Why is Saudi Arabia doing this?

MoA - Trump, Putin Will Discuss The End Of U.S. Shale Oil

We'll see what happens.

 

Saudis Arabia has little cost to extract oil or ramp up production. The initial overture was for other producers to cut production and raise prices. When the Russians refused to play nice the Suadis tried to instill some discipline by using their enormous capacity to flood the market. The Saudis have no qualms about dealing misery to US producers. But this time I think they are mere collateral damage.

 

The only way I see this turning around for my Industry is if we some how force the Saudi's to cut production. Maybe a deal with Vladimir Putin? Maybe military action which would be expensive politically and we're in an election year. It's almost like someone got China, Russia, and Saudi Arabia to hit the US all at once 8 months before our election. I am not saying it was on purpose but anything's possible. I really think Trump could lose in 2020 if all this shitstorm isn't cleaned up by 11/01/2020. What a mess!

 

It won't dwarf anything. Markets move up and down. The Saudis won’t forego oil revenues indefinitely. If it’s cheaper to buy their oil than to extract our own, buy their oil.

 

I think it was Jimmy Carter and/or his administration that suggested a similar idea for a GPEC organization: Grain Producing and Exporting Countries, during the big oil crisis in the late 70s. Nations that produce a lot more foodstuffs than they consume include us, Canada, Australia, Brazil, and Argentina. It’s an enviable position to be in. It could also be a huge part of Putin’s designs for the Ukraine, one of Europe’s breadbaskets. It wouldn’t be the first time Russia expropriated Ukraine’s grain for Russia.

Oh yeah, and China has been engaging in a sort of colonizing of Africa for resource production, especially foodstuffs and rare earth minerals. I don’t know how that will play out, but don’t be surprised if, after a number of years under the Chinese heel, many Africans would consider rule by the likes of the French and the English to be relatively benign in comparison. (Belgian rule was a different story...; strange how a land best known for fine chocolate and great beer could be so incredibly cruel.).

 

Australia no longer exports wheat due to horrendous drought conditions. Argentina is halting exports. The US? We’ve been the largest exporter for a long time. But last year’s flooding and this year’s shortage of fertilizer (almost all of it comes from China) will mean we export less whether or not we change policy. Food is about to become scarce in many countries and more expensive in all countries. Including here. Grow a garden.

 

We should be ok for food production as a nation. I knew Australia was running low on aquifer water, but yeah the fires and drought are sure to have an effect.

I like eating a good steak or a burger, but the annoying preachy vegetarians are correct that if the land used to grow animal feed was diverted to grains, legumes, and vegetable production for human consumption, we could feed many, many more. I don’t think we’re at (or even near) the point where we need to do that in order to feed our people, but it’s good to know that such an option exists. In a pinch, we could cut down a lot on eating meat and feed many, many more.

 

Interesting op-ed from a Pennsylvania oilman: An Oilman’s Plea To President Trump | OilPrice.com

He believes its time to cut ties with the Saudis. His plan to save the oil industry?

1. Have Trump set the price at $62/barrel (The hell with markets).
2. Place tariffs on imported oil. Use the proceeds to appease the clean energy folks.

Of course, such a policy would mean much more. Obviously the Saudis would begin accepting payments in other currencies, global demand for dollars would decrease, thus weakening the dollar. Maybe that would be a good thing. It would definitely mean the end to globalism and global supply lines and Americans would no longer be able to afford imported products.

Anyway, I thought it was an interesting letter to the President.

 

I could go for the tax on imported oil.

 

At the risk of hijacking the thread, there are a lot of possibilities in the not so far future, for how the food picture is shaping up in America.

First, there will be a shortage of workers due to closing of the borders and fear of contracting the virus. On the delivery end, truck drivers and warehouse workers are already demanding more pay in compensation for having to place themselves at risk. As they are experienced and not that many people are currently willing to take such jobs in an environment susceptible to catching the virus, they will get this pay and the cost will be transferred to the consumer.

Secondly, the eco/veggie movie is trying to replace "beef" with "synthetic meat." If American's have less money to spend due to job losses,etc. combined with rising food costs, diets will change. Also, if farmers are unable to plant timely again this year because of lack of fertilizer (last year is was because of flooding), that will raise the price of grains which will be passed on to the consumer as well.

Look for vertical farms, large aquatic vegetable farms and the like to fill the void. Small farms will be wiped out and the Bezos's of the world will fill the void.

 

We wouldn’t need any foreign oil if the Jones Act was rescinded.

 

Please explain? I’m not seeing the Jones Act connection. Most domestic oil and gas is transported to US refineries by pipelines. A relatively smallish percentage moves from the US wellhead to a US refinery by water transport. If it’s Alaskan oil you’re getting at, Texas outproduces Alaska by a long shot. There’s also nothing stopping Alaska producers from sailing US flagged ships from Alaska.to wherever. Exxon has its own fleet of tankers. They could always flag some in the US for Alaska to West Coast transport if they want. Maybe they do, I don’t know.

While we have enough domestic petroleum reserves to supply our country’s needs, it’s mostly not cheap oil. It costs a lot to produce. So if our supposed pals the Saudis dump enormous amounts of very cheap oil on the markets, our domestic producers cut back or shut down. At that point, we’re not producing enough domestic petroleum to supply our needs. Rather, we import the cheap oil instead of produce the expensive oil.

 

It’s cheaper to import oil from Saudi to the US NE than to ship it from USGC. That is due to the Jones Act. The pipelines to the NE (Colonial and one other I can’t remember) are full. They also don’t ship crude every day. They switch out to a different product every 2 weeks: crude, gasoline, diesel, heating oil, etc.

 

I wouldn’t flinch if you showed me evidence that Russia developed this bio weapon, released it in China and got in a price war with the saudis to try to run the shale producers here out of business. The only thing is that it would seem to hurt their hand selected president’s chances for re-election.

 

You think Russia doing this is more plausible than China? I'm very much of a Russia hawk, but that is laughable.

That isn't out of the question.

There is another possibility, but you'd have to turn off Rachel Maddow to understand it. It's possible that he isn't actually their hand selected president but just a goober who said a lot of stupid **** about foreign policy during the 2016 campaign. That would explain the many inconstancies in your narrative. It would explain Mueller's inability to prove a collusion between Trump and the Kremlin. It would explain the military buildup taking place in Eastern Europe. It would explain the sanctions imposed on Russia. It would explain the arming of the Ukrainians. None of those moves make any sense at all unless you reject the Putin hand puppet narrative. And I point this out as a Russia hawk and as someone who bought the narrative for a long time.

 

There is a difference there though. Russian territory oil is also on the cheaper side to produce. But I read recently that the Saudis actually fund a greater percentage of their govt off it than modern Russia does. If you this metric, the math is different.

One more thing, they helped us end the USSR by flooding the market with oil in the 1980s. Price fell all the way back to single digits. With Reagan also squeezing their testicles at the same time, the oil crash forced the Soviets to borrow from Western banks. And once they did that, it was over. LOL. Western banking will get you every time. Lots of Russians never forgot that, including Putin.

 

I’m not a conspiracy theorist, now look what i instigated! Oops.

I was more thinking China was behind this and some of the liberal media as well. Was not thinking it was all Russia. Really it’s most likely that China, Russia, Saudi Arabia and the Liberal Media in the US independently saw an opportunity to get Trump. However, China fired the first shot.

 

You may be right. I keep reading that this is proven scientifically to NOT be man made. So I have to fight my conspiracy theory mind.

I've watched Maddow one time in my home since I moved there circa 2005. I don't even know what channel MSNBC is. Ironically, I go to Foxnews and then hit guide if I want to see what's going on on the "impeachment porn" channel. I do like to go to Foxnews to catch up on the latest on Hillary and her emails.

 

I don't think it's man-made, and I don't blame China for it starting. Virus outbreaks can happen anywhere. I think the bat-eating is dumb, but that's a cultural difference. People can eat whatever want. I'm sure the Chinese think the squirrel, sewer rat, and possum-eating that happens in Oklahoma is dumb.

I do blame them for hiding it, throwing doctors who tried to sound the alarm in the slammer, for trying to blame the US and military, and for expelling journalists who didn't tow the government line. I don't think they set the problem up. I do think they made it worse for the whole world.

 

We agree, mostly. Mostly. https://media.tenor.com/images/109dfdc53f6b49a626987bee657c1031/raw

 

Time to go long oil?
In Surprise Tweet, Trump Warns 'Iran Sneak Attack' Coming - Tehran To Pay "Very Heavy Price"

As the administration becomes desperate to save the oil industry, what better (sinister) way than to trigger a war with Iran? Should Iran retaliate by closing the straits of Hormuth or directly striking Saudi oil facilities, shale production becomes viable. Is it too much to ask thousands of US lives to preserve an essential industry?

 

The Saudi Energy minister said that the Russian energy minister did not tell the truth and his comments today are baseless. If they are playing a game, they are making it look pretty good

 

Looks like the Saudis and Russians have finally worked it out.

 

I’m beginning to believe we lost the last truth speaker when Billy Graham died.

 

There looks to be no deal.
After Record Rally Oil Faces Collapse As New Feud Erupts Between Saudis And Russia; Monday OPEC+ Meeting Cancelled

 

This is all part of a longer term negotiation. I think at some point the US will realize that a stable commodity market is in everyone's interest. We finally have leverage against OPEC so we should use it.

 

It seems to me the Saudis and Russia have the leverage; especially Russia.
For there to be a deal, both the Saudis and Russia demand that the US curtail production. Trump, arguably doesn't have the ability to force independent oil companies to shut down, and if he does so, that further hurts the economy, particularly in Texas.

Some have floated the idea that Trump would set price controls (for example $60/barrel) on US production, shut down imports or place tariffs on imports, and see how that works. Maybe someone can explain that to me. If I understand correctly, our refining infrastructure is currently geared toward the heavy imported oil moreso than the lighter, shale oil.

If there is no deal, and the above scenario doesn't materialize, the US would be forced to control oil elsewhere. This could mean attacking Venezuela or even Iran militarily if necessary. Now, we can't just launch an attack and tell the American people we need to control oil production. But we can ramp up propaganda such as we've seen recently about naming Maduro as a narco-terrorist, or Iran being responsible for the Iraqi Shia-militia attack on our bases in Iraq.

 

If, as a nation, we're going to become a de facto (or actual) member of an international oil cartel, here's a mechanism that might work under our current federal system:

Trump/the feds lean on the Texas RRC and similar state agencies in oil producing states to lower production limits by well. Such anti-competitive price fixing is not illegal when the government(s) does it. The carrot and stick the feds could use would be the usual highway funding, pork projects, military bases, etc. The feds could also threaten new federal O&G production taxes if the oil states' regulatory authorities don't play ball and lower production. The oil states and the feds would meet like OPEC and agree to production levels by state. Meanwhile, the US joins OPEC and the feds meet with the OPEC leaders to set quotas by nations.

 

That's a good thought experiment. Sounds like a reasonable possibility. As this goes on, its obvious the government will (must?) become more and more authoritarian to keep the trains running, so to speak. That's scary.

 

There's good and bad to this sort of thing. Basically, if we were to do this, it would be like the US having its own Railroad Commission to regulate/limit production. The argument is that if it's ok for the Texas RRC to go in and shut down/limit production, then the federal government should be able to limit production by the states. There's an obvious constitutional federalism problem with this. Historically, the feds use carrots and sticks to get the states to do what they want. Witness, the Louisiana 18 year old drinking age. The loss of fed highway funding made Louisiana change it to 21 under federal pressure. The threat of new O&G production/extraction taxes, and the goal of obtaining stable reasonably high prices might lead many energy producers to support something like this.

A danger: it could morph into a highly controlling restrictive farm program-like Frankenstein. Big players might be broken up. Fed production restrictions could include onerous fed environmental restrictions.