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