Saudi Arabia's Leverage In Oil Market Is Sapped

[phantom power]

Saudi Arabia has now made clear that it may never increase its production capacity beyond 12.5 million barrels a day -- its target for the end of 2009 -- up from its current level of 11.4 million barrels a day. After that, all drilling and exploration could go to maintain that as the country's oil fields age.

With demand still growing strongly in China and other parts of Asia, as well as within the Persian Gulf itself, the market is now digesting the fact that Saudi Arabia -- with nearly a quarter of the world's proven oil reserves -- may provide only a few of the added barrels that countries will need in the future. That has helped deepen the widespread fears over whether other suppliers can keep up with demand in the next decade.

Some analysts have pointed to the country's Khursaniya oil field, which is expected to come onstream next month, as proof that Saudi Arabia can easily bump up its production by 500,000 barrels a day if it wants. But the plan for that field was to ramp up its production slowly, while using the new stream to allow some of the country's older fields to rest.

http://online.wsj.com/article/SB121355902769475555.html

[liberal N proud]

1. All fodder supporting the speculators

While they drive the price ever higher while the MSM talks abut Supply and Demand driving price.

[Zachstar]

3. Oil Price is just a little higher than it needs to be.

Take that equation out and it may drop to what? 120?-110 at the most?

We need to stop talking conspiricy theories and just face the fact the oil age is ending. The sooner we stop yelling Enron and start walking more and getting more sustainable aspects about the home and garden. The faster we can face the problem more effectively.

[liberal N proud]

4. A little higher?

:wtf:

So you enjoy spending your money on gas for your car vs food for your kids?

[Zachstar]

5. I dont enjoy it. But oil is precious right now.

We have grown FAR too dependent on it. And therefore when another user (China) comes in. Demand skyrockets while production is lower because of the decades we spent sucking that tit of oil. Which is exactly the right phrase to use because oil was and always will be a temporary resource.

There is no shadow forces driving it up. The simple fact is cheap oil is done. As long as prices are high and we deal with the consequences rather than acting like a bunch of kids and sprouting tons of conspiricy theories we will dig ourselves out of this hole so the children do not have to face the horror as we will.

High prices are fueling demand for alternative technology.

Battery Technology which has been almost stagnant for decades is growing rapidly due to high prices and demand for cheaper energy density.

EMC2Fusion development got restarted by the Navy obviously because they cant afford the huge jumps in oil.

Etc...

It's helping us in the long run.

[liberal N proud]

6. And for those who don't survive the long run?

???????

Survival of the fittest?

[Zachstar]

7. Low blow.

But yes those who prepare and are able to get through the process will make it. Those that wont I don't know what to say. Sitting on a ton of debt driving an SUV? I just don't know what to say.

[liberal N proud]

8. Doesn't take an SUV to be in trouble financially with the current inflation

Prices of food, fuel and things needed to live going up. Wages stagnant.

What about the minimum wage workers trying to make ends meet? They were living on the edge before prices skyrocketed. Now, they are making those tough decisions, food or fuel. Fuel is necessary to get to work to pay for more fuel.

And it only gets worse.

[hogwyld]

12. There are alternatives to driving.

I've started taking public transport more often, planning trips together, and staying home with the family on weekends instead of hitting the road. These little steps help a lot. Also, I've parked my P/U during the week, and drive my 10 y.o mazda compact.

[Zachstar]

2. Tho once fusion sucess is noted watch them pump with everything they got and still do nothing.

The fact is cheap oil is over. Period. There is no 5 dollar oil people were talking about decades ago. but there will be 5 dollar gas soon enough. Along with plenty of 5 dollar foot longs at subway :P

The Saudis screw around and make broad notes that they can flood the market if it wanted to. It cant. I'm seeing so much hype about this new super field that will do NOTHING in the face of increased demand from China.

[Dissent Is Patriotic]

9. Can someone with a geology background tell

me how long it will take before all this drilling causes the earth to implode? I am being deadly serious...it defies logic that we could take so much oil out of the ground without the ground caving in.

[phantom power]

10. I'm aware of two reasons why that isn't a problem...

1) oil and NG reside in porous layers of rock. The rock is stable with or without the oil or NG. In fact, my understanding is that oil/NG usually migrate into these formations after their creation.

2) When an oil/NG well is tapped, it flows until the pressure becomes neutral. If you want to continue extraction, you have to force it by injecting some other substance, like water or CO2. Tangentially, this practice gives rise to a fractional flow curve, which will eventually cause the extraction rate to tail off quite rapidly, stoking the fears of the "fast-collapse" peak oil scenario that doomers such as myself get ulcers over.

There may be some exceptions to this, where extraction does cause some kind of subsidence.

[Nihil]

11. There are three main points to consider (IMO):

1) Stability

To expand on what PP said above ...
> The rock is stable with or without the oil or NG.

This is due to the "stable" part being the cap rock that is impermeable
(hence sealing in the fluid that has migrated to the trap - being the
"highest" point in the permeable rocks above the source of the fluid).

The reservoir rock does suffer some change but, as this is below the
cap rock (and the higher, unchanged & stable, strata) the impact is
greatly reduced - to the point that is can largely be ignored.


2) Volume

Although the volume of oil & gas removed (and largely burned :-() is
large compared to the volume measurements we encounter in our day-to-day
operations, it is *tiny* compared to the volume of rock surrounding it.

If all of the world's oil & gas had come from one supersize well then
there would have been an impact but it didn't: it came from millions of
tiny pinpricks around the globe.


3) Drilling vs mining

Again as PP mentioned, oil & gas is extracted from the "pores" within a
rock so the actual rock "framework" remains (even when the liquid has
been removed). In mining (pit mining), the entire rock is removed so
that there is no original "framework" left behind (apart from the odd
pillar or so to hold up the roof for the duration of the extraction
project). This is why coal mines *do* collapse - the overlaying rock
falls into the gaps from where the mined mineral was removed - and this
*does* lead to earthquakes & subsidence. It is a completely different
ball-game.

The exception to the above is when the oil/gas extraction requires
the injection of external fluid (typically water): if the pressure
of injection is significantly higher than the original oil pressure
then this process can introduce a bunch of new problems ranging from
fracturing of the cap rock (hence leakage to higher strata) to an
effective lubrication effect (hence allowing slippage along existing
fault planes). Both of these can lead to subsidence and seismic activity.

Hope this helps! :hi:

[Dissent Is Patriotic]

13. Thank you! This does help...

I appreciate the explanation.