Comments by "Neolithic Transit Revolution" (@neolithictransitrevolution427) on "Will Saudi Arabia Start an Oil Price War? || Peter Zeihan" video.

  1. Two counter points to consider. Many of the "new wells" or new production is DUCs, drilled but uncomplete wells. To some extent that aligns with your point on drill now, frack later. But it's important to also see that the drill rig decrease is real, it's not (just) the rigs are more efficient, it's that DUCs have been decreasing over the last few years while new wells are drilled at a lower rate. The second point is that the Permian basin is seeing declining productivity in new wells, a situation already affecting Bakken and Eagle Ford, the two other large fracking zones. Shale Basins as a whole see declining productivity relatively quickly, and per well production in the Permian is already falling. This is just compensated with more wells. The last point to consider is the Fracking produces very light oil, nearly NGLs or condensate. Fracking also requires a lot of Diesel. If the US were forced to use its own Fracked oil, rather than sell it abroad, the Gulf refineries it's located near would face the issue of being tooled for heavy oil, and the fact it's difficult to turn light oil into heavy oil products, more so than the reverse. While Gasoline production would remain high, diesel production would find itself very stressed while diesel was in high demand. I have seen proposals to use wet CNG captured at the well head to power the pumps used for fracking. This would be a major improvement on economics - but isn't commercialized.
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  2. The US should be viewed as several regions for oil talk. First and easiest is the Mid west. Something like 70% of oil products in the Mid west start as Canadian DilBit from Alberta and largely refined around Chicago. That's Bitumen from the oil sands mixed with very light oil, either imported from NG plants in the US, or from fracking in BC/Alberta. The other 30% is Fracked in the Bakken, ie North Dakota, and mixed with the DilBit at the refinery. Second easiest is the Rockies (not the coast). Again, about 50% of oil is Canadian heavy from Alberta or Saskatchewan (but not generally DilBit), again mixed with Bakken shale oil. I'd say the third easiest to grasp is California, which is an oil producer itself. California has regulation on petrolium products that limit where it can import from, and because it's seperate by mountains no pipeline connection to the rest of the US exosts. LA is known for Tar pits, and that's because there is heavy oil. I believe California was once the largest producer but that may be wrong. Now California meets about a third of its demand, with the rest being heavy crude from south america and the Gulf countries. At one point Alaska was a major supplier, but that is no longer (directly the case). Canada is a growing supplier, with trains of bitumen increasing to California over the last few years, and now a pipeline allowing shipping to California as well. That pipeline connects directly to Washington State, which is the only state able to export to California due to regulations. Washington gets a reasonable amount of Canadian crude, along with Alaskan crude and some Gulf oil. Russian used to be on the menu as well. Bakken light oil was as well, but I believe that has decreased. After that you have the south. Suffice it to say, no one expected the shale revolution, so giant refineries for heavy, sour crude expected from Mexico and Venezuela were built. But with Mexican oil production being a mess and Venezuela collapsing, this hasn't gone to plan. They used to import heavy "unfinished oils" from Russian refineries that couldn't process it. Keystone XL was about getting Canadian DilBit to the Gulf at lower prices than a train. Canada is now the largest provider (500,000 brls a day), mainly by rail I believe, followed by Mexico, Venezuela is about half of Mexico, and Columbia follows that, followed by the Saudis and Iraq, and then a mix to fill it out. Most of the refineries are coastal, so it's a very flexible price driven market (vs the interior where you need pipelines, or the west coast where regulations are at play). Some shale oil is also used as the largest and second largest basin are in the region, and the Off Shore Gulf of Texas oil mainly goes to these refineries. But shale is very light, and not ideal for these refineries due to the high international price and lower output. much of the refinery products in this region are also exported. The Atlantic seaboard is a real shmorgus borg, but there are a few refineries near NY that import from the Bakken or overseas, a large pipeline that connects very thing below NY to Gulf of Texas refineries, and the New England area generally imports oil products refined in New Brunswick Canada, with the oil refined coming from Nigeria and the Saudis. The US then exports a large amount of Bakken shale oil to Canadian refineries in Ontario and Quebec (mostly Quebec) since the refineries are built for light crudes. Much of the Texas produced crude is exported overseas.
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  3. ​ @Withnail1969 that isn't true. Wells were shut in during covid. If there is no where to store the oil, you can't produce it.
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  4. The issue is shale gas has become the significant source of oil. And shale wells have very short life cycles with a very high upfront production and quickly dropping off to nearly 0 within 3 years. So in the US, at least, you will see a rapid collapse in production. In fact, we're all ready seeing a collapse in new wells from the Shale industry over the last few years, with most wells being brought online being partially completed wells from prior to covid.
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  5. ​ @Withnail1969 Trump/the president does decide which federal lands are available, what subsidies are available, and what regulations are in place. And also, because Fracking produced very light oil with a lot of NG coproduction, what the LNG export capacity is allowed to be and so what prices oil producers get for the gas, and also wether a Keystone XL pipeline with heavy DilBit is built, which requires light oil to balance the heavy bitumen and would allow the US to use more Fracked oil domestically. Also, the president evidently decides whether federal employees work from home or are forced to commute daily, which impacts gas demand.
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  6. But, gas for the commute you won't be doing will be cheaper... I'm just joking of course, I'm Canadian, low oil prices mean my entire country is fucked.
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  7. ​ @waltershearls the US does have a trade deficit on oil, that is correct. They are a net petroleum exporter, but that includes gas and diesel etc. If you exclude Canada, because the oil trade is protected by physical infrastructure and legal treaties, then you get oil independence. But the entire mid west runs mainly on Canadian oil. California/the west coast runs largely on imports from Iraq and south america, although Canadian oil is increasing there as well.
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  8. That's not really how industries work. For a while you can fill the strategic reserve, as you should, but labour and equipment doesn't just sit around waiting during the dip.
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  9. Do you... Do you understand our economy is based on oil exports? A price war will not only destroy the CAD, it will kill Alberta and Newfoundland. Offshore and oilsands mining operations both nearly died after a month of price war in Covid. It's like you're saying we need more protein in our diet and you want someone to cut off your leg and feed it to you.
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  10. What
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  11.  @genrihlanevsky6612  you understand the exception is because the US can easily cut exports, yes? He has said both are possible. Demanding exact knowledge of the future isn't going to get far. I don't think Zeihan is all that, but I've been expecting the Saudis to launch a price war for sometime, and it's entirely possible war in the middle east distrupts global production.
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  12.  @billpetersen298  it's important to understand why China is building coal though. In part it's politics around regional vs central governments, but mainly it's because China doesn't have access to a lot of NG. Coal is used balance the grid in the same way the US uses NG. But China is building an enormous amount of solar and wind, and storage. Now, storage is largely only a few hours, but coal will soon be relegated to mainly serving overnight demand. China builds coal plants, but it also closes coal plants, and the new plants are generally larger and much more efficient, so while you may have more coal capacity, you aren't necessarily building more coal. Actual coal demand in the second half of this year is expected to be lower than the second half of 2023, because the drought in the South seems to have ended bringing hydro back on line. All of that is to say, yes, China still burns coal. But coal consumption has only seen increases in the last few years due to drought, and even then relatively small increases. Actual consumption will likely drop over the next few years quite rapidly because of the solar and storage build out.
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  13. This is silly as more Oil has been produced under Biden than Trump.
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  14. You're energy independent because you have a technology to produce oil, but it's an expensive technology
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  15. Oil is like everything else, you can get it cheap from overseas or buy it more expensive but have a domestic industry. So, do you think the lower prices from making China the world Manufacturer were worth it at the cost of American manufacturering and jobs?
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  16.  @Withnail1969  this is a really key point, particularly because Fracking uses a lot of Diesel, but produces very light oil
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  17.  @Withnail1969  if you mean not enough at this very moment, that may be correct, although I think it's more regional since Russian oil is going to very specific markets. With Canadian Transmountain operating this should improve the situation somewhat, at the expense of higher oil prices in the Midwest. But with Venezuela off line and Mexico a mess, and between shale and Guyana, certainly the average barrel has become a lot lighter than anyone expected.
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