided to end them, would anyone care?  I know no one would come to their aid, that being a fool's errand, but would the world think less of the US and Russia for squashing SA?

Herewith the short answer(s) to your question and implied question.    First up, at this point, "America and Russia" are not going to agree on anything.  Historically, that area of the world (and including Greater India) was a Big Power conflict zone called "The Great Game."  The major protagonist was Britain, which invaded and conquered India-Pakistan-Afghanistan, and kept control on the cheap by building railroads and having the locals in the Territorial Army.  Their competitors were the Turks (Ottoman Empire), the Russians of course, and the French. So you have this historical antipathy and that continues to this day. 

Second, the US has this horror of instability.  It is why the US has soiled its hands by getting into the playpen with all manner of filth, dictators and oppressors around the globe, human rights violators, mass murderers, total scum, and the US ends up as Best Friend Forever. Look at the relationship of the US with Netanyahu, the man who is the great promoter of Middle East instability and a continuing state of war, frozen or hot. The idea is that being cozy with a tyrant and a monster is a better deal than with a nascent democracy which can go off the rails at any moment.  SO, with the Shah of Iran, the US propped him up in exchange for his iron hand in controlling Iran  (and by extension, Iraq). 

So it is not as if anyone else would care, it is that the thought is unthinkable to the US political establishment.  Dumping the Kingdom unleashes instability - and the US is in horror of instability.  And instability plays into the hands of the arch-rival, the Russians.  So, bottom line, the US will support KSA. 

Except, of course, we now have Donald Trump.  And he is quite capable of doing the unthinkable.  He seems to like doing that. 

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On 10/14/2018 at 2:25 PM, ceo_energemsier said:

10,000,000bpd +/-, who is going to make up for the shortfall for even 1-2mil bpd?

Some discussion about the same subject under this other topic page 8

 

In my humble opinion the best tool and weapon saudis have and can wield is that one of spare capacity, in times of emergency, and also there are many emerging threats over the kingdom, i.e. ISIS, Al Qaeda, Houthis in Yemen that have perpetrated attacks against oil facilities and also shiites in the eastern province, which if generalised definitely will cause a major disruption in saudi oil output and spike in oil prices. 

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1 hour ago, Jan van Eck said:

Herewith the short answer(s) to your question and implied question.    First up, at this point, "America and Russia" are not going to agree on anything.  Historically, that area of the world (and including Greater India) was a Big Power conflict zone called "The Great Game."  The major protagonist was Britain, which invaded and conquered India-Pakistan-Afghanistan, and kept control on the cheap by building railroads and having the locals in the Territorial Army.  Their competitors were the Turks (Ottoman Empire), the Russians of course, and the French. So you have this historical antipathy and that continues to this day.

I know great powers used to jockey for position in the Middle East, but I don't grasp why.  America didn't get into this "Great Game" until oil was involved, oil being a perfectly reasonable motivation. 

And who has antipathy for whom?

 

1 hour ago, Jan van Eck said:

Second, the US has this horror of instability.  It is why the US has soiled its hands by getting into the playpen with all manner of filth, dictators and oppressors around the globe, human rights violators, mass murderers, total scum, and the US ends up as Best Friend Forever. Look at the relationship of the US with Netanyahu, the man who is the great promoter of Middle East instability and a continuing state of war, frozen or hot. The idea is that being cozy with a tyrant and a monster is a better deal than with a nascent democracy which can go off the rails at any moment.  SO, with the Shah of Iran, the US propped him up in exchange for his iron hand in controlling Iran  (and by extension, Iraq).

When you rely on a region for a strategic resource, it makes sense to want stability.  So yes, America is in the "playpen" with all manner of filth.  Until now, that was the cost of doing business.

I'm not familiar enough with Netanyahu to know what makes him the "great promoter of Middle East instability".  I do have direct experience with non-Israeli Middle Easterners, though, and that experience convinced me that whatever crimes people allege against Israel are most likely justifiable self defense.  To establish some perspective, let's contrast Western culture - what you and I grew up in - with Middle Eastern culture.  During The Great War, soldiers from both sides declared an informal cease-fire and celebrated Christmas together.  Even when faced with unprecedented death and destruction, they retained their humanity, civility, and sensibility.  They respected each other, and because they respected each other, a measure of politeness could be afforded.  Rules of war could be established.  The worst atrocities could be avoided.  That's Western culture.  It has its problems, but the foundation is civil and reasonable. 

Now consider Iraq.  We were trained by the Marines who fought immediately before us.  The last advice they gave was - and I quote verbatim - "If you find yourself in a situation where you'll be captured, fight to the death or save the last bullet for yourself, because they're just going to cut your head off."  Respect, dialogue, and peaceful resolution clearly weren't options.  It went downhill from there.  The insurgents we fought - drawn from across the Middle East and frequently motivated by religious zealotry - had no qualms.  They would hide weapons in Mosques, use women to haul ammunition, stand next to children and start firefights...  One time they even gave AK-47 look-alike airsoft rifles to young boys hoping we would accidentally kill one - just to get media attention.  These people don't hold Western values and don't behave the way we do.  When dealing with the worst of them, you face a different kind of evil - something most genteel Western citizens never experience. 

Now imagine living among people who kill children to further their politics.  Imagine those people have promised death to you and your kind, they regularly attack your homes and families, and they show no sign of relenting.  That's Netanyahu's reality.  Until one has experienced this for himself, I don't think it's reasonable to pass judgement.  So no, I don't accept the conclusion that Netanyahu is a monster.  I suspect he's doing what any reasonable person would do under those circumstances. 

On that note, everyone likes to chide the US for supporting dictators, but they rarely ask why the US might do this.  More perspective: when asked what form of government the Founding Fathers had given the people, Benjamin Franklin allegedly quipped, "A Republic - if you can keep it."  Representative government is inherently unstable.  It can only be maintained by an intelligent, educated, honorable society dedicated to the necessary work and sacrifices.  I saw very little in the Middle East indicating that these cultures matched that description.  I would argue that, when you deal with the unfettered violence of the Middle East, a dictator is often required.  Better a stable dictatorship than a democracy that rips itself to shreds.  So again, let's hold the judgement until we've gone and seen. 

 

2 hours ago, Jan van Eck said:

So it is not as if anyone else would care, it is that the thought is unthinkable to the US political establishment.  Dumping the Kingdom unleashes instability - and the US is in horror of instability.  And instability plays into the hands of the arch-rival, the Russians.  So, bottom line, the US will support KSA. 

Except, of course, we now have Donald Trump.  And he is quite capable of doing the unthinkable.  He seems to like doing that. 

Dumping SA only unleashes instability if we leave their enemies unchecked.  If America and Russia were to weaken both sides simultaneously - say, through a combination of sanctions, inciting regional wars, stealing market share, etc. - then the balance would be maintained.  As oil-rich nations that would benefit from increased market share, I suspect the US and Russia have a common interest in this. 

Which brings us back to that Great Game.  The Game is to gain power, wealth, influence, etc.  Selling oil accomplishes that far better than proxy wars in The Sandbox, so why wouldn't the great powers steal market share?  Besides, if everyone is absolutely hellbent on using The Sandbox, we can still do so after we've taken the market share.  No one is policing this. 

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