Oil in perspective

Saudi Arabia changed course today. Possibly in response to the United States playing hardball on 9/11, the Saudis agreed in principle to stop producing oil as fast as they can. OPEC agreed in principle to shrink production 750,000 barrels a day. Oil prices went up 6%. What does that really mean?

Total proven reserves of oil are estimated at about 1,400 billion barrels
Global oil consumption is about 93 million barrels a day, or 33 billion barrels a year
At current consumption rates, that is 42 years of oil

OPEC countries produce about 38 million barrels a day – note that not all OPEC members are in the Middle East – Venezuela, Nigeria, Ecuador, Algeria, Angola, Gabon, Indonesia…

2/3 of oil consumed is not from OPEC – many countries consume oil they produce locally and are neither large exporters or importers of oil.

The United States consumes about 18 million barrels a day
– 9.3 million for gasoline (about 1.3 gallons per day per person)
– 3.5 million for diesel fuel
– 1.5 million for jet fuel
– 0.3 for heating oil

Where does the US get those 18 million barrels a day?

- thanks to Fracking, US domestic oil production is 13.6 million barrels a day
- total imports are around 10 million barrels a day
.... we "use" 23 million a day, but 3.9 is exported
  - about 3 million a day is OPEC, 1 million is Saudi Arabia
  - total Middle East (OPEC & non-OPEC) is about 1.5 million per day
  - about 3.4 million a day is from Canada 🇨🇦 
  - after Canada, in order:
    Saudi Arabia 1.1  (their refinery in Houston uses 800k barrels/day
    Venezuela  0.7
    Mexico     0.7
    Columbia   0.5
    Russia     0.4
    Iraq       0.4
    Nigeria    0.3
    Ecuador    0.2
    Brazil     0.2

Refineries use oil that matches their ability to refine – at the lowest cost, including shipping. If Saudi Arabia cut off all imports to the US, it would have negligible impact on the US. Closing the refinery in Houston would have an impact eventually, but US Gasoline stocks are about a year’s worth of production of that refinery. The other refineries and pipelines around the United States would adjust. We would reduce gasoline exports. If prices go up, people will drive less or buy smaller cars. Economies adjust – as long as governments don’t step in to “fix” problems

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5 Responses to Oil in perspective

  1. Parrott says:

    well Maybe the fracking industry will pick up. If Mexico could get their act together, the could actually sell some oil, but from I have read over the years they are not very efficient, in production. Have you all heard that about Pemex ?
    A lot of people laid off in the fracking so maybe they will get going again, Maybe they can hire some laid off coal miners?

    • Fred Stiening says:

      The nationalization of the Mexican oil business has been a disaster. The US oil companies have no incentive to help. Mexico had a horrible blowout in the Gulf of Mexico, much worse than the Deepwater Horizon. The Mexicans didn’t know how to stop it. The US only intervened when the pollution started to affect the US Gulf Coast. The oil service companies demanded to be paid in advance for the work.

      Management of an oil field is very important. When oil is tapped into, it generally has pressure equal to the force of the mass above it – the deeper the oil, the higher the pressure. In the beginning, the oil pressure alone brings the oil to the surface, but as oil is removed, the pressure drops and you have to start pumping the oil up. Eventually that stops working and you have to use secondary recovery techniques – generally pumping in CO2 or water to repressurize the pool pushing the oil toward the extraction wells.

      Pumping oil out as fast as possible depletes an oil field quickly, causing permanent damage. Mexico and Venezuela made the same mistakes. Pemex lacks the refinery capacity for its own needs, so it exports crude to Houston and re imports it back as gasoline and diesel fuel. A couple years ago, the value of the oil fell below the cost of the refined products, turning Mexico into a net importer of oil. Mexico probably still has significant capacity, but the Texas oil companies are never going to help.

      • briand75 says:

        I did business years ago with Pemex (working for GE). Those were the most corrupt people I had ever met. You should understand that corruption is a way of life in Mexico and Pemex was at the very Pinnacle of it. I am not surprised that Mexico has issues fracking or drilling for oil. You actually have to work hard (which most do) and, as a business, you have to stay solvent which means paying bills and making a profit. Pemex is the government and governments are horrible at business, technology and accounting.

        In any event, let the Saudis rot. We will never run out of oil – and we are one of the largest – if not the largest – exporters of oil to the world.

        Someone tell the anti-fracking screwballs to go find a tree to hug.

        • Fred Stiening says:

          Horizontal Fracking is a relatively new technology basically discovered by accident. As we do it more, they’ll learn how to do it better. The current slowdown because of the Saudis driving down the price is thinning the herd of the frackers that are inefficient or made bad choices. There is every reason to believe that the same technology will work in other places. Even if it isn’t done by US oil companies (if there is such a thing), the increase in supply will keep prices low.

          Jimmy Carter believing in the 1970s that we only had a few years of oil left was a fundamental misunderstanding of how things work. An oil driller is looking at what it will cost to develop a new oil field and how much it will bring in over its lifetime. Oil companies won’t drill new wells if they figure they’ll lose money. Oil is different than Obamacare.

  2. Fred Stiening says:

    If Saudi Arabia produces 10 million barrels a day, but the US buys only 1 million a day, whose oil trade is the US military protecting in the Persian Gulf?

    China 14%, Japan 14%, South Korea 11%, India 10%, France 3%

    Trump may have a point. Why is the United States paying the costs of keeping oil flowing?

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