New York (CNN Business) The epic American oil boom is just getting started. OPEC, on the other hand, is stuck on the sidelines. US oil production is on track to spike to a record 13.4 million barrels per day by the end of 2019, according to a recent report by energy research firm Rystad Energy. Texas alone is expected to soon top 5 million barrels per day in oil production — more than any OPEC member other than Saudi Arabia. Oil plunges back into bear market The surge in American barrels — led by the Permian Basin in West Texas — has offset oil blocked by US sanctions on Venezuela and Iran. But all of that US oil is also contributing to a supply glut that last week sent crude into another bear market. OPEC has been forced to scale back its output — a trend that could continue as the cartel tries to prop prices back up. “We continue to see the Permian representing the key driver of global oil supply growth for the next five years,” Goldman Sachs analyst Brian Singer wrote to clients on Monday.
US daily output could soon top 14 million
The shale oil revolution has made the United States the world’s leading producer, surpassing Saudi Arabia and Russia. The ferocity of the US shale oil revolution has caught analysts off guard several times over the past decade. Rystad Energy ramped up its year-end US output forecast by 200,000 to 13.4 million barrels per day. In May, the United States likely produced a record 12.5 million barrels of oil per day, the firm added. All but four million of those barrels were from shale oilfields. That growth is expected to continue. The United States is on track to end 2020 by producing 14.3 million barrels per day, Rystad projects. That’s slightly higher than the firm previously estimated and nearly triple 2008’s output. Of course, analysts could have to rein in those blockbuster forecasts if oil prices crash significantly further. That would force American frackers to preserve cash and pull back on production.
OPEC’s production hits five year low
OPEC remains in retreat as the cartel tries to balance the market by putting a floor beneath prices. OPEC’s oil production tumbled to 29.9 million barrels per day in May, the lowest level in more than five years, Rystad said. OPEC output is down 2.6 million per day since October 2018 — the month before oil prices crashed into the last bear market. Khalid al-Falih, Saudi Arabia’s energy minister, said on Friday that OPEC is close to a deal to extend its production cuts. Those cuts, which Saudi Arabia has borne the brunt of, are due to expire at the end of June. The stock market is ‘spoiled’ by rate cuts” We think that OPEC will at least maintain its output cuts, and maybe even deepen them at their next meeting,” Caroline Bain, chief commodities economist at Capital Economics, wrote in a note to clients on Monday. Rystad dimmed its projection for Saudi Arabia’s oil production from 10.6 million barrels per day to 10.3 million.
Venezuela, Iran under pressure
OPEC’s output could be further hurt by problems in some of its member countries. Iran’s oil exports have plunged because of US sanctions. The years-long collapse of Venezuela’s oil industry has been accelerated in recent months by US sanctions and sprawling blackouts in the South American nation. “There appears little prospect of a recovery in output from Iran or Venezuela any time soon,” Bain wrote. Violence is also threatening oil production in Libya and Nigeria. All told, Rystad Energy estimates 1.3 million barrels per day of oil production is at risk in those four OPEC nations. “Risks to short-term supply are undoubtedly still plentiful,” Rystad analyst Bjørnar Tonhaugen said in the report.
Will crude slide below $50?
Despite all this, analysts aren’t predicting a spike in oil prices. If anything, forecasters are bracing for more pressure on prices, due in part to robust US production. Brent, which has tumbled about 15% since late April to $63 a barrel, should finish the year at around $60 a barrel, according to Capital Economics. The US economy is about to break a record. These 11 charts show why US oil prices, trading at about $54 a barrel, are down nearly 19% since late April. Recent selling has been driven by a spike in oil inventories that suggest demand for crude is deteriorating. Goldman Sachs said that a reversal in the oil demand metrics will be required to prevent US oil prices from sinking below the $50-$60 range.”Our real concern is over demand weakness,” consulting firm Facts Global Energy wrote in a report on Monday. “Have we entered an era where demand will keep falling and we have a lot more oil on our hands than expected?”
Polluters, as all those big energy producers (Big Oils, OPEC members and non members alike) are labelled, appeared to be ‘undermining’ UN climate Paris agreement. In effect, Oil, Gas and Coal world giants are exploiting a lack of conflict-of-interest protection at UN climate talks to push for continued fossil fuel use despite its contribution to catastrophic climate change through expensive lobbying campaigns because as it happens these oil, gas and coal giants could stand to waste trillions in a moderate world climate change. Patrick Galey elaborates on Phys.org.
The five largest publicly listed oil and gas majors have spent $1 billion since the 2015 Paris climate deal on public relations or lobbying that is “overwhelmingly in conflict” with the landmark accord’s goals, a watchdog said Friday.
Despite outwardly committing to support the Paris agreement and its aim to limit global temperature rises, ExxonMobil, Shell, Chevron, BP and Total spend a total of $200 million a year on efforts “to operate and expand fossil fuel operations,” according to InfluenceMap, a pro-transparency monitor.
Two of the companies—Shell and Chevron—said they rejected the watchdog’s findings.
“The fossil fuel sector has ramped up a quite strategic programme of influencing the climate agenda,” InfluenceMap Executive Director Dylan Tanner told AFP.
“It’s a continuum of activity from their lobby trade groups attacking the details of regulations, controlling them all the way up, to controlling the way the media thinks about the oil majors and climate.”
The report comes as oil and gas giants are under increasing pressure from shareholders to come clean over how greener lawmaking will impact their business models.
At the same time, the International Panel on Climate Change—composed of the world’s leading climate scientists—issued a call for a radical drawdown in fossil fuel use in order to hit the 1.5C (2.7 Fahrenheit) cap laid out in the Paris accord.
InfluenceMap looked at accounts, lobbying registers and communications releases since 2015, and alleged a large gap between the climate commitments companies make and the action they take.
It said all five engaged in lobbying and “narrative capture” through direct contact with lawmakers and officials, spending millions on climate branding, and by employing trade associations to represent the sector’s interests in policy discussions.
“The research reveals a trend of carefully devised campaigns of positive messaging combined with negative policy lobbying on climate change,” it said.
It added that of the more than $110 billion the five had earmarked for capital investment in 2019, just $3.6bn was given over to low-carbon schemes.
The report came one day after the European Parliament was urged to strip ExxonMobil lobbyists of their access, after the US giant failed to attend a hearing where expert witnesses said the oil giant has knowingly misled the public over climate change.
“How can we accept that companies spending hundreds of millions on lobbying against the EU’s goal of reaching the Paris agreement are still granted privileged access to decision makers?” said Pascoe Sabido, Corporate Europe Observatory’s climate policy researcher, who was not involved in the InfluenceMap report.
The report said Exxon alone spent $56 million a year on “climate branding” and $41 million annually on lobbying efforts.
In 2017 the company’s shareholders voted to push it to disclose what tougher emissions policies in the wake of Paris would mean for its portfolio.
With the exception of France’s Total, each oil major had largely focused climate lobbying expenditure in the US, the report said.
Chevron alone has spent more than $28 million in US political donations since 1990, according to the report.
AFP contacted all five oil and gas companies mentioned in the report for comment.
“We disagree with the assertion that Chevron has engaged in ‘climate-related branding and lobbying’ that is ‘overwhelmingly in conflict’ with the Paris Agreement,” said a Chevron spokesman.
“We are taking action to address potential climate change risks to our business and investing in technology and low carbon business opportunities that could reduce greenhouse gas emissions.”
A spokeswoman for Shell—which the report said spends $49 million annually on climate lobbying—said it “firmly rejected” the findings.
“We are very clear about our support for the Paris Agreement, and the steps that we are taking to help meet society’s needs for more and cleaner energy,” they told AFP.
BP, ExxonMobil and Total did not provide comment to AFP.
To date, nine cities have
sued the fossil industry for climate damages. California fisherman are going after oil companies for their role in warming the Pacific Ocean,
a process that soaks the Dungeness crabs they harvest with a dangerous neurotoxin.
Former acting New York state attorney general Barbara Underwood has
opened an investigation into whether ExxonMobil has misled its
shareholders about the risks it faces from climate change, a push current
Attorney General Leticia James has said she is eager to keep up. Massachusetts
attorney general Maura Healey opened an earlier investigation into
whether Exxon defrauded the public by spreading disinformation about climate
change, which various courts — including the Supreme Court — have refused to block despite the company’s pleas. And in Juliana vs. U.S., young people have filed suit against the
government for violating their constitutional rights by pursuing policies that
intensify global warming, hitting the dense ties between Big Oil and the state.
These are welcome attempts to hold the industry
responsible for its role in warming our earth. It’s time, however, to take this
series of legal proceedings to the next level: we should try fossil-fuel
executives for crimes against humanity.
a Reasonable Doubt
Just one hundred fossil fuel producers — including privately
held and state-owned companies — have been responsible for 71 percent of the
greenhouse gas emissions released since 1988, emissions that have already
killed at least tens of thousands of people through climate-fueled disasters
Green New Deal advocates have been right to focus
on the myriad ways that decarbonization can improve the lives of working-class Americans. But an important
complement to that is holding those most responsible for the crisis fully
accountable. It’s the right thing to do, and it makes clear to fossil-fuel
executives that they could face consequences beyond vanishing profits.
More immediately, a push to try fossil-fuel
executives for crimes against humanity could channel some much-needed populist
rage at the climate’s 1 percent, and render them persona non grata in
respectable society — let alone Congress or the UN, where they today enjoy
broad access. Making people like Exxon CEO Darren Woods or Shell CEO Ben van Beurden well known and widely reviled would put names
and faces to a problem too often discussed in the abstract. The climate fight
has clear villains. It’s long past time to name and shame them.
Left unchecked, the death toll of climate change
could easily creep up into the hundreds of millions, according to the Intergovernmental Panel on
Climate Change (IPCC), in turn unleashing chaos and suffering that’s simply
impossible to project. An independent report commissioned by twenty governments in 2012
found that climate impacts are already causing an estimated four hundred
thousand deaths per year.
Counting a wider range of casualties attributed to
burning fossil fuels — air pollution, indoor smoke, occupational hazards, and
skin cancer — that figure jumps to nearly 5 million a year. By 2030, annual
climate and carbon-related deaths are expected to reach nearly 6 million.
That’s the rough equivalent of one Holocaust every year, which in just a few
short years could surpass the total number of people killed in World War II.
All caused by the fossil-fuel industry.
Knowing full well the deadly consequences of
continued drilling, the individuals at the helm of fossil-fuel companies each
day choose to seek out new reserves to burn as quickly as possible to keep
their shareholders happy. They use every possible tool — and they have many —
to sabotage regulatory action.
That we need to instead strip fossil fuels from the
global economy isn’t up for debate. Without the increasingly distant-seeming
deployment of speculative, so-called negative emissions technologies, coal
usage will have to decline by 97 percent, oil by 87 percent, and gas by 74
percent by 2050 for us to have a halfway decent shot at keeping warming below
1.5 degrees celsius. That’s what it will take to avert pervasive, catastrophic
climate impacts that will destabilize the very foundations of society. (Keeping
warming to a more dangerous 2.0 degrees celsius will require decarbonization
that’s almost as abrupt.)
A recent report by
Oil Change International detailing the climate costs of continued drilling lays
the problem out in simple terms: either we embark on a managed decline of the
fossil-fuel industry, or we face economic and ecological ruin. Simply put, the
business model of the fossil-fuel industry is incompatible with the continued
existence of anything we might recognize as human civilization.
Barring a major course correction, that business
model — and more specifically, the executives who have designed and executed it
— will be responsible for untold suffering within many of our lifetimes, with
the youngest and poorest among us bearing a disproportionate burden, along with
people of color and residents of the Global South.
As recent research and reporting have documented,
some of the world’s biggest polluters have known for decades about the deadly
threat of global warming and the role their products play in fueling it. Some
companies began research into climate change as early as the 1950s. These days,
none can claim not to know the mortal danger posed by their ongoing extraction.
Crime Against Humanity
Technically speaking, what fossil-fuel companies do
isn’t genocide. Low-lying islands and communities around the world are and will
continue to be the worst hit by climate impacts.
Still, the case against the fossil-fuel industry is
not that their executives are targeting specific “national, ethnical, racial,
or religious” groups for annihilation, per the Rome Statute,
which enumerates the various types of human rights abuses that can be heard
before the International Criminal Court. Rather, the fossil industry’s behavior
constitutes a Crime Against Humanity in the classical sense: “a widespread or
systematic attack directed against any civilian population, with knowledge of
the attack,” including murder and extermination. Unlike genocide, the UN
clarifies, in the case of crimes against humanity,
it is not necessary to prove that there is an
overall specific intent. It suffices for there to be a simple intent to commit
any of the acts listed…The perpetrator must also act with knowledge of the
attack against the civilian population and that his/her action is part of that
Fossil-fuel executives may not have intended to destroy the world as we know it. And climate change may not look like the kinds of attacks we’re used to. But they’ve known what their industry is doing to the planet for a long time, and the effects are likely to be still more brutal if the causes are allowed to continue.
Saudi Arabia clinched 37 deals worth $53 billion after announcing that
it intends to attract upwards of $426 billion in total over the next decade as
it seeks to advance Crown Prince Mohammed Bin Salman’s (MbS) ambitious Vision
2030 agenda of socio-economic reform. The young leader knows that his
majority-youthful country has no hope for the future if it doesn’t rapidly
transition to a post-oil economy before its world-famous reserves run dry,
which is why he’s doing everything in his power to court infrastructural,
industrial, defense, and technological investments in order to prudently give
his people a chance to survive when that happens.
This will naturally result in
far-reaching lifestyle changes whereby the relatively well-off native
population is compelled to leave their plush government jobs and segue into the
competitive private sector out of economic necessity. Relatedly, the Kingdom is
loosening its previously strict religious edicts that hitherto prohibited
Western-style social freedoms such as playing music in restaurants, going to
the cinema, and allowing women to drive. About the last-mentioned of these
three latest reforms, it’s inevitable that more women will move out of the home
and into the workforce as Vision 2030 progressively develops, though therein
lays the potential for serious social unrest.
The Saudi state is upheld by the dual
pillars of the monarchy and the Wahhabi clerics, the latter of which have been side
lined as a result of Vision 2030 and MbS’ previous crackdown on both radical
Islam and the corrupt elite. For all intents and purposes, the Crown Prince’s
rapid rise to power was a factionalist coup within the monarchy itself but also
a structural one of the monarchy imposing its envisioned will over the Wahhabi
clerics, both in the sense of curtailing any militant activities that some of
them might have been encouraging and/or funding and also when it comes to
counteracting their previously dominant influence over society.
As the country makes progress on
advancing Vision 2030 and its related economic reforms continue catalyzing
social ones as well, it’s very possible that the structural fault lines between
the monarchy & Wahhabis and the younger generation & the older one will
lead to political destabilization if they’re not pre-emptively and properly
dealt with. While it might sound overly dramatic, there’s a lot of objective
truth in the forecast that MbS might either end up as the first King of a New Saudi Arabia or the last Crown Prince of a country that might ultimately cease to exist if these naturally occurring Hybrid War variables
aren’t brought under control.
Energy Reporters posting an article on Libya’s oil chief being bullish amid his country’s chaos that does seem to be wanting to end.
aims to more than double its oil production to 2.1 million
barrels per day (bpd) by 2021 provided security and stability are boosted, said Mustafa Sanalla, the chairman of
the state oil company, the National Oil Corporation (NOC).
The war-torn state produces 953,000 bpd, compared
to its pre-war capacity of 1.6 million bpd, according to Sanalla.
The oil boss demanded increased security at El Sharara oil field to ensure the
315,000 bpd site – which on December 8 was overrun by tribal activists, protesters and
security guards demanding unpaid wages – could return to production.
El Sharara, around 750km southwest of the capital Tripoli, is the country’s
largest oil field. Until recently it was producing about 270,000 barrels of oil
per day, more than a quarter of Libya’s daily oil production.
The oil activists demanded the rebuilding of cities and towns affected by
post-2011 armed conflict and providing liquidity for banks in the south to
boost recovery efforts.
“What happened in El Sharara discourages foreign companies,” said Sanalla, who
announced a visit to China in early 2018 to discuss oil investment
“The legitimate and rightful concerns of the southern Libyan communities are
being hijacked and abused by armed gangs, who instead of protecting the field
to generate wealth for all Libyans, are actually enabling its exploitation and
looting,” said Sanalla.
He also confirmed the improved security conditions in the Sirte basin in
central Libya which would enable the launch of production at the Farigh gas
field to 24 million cubic feet per day in three months, with an eventual output
goal of 270 million cubic feet per day, Sanalla said.
Prime Minister Fayez al-Serraj (pictured) recently agreed to set up funds in
excess of US$700 million for the development of southern Libya, which has
suffered from decades of neglect after talks with the El Sharara militants. The
talks followed a warning from Sanalla that the government should not encourage
the militant groups at El Sharara with concessions as this would set a
dangerous precedent for other direct action.
Despite security problems, the NOC said it expected full-year revenue to surge
by 76 per cent to US$24.2 billion for 2018.
Prime Minister Fayez al-Serraj. Libya’s oil
producers struggle with security challenges, making the war-torn state an
unreliable member of Opec. Picture credit: Wikimedia
Although Qatar’s exit from OPEC does not
affect much OPEC’s oil production power since the Emirate contributes only 2
percent to the cartel’s production capacity, it does pose serious questions on
the future of the organization and the role it is expected to play in global
Qatar’s decision to pull out of OPEC may
well be driven by political considerations; however, it also reflects the
growing signs of discontent among OPEC’s members with how the organization is
governed and how its production policies do not necessarily align with those of
some member states.
Structural shifts of oil markets and the
existence of major imbalances of the needs and policies of OPEC’s members pose
a serious challenge to the organization’s unity and its ability to continue to
abide by its mandate to “coordinate and unify the petroleum policies of its
member countries”. OPEC, as an organization, is likely to continue to exist,
but its role has already been weakened and will continue to dissipate as
differences among its members become more pronounced and other producers like
Russia and the United States increase their market share.
What is OPEC and how it is governed?
OPEC, which stands for Organization of the Petroleum Exporting Countries, can be understood as a club of some of the oil producing countries that is primarily mandated with protecting the interests of its member states and ensuring “a steady income to producers”. At the time of its inception in 1960, OPEC was seen as a “revolt” against private oil companies that seemed to ignore the interests of the producing states.
With Qatar’s exit, the organization
currently lists 14 members including Saudi Arabia, Iran, Iraq and Venezuela,
who are also founding members of OPEC. In 2017, OPEC members produced around 42
percent of the total global oil supply — more than 39 million barrel per
day — with Saudi Arabia, alone, contributing about a third of OPEC’s
production. In terms reserves numbers, OPEC members host 70 percent of global
proven oil reserves.
On paper, OPEC’s governance and decision
making requires the agreement of all member states; however, Saudi Arabia is
the de facto leader of OPEC due to its market share and spare capacity that
could be utilized to implement OPEC’s policies. Effectively, Saudi’s ability to
substantially vary its production and thus directly impacting oil markets made
it a price setter.
OPEC’s destabilizing factors
Infighting and cheating: Despite being oil
producing countries, OPEC members have different political, social and economic
realities. These differences translate into different needs at different times
and consequently, and naturally, creates tension and discontent within the
group. These different needs are manifested by the “budget break-even” price of
oil that each member states requires to fully cover its budgetary expenses (see
The numbers shown in the chart above are
largely dependent on the production in each country. For example, Venezuela’s
very high break-even price is due to its diminished production share of just 4
percent of OPEC’s basket — 500,000 barrel per day below its OPEC output target. Libya is also in
similar situation where it is looking to increase production to meet its
Because of these imbalances, OPEC members
continue to cheat to maximize their gains. Cheating is particularly rewarding when
production cuts are made and prices are elevated as countries with low
compliance eat into the market share of other oil producers. Iran, Iraq, Libya
and Nigeria have all attempted to cheat their way to produce more than they are
supposed to do.
Cheating has been reported in the academic literature as
the one of the main reasons that lead to cartels’ eventual collapse.
Shale oil: It was in 2014 when, driven by
Saudi Arabia’s interest in putting pressure on US
shale companies, oil supply exceeded demand, despite resistance of other
OPEC members with lower tolerance thresholds. The resulting glut sank oil
prices below $30 per barrel. Although many US shale companied filed for
bankruptcy, the industry emerged much stronger after the crisis due to
better adaptation to lower
prices, cost cutting measures, and technological efficiencies.
What makes shale oil a destabilizing factor
for OPEC is its relatively quick response to oil prices, limiting OPEC’s
ability to manipulate prices. The many independent shale companies in the US
can gradually increase their supply in response to higher prices, which would
eventually exert a downward pressure on prices.
Additionally, advancement in shale
technologies and reduced costs of offshore exploration and production allowed
new counties to become oil and gas producers, reducing their reliance on
Is OPEC still relevant?
Yes, but its power is diminishing. OPEC remains a dominant player in the global oil markets with production flexibility to smoothen price volatility. Additionally, OPEC members still have a major cost of production advantage compared to non-OPEC and shale rigs in the United States. However, market shifts such as increased share of unconventional oil and gas, especially in big oil consuming countries, and the increasing use of natural gas in power production are increasingly limiting OPEC’s ability to manipulate oil prices as it used to do. Now, shale producers are carefully watching prices and stand ready to react accordingly.