Good news, you say? Maybe. The forces moving oil around the world are complex, and in addition to recession-related decline in oil consumption in the US (mostly in diesel and jet fuel, not so much in gasoline), Saudi Arabia is shifting its market more toward China. This matters, because as exporters find markets willing to pay higher prices, those prices will increase in the United States as well, even if we are buying less. And as exporters begin to care less about the economic stability of their lower-demand customers, what the U.S. says about the question becomes increasingly irrelevant.
Believe it or not, Saudi Arabia has had a vested interest in keeping oil prices low enough to keep the economic engine of the U.S. purring. Gouging is not in their interest—contented, spending customers are. When other customers supply most of the money any exporter needs, those who are lower on the totem pole become second-rate, at least as far as price concerns go.
For the record, here are the top import sources for U.S. oil in November 2009:
- Canada – 23% of imports
- Mexico – 9.8%
- Nigeria – 8.8%
- Venezuela – 8%
- Saudi Arabia – 7.7%
The next tier of import sources vary from month to month, but each of the following nations supplies the U.S. with about 3% to 4% of our oil imports: Angola, Iraq, Algeria, and Russia.
Virtually every drop of Canadian oil exported comes to the United States. So don’t think we can simply “get more” from Canada. There is no more to give, except as Canadian supplies slowly grow. With prices as low as they are ($78 or so per barrel), the Canadian Tar Sands are barely economic, or non-economic, to produce. Which means they are not produced.
2 comments:
I had a bunch of Arab students in a summer class and they got into a huge spat -- split about 50-50 -- between those who think Saudi Arabia has already reached "peak oil" and those who think it is still 30 years off (that's the official SA gov't position, I think).
What thinkest thou?
I would have said the official policy would suggest even further down the road than 30 years. But I just (in the past 10 days) read where they are starting CO2 flooding at Ghawar, much earlier than expected. That's an approach usually taken when it has become difficult to get the oil out.
I'm pretty much in agreement with Matt Simmons, in Twilight In The Desert, his detailed, compelling explanation of why he thinks Ghawar (and the other old, giant fields, which is most of them) is already past peak. Since there have been no actual field-level production data from Saudi Arabia since 1982, we can't know, but Simmons uses a remarkable analysis of technical papers published by Saudi Aramco to come to his (IMO) well-reasoned conclusions.
Whenever Ghawar does peak, it will be safe to say the world has peaked. I'd be willing to bet a beer or three that Saudi Arabia is probably already in a "peak plateau", at least.
I would have enjoyed being a fly on the wall listening to your students!
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