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Oil is about to get more expensive in 2018, says analyst

$80 per barrel estimated within possibility after Futures continue to rally after 22% gain over the last year

Seraphim Hanisch

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The Petrodollar is gaining strength. So is the Petroruble, to coin a phrase.

Yes, that was a pun.

The truth is that over the last twelve months, oil prices have been gradually and steadily on the increase.  At the beginning of 2017, the price for a barrel of crude was about $56.  It sunk gradually until June of last year, bottoming out in the mid $40’s, and has been on the rise again ever since.

This rise gave one market forecaster, Byron Wien, impetus to predict that the price in 2018 is likely to continue to increase, reaching the US$ 80 point this year.  He predicts this as a surprise for the market.

Oil is a uniquely regulated market, because the quantity of actual oil available to pump is far higher than the amount that the oil-producing nations decide to pump.  This is what gave the OPEC cartel so much power in the late 20th century.  The common knowledge at that time was that the American oilfields were depleted, therefore the US, as the chief consumer of oil in those times, would have to pay the fiddler for the tune, and that fiddler was, of course, the consortium of oil producing nations in the Middle East.

However, this did not work all the time.  While there are many stories to tell about this, and probably infinite reasons given by many people as to what exactly controls price and demand of oil, by the early 21st century, the price per barrel had dropped very low, as low as $18 or $19 a barrel at times, and below $40 overall for nearly the first five years of this century.  Then it began an overall rise, peaking in 2008 with a price of about $140 per barrel.  This was the first time many American drivers witnessed prices per gallon of gasoline in excess of $4. This author believes that this price shock was the kickoff point for what became known as the Great Recession. The prospect of paying $100 per tank of gas was overwhelming to many people who owned low-efficiency vehicles, such as SUV’s, and the market for these vehicles came to a standstill as people stopped driving them and stopped buying them.  At the same time the attention of the nation turned to AIG and several other large companies in urgent need of a bailout, and so, the crisis was on.  As the graph below shows, the effect on oil prices was drastic.

The next rise, from about 2009 to about 2014 was partly politically driven, or at least hoped for.  The Obama Administration hoped to change the energy policy in the USA drastically, but his approach was a negative one, wishing to keep oil prices high to force the population to choose then-inefficient electric vehicles, or gas-powered ones with very small engines, His Energy Secretary, Steven Chu, had openly expressed hope for $10 per gallon gas before his appointment as Secretary, and to be fair he later recanted this.  On the record, Obama and Chu do not insist on such a rise as policy. But in the rather crafty way Obama had, he was able to express his wishes “nicely” without having to ever be forced to take responsibility for his words.  The prices for oil increased again, this time staying between $100 and $120 a barrel for several years, and during this time fuel prices continued to climb back into the $4 region.

But a new force was about to emerge in the oil market, and it came as a surprise to the whole industry.

The extraction industry had refined the technique of Hydraulic Fracturing (fracking) over the years, and with it, a new drilling technique was also devised, where instead of punching a hole straight down to where the oil was, companies could now change direction in the ground, or drill sideways, and pump water or other chemical compounds into the substrata and force more oil out.  This, plus the discoveries of at least two new major American oilfields, the Bakken Formation in North Dakota and the Niobrara Formation in Colorado and Wyoming, coupled with $120 per barrel prices, drove a drilling boom in the United States, of which I was a personal witness to, since I lived in the Niobrara region at the time. This technology did not stay restricted to the USA of course, and now for the first time in a generation, OPEC had an extremely aggressive challenger in the market.  In 2006, Russia and Saudi Arabia held roughly two-thirds of the production volume, with the USA at about 20%, but by the beginning of 2015, the American share of output had risen to 25%, while Russia and Saudi Arabia fell a bit, to about 28% apiece.

Crude Oil output of Top Five producing countries, from 1972 through 2016.

This broke the back of high-priced oil, and again the per-barrel price plunged below $40 in about one year’s time.  Now this price caused some of the new wells in the States to become unprofitable, so they were turned off for a time.  But as the price increases past the profitability points for these wells (ranging from as low as $10/bbl to $70/bbl), production can be increased again at the flip of a switch.

OPEC no longer has absolute control over the market.  However, like any good enterprise it is in competition, mainly to maintain a price-level and production level that maximizes its own profitability.

We have presented all of this information to make the following prediction.  Mr. Wien’s idea of $80/bbl oil is not entirely insane.  But it is unlikely to happen.  It should be somewhat more clear to the reader that this market is not just a simple supply vs demand equation.  There matters of geopolitics, national, regional and global finance, and efforts to regulate this industry to control it.  The amount of oil that is available in the world is certainly finite, but the truth is we keep finding more and more of it, so exactly what that finite point is, is still unknown.  It seems unlikely that we will see $80 oil, because high-priced gasoline will not be supported in the USA, even with this stronger economy now reported there.  Further, the increasingly successful EV market is getting more and more attractive and affordable.  With the advent of affordable electric vehicles that have comparable range to gas-powered ones, the demand for oil for gasoline (the biggest single by-product) will top out, and then slowly start to fall.

It is a matter of timing, of course, and the fascinating thing about following this market is to observe when, and how, all these elements come together.

Our prediction, for what it is worth: Oil will not exceed $74 this year.

Let the games begin.

 

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Putin Keeps Cool and Averts WWIII as Israeli-French Gamble in Syria Backfires Spectacularly

Putin vowed that Russia would take extra precautions to protect its troops in Syria, saying these will be “the steps that everyone will notice.”

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Authored by Robert Bridge via The Strategic Culture Foundation:


By initiating an attack on the Syrian province of Latakia, home to the Russia-operated Khmeimim Air Base, Israel, France and the United States certainly understood they were flirting with disaster. Yet they went ahead with the operation anyways.

On the pretext that Iran was preparing to deliver a shipment of weapon production systems to Hezbollah in Lebanon, Israeli F-16s, backed by French missile launches in the Mediterranean, destroyed what is alleged to have been a Syrian Army ammunition depot.

What happened next is already well established: a Russian Il-20 reconnaissance aircraft, which the Israeli fighter jets had reportedly used for cover, was shot down by an S-200 surface-to-air missile system operated by the Syrian Army. Fifteen Russian servicemen perished in the incident, which could have been avoided had Israel provided more than just one-minute warning before the attack. As a result, chaos ensued.

Whether or not there is any truth to the claim that Iran was preparing to deliver weapon-making systems to Hezbollah in Lebanon is practically a moot point based on flawed logic. Conducting an attack against an ammunition depot in Syria – in the vicinity of Russia’s Khmeimim Air Base – to protect Israel doesn’t make much sense when the consequence of such “protective measures” could have been a conflagration on the scale of World War III. That would have been an unacceptable price to achieve such a limited objective, which could have been better accomplished with the assistance of Russia, as opposed to NATO-member France, for example. In any case, there is a so-called “de-confliction system” in place between Israel and Russia designed to prevent exactly this sort of episode from occurring.

And then there is the matter of the timing of the French-Israeli incursion.

Just hours before Israeli jets pounded the suspect Syrian ammunition storehouse, Putin and Turkish President Recep Erdogan were in Sochi hammering out the details on a plan to reduce civilian casualties as Russian and Syrian forces plan to retake Idlib province, the last remaining terrorist stronghold in the country. The plan envisioned the creation of a demilitarized buffer zone between government and rebel forces, with observatory units to enforce the agreement. In other words, it is designed to prevent exactly what Western observers have been fretting about, and that is unnecessary ‘collateral damage.’

So what do France and Israel do after a relative peace is declared, and an effective measure for reducing casualties? The cynically attack Syria, thus exposing those same Syrian civilians to the dangers of military conflict that Western capitals proclaim to be worried about.

Israel moves to ‘damage control’

Although Israel has taken the rare move of acknowledging its involvement in the Syrian attack, even expressing “sorrow” for the loss of Russian life, it insists that Damascus should be held responsible for the tragedy. That is a highly debatable argument.

By virtue of the fact that the French and Israeli forces were teaming up to attack the territory of a sovereign nation, thus forcing Syria to respond in self-defense, it is rather obvious where ultimate blame for the downed Russian plane lies.

“The blame for the downing of the Russian plane and the deaths of its crew members lies squarely on the Israeli side,” Russian Defense Minister Sergey Shoigu said. “The actions of the Israeli military were not in keeping with the spirit of the Russian-Israeli partnership, so we reserve the right to respond.”

Russian President Vladimir Putin, meanwhile, took admirable efforts to prevent the blame game from reaching the boiling point, telling reporters that the downing of the Russian aircraft was the result of “a chain of tragic circumstances, because the Israeli plane didn’t shoot down our jet.”

Nevertheless, following this extremely tempered and reserved remark, Putin vowed that Russia would take extra precautions to protect its troops in Syria, saying these will be “the steps that everyone will notice.”

Now there is much consternation in Israel that the IDF will soon find its freedom to conduct operations against targets in Syria greatly impaired. That’s because Russia, having just suffered a ‘friendly-fire’ incident from its own antiquated S-200 system, may now be more open to the idea of providing Syria with the more advanced S-300 air-defense system.

Earlier this year, Putin and Israeli Prime Minister Benjamin Netanyahu reached an agreement that prevented those advanced defensive weapons from being employed in the Syrian theater. That deal is now in serious jeopardy. In addition to other defensive measures, Russia could effectively create the conditions for a veritable no-fly zone across Western Syria in that it would simply become too risky for foreign aircraft to venture into the zone.

The entire situation, which certainly did not go off as planned, has forced Israel into damage control as they attempt to prevent their Russian counterparts from effectively shutting down Syria’s western border.

On Thursday, Israeli Major-General Amikam Norkin and Brigadier General Erez Maisel, as well as officers of the Intelligence and Operations directorates of the Israeli air force will pay an official visit to Moscow where they are expected to repeat their concerns of “continuous Iranian attempts to transfer strategic weapons to the Hezbollah terror organization and to establish an Iranian military presence in Syria.”

Moscow will certainly be asking their Israeli partners if it is justifiable to subject Russian servicemen to unacceptable levels of danger, up to and including death, in order to defend Israeli interests. It remains to be seen if the two sides can find, through the fog of war, an honest method for bringing an end to the Syria conflict, which would go far at relieving Israel’s concerns of Iranian influence in the region.

 

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This Man’s Incredible Story Proves Why Due Process Matters In The Kavanaugh Case

Accused of rape by a fellow student, Brian Banks accepted a plea deal and went to prison on his 18th birthday. Years later he was exonerated.

The Duran

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Authored by James Miller of The Political Insider:


Somewhere between the creation of the Magna Carta and now, leftists have forgotten why due process matters; and in some cases, such as that of Judge Brett Kavanaugh, they choose to outright ignore the judicial and civil rights put in place by the U.S. Constitution.

In this age of social media justice mobs, the accused are often convicted in the court of (liberal) public opinion long before any substantial evidence emerges to warrant an investigation or trial. This is certainly true for Kavanaugh. His accuser, Christine Blasey Ford, cannot recall the date of the alleged assault and has no supporting witnesses, yet law professors are ready to ruin his entire life and career. Not because they genuinely believe he’s guilty, but because he’s a pro-life Trump nominee for the Supreme Court.

It goes without saying: to “sink Kavanaugh even if” Ford’s allegation is untrue is unethical, unconstitutional, and undemocratic. He has a right to due process, and before liberals sharpen their pitchforks any further they would do well to remember what happened to Brian Banks.

In the summer of 2002, Banks was a highly recruited 16-year-old linebacker at Polytechnic High School in California with plans to play football on a full scholarship to the University of Southern California. However, those plans were destroyed when Banks’s classmate, Wanetta Gibson, claimed that Banks had dragged her into a stairway at their high school and raped her.

Gibson’s claim was false, but it was Banks’s word against hers. Banks had two options: go to trial and risk spending 41 years-to-life in prison, or take a plea deal that included five years in prison, five years probation, and registering as a sex offender. Banks accepted the plea deal under the counsel of his lawyer, who told him that he stood no chance at trial because the all-white jury would “automatically assume” he was guilty because he was a “big, black teenager.”

Gibson and her mother subsequently sued the Long Beach Unified School District and won a $1.5 million settlement. It wasn’t until nearly a decade later, long after Banks’s promising football career had already been tanked, that Gibson admitted she’d fabricated the entire story.

Following Gibson’s confession, Banks was exonerated with the help of the California Innocence Project. Hopeful to get his life back on track, he played for Las Vegas Locomotives of the now-defunct United Football League in 2012 and signed with the Atlanta Falcons in 2013. But while Banks finally received justice, he will never get back the years or the prospective pro football career that Gibson selfishly stole from him.

Banks’ story is timely, and it serves as a powerful warning to anyone too eager to condemn those accused of sexual assault. In fact, a film about Banks’s ordeal, Brian Banks, is set to premiere at the Los Angeles Film Festival next week.

Perhaps all the #MeToo Hollywood elites and their liberal friends should attend the screening – and keep Kavanaugh in their minds as they watch.

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Clinton-Yeltsin docs shine a light on why Deep State hates Putin (Video)

The Duran – News in Review – Episode 114.

Alex Christoforou

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Bill Clinton and America ruled over Russia and Boris Yeltsin during the 1990s. Yeltsin showed little love for Russia and more interest in keeping power, and pleasing the oligarchs around him.

Then came Vladimir Putin, and everything changed.

Nearly 600 pages of memos and transcripts, documenting personal exchanges and telephone conversations between Bill Clinton and Boris Yeltsin, were made public by the Clinton Presidential Library in Little Rock, Arkansas.

Dating from January 1993 to December 1999, the documents provide a historical account of a time when US relations with Russia were at their best, as Russia was at its weakest.

On September 8, 1999, weeks after promoting the head of the Russia’s top intelligence agency to the post of prime minister, Russian President Boris Yeltsin took a phone call from U.S. President Bill Clinton.

The new prime minister was unknown, rising to the top of the Federal Security Service only a year earlier.

Yeltsin wanted to reassure Clinton that Vladimir Putin was a “solid man.”

Yeltsin told Clinton….

“I would like to tell you about him so you will know what kind of man he is.”

“I found out he is a solid man who is kept well abreast of various subjects under his purview. At the same time, he is thorough and strong, very sociable. And he can easily have good relations and contact with people who are his partners. I am sure you will find him to be a highly qualified partner.”

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss the nearly 600 pages of transcripts documenting the calls and personal conversations between then U.S. President Bill Clinton and Russian President Boris Yeltsin, released last month. A strong Clinton and a very weak Yeltsin underscore a warm and friendly relationship between the U.S. and Russia.

Then Vladimir Putin came along and decided to lift Russia out of the abyss, and things changed.

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Here are five must-read Clinton-Yeltsin exchanges from with the 600 pages released by the Clinton Library.

Via RT

Clinton sends ‘his people’ to get Yeltsin elected

Amid unceasing allegations of nefarious Russian influence in the 2016 presidential election, the Clinton-Yeltsin exchanges reveal how the US government threw its full weight behind Boris – in Russian parliamentary elections as well as for the 1996 reelection campaign, which he approached with 1-digit ratings.

For example, a transcript from 1993 details how Clinton offered to help Yeltsin in upcoming parliamentary elections by selectively using US foreign aid to shore up support for the Russian leader’s political allies.

“What is the prevailing attitude among the regional leaders? Can we do something through our aid package to send support out to the regions?” a concerned Clinton asked.

Yeltsin liked the idea, replying that “this kind of regional support would be very useful.” Clinton then promised to have “his people” follow up on the plan.

In another exchange, Yeltsin asks his US counterpart for a bit of financial help ahead of the 1996 presidential election: “Bill, for my election campaign, I urgently need for Russia a loan of $2.5 billion,” he said. Yeltsin added that he needed the money in order to pay pensions and government wages – obligations which, if left unfulfilled, would have likely led to his political ruin. Yeltsin also asks Clinton if he could “use his influence” to increase the size of an IMF loan to assist him during his re-election campaign.

Yeltsin questions NATO expansion

The future of NATO was still an open question in the years following the collapse of the Soviet Union, and conversations between Clinton and Yeltsin provide an illuminating backdrop to the current state of the curiously offensive ‘defensive alliance’ (spoiler alert: it expanded right up to Russia’s border).

In 1995, Yeltsin told Clinton that NATO expansion would lead to “humiliation” for Russia, noting that many Russians were fearful of the possibility that the alliance could encircle their country.

“It’s a new form of encirclement if the one surviving Cold War bloc expands right up to the borders of Russia. Many Russians have a sense of fear. What do you want to achieve with this if Russia is your partner? They ask. I ask it too: Why do you want to do this?” Yeltsin asked Clinton.

As the documents show, Yeltsin insisted that Russia had “no claims on other countries,” adding that it was “unacceptable” that the US was conducting naval drills near Crimea.

“It is as if we were training people in Cuba. How would you feel?” Yeltsin asked. The Russian leader then proposed a “gentleman’s agreement” that no former Soviet republics would join NATO.

Clinton refused the offer, saying: “I can’t make the specific commitment you are asking for. It would violate the whole spirit of NATO. I’ve always tried to build you up and never undermine you.”

NATO bombing of Yugoslavia turns Russia against the West

Although Clinton and Yeltsin enjoyed friendly relations, NATO’s bombing of Yugoslavia tempered Moscow’s enthusiastic partnership with the West.

“Our people will certainly from now have a bad attitude with regard to America and with NATO,” the Russian president told Clinton in March 1999. “I remember how difficult it was for me to try and turn the heads of our people, the heads of the politicians towards the West, towards the United States, but I succeeded in doing that, and now to lose all that.”

Yeltsin urged Clinton to renounce the strikes, for the sake of “our relationship” and “peace in Europe.”

“It is not known who will come after us and it is not known what will be the road of future developments in strategic nuclear weapons,” Yeltsin reminded his US counterpart.

But Clinton wouldn’t cede ground.

“Milosevic is still a communist dictator and he would like to destroy the alliance that Russia has built up with the US and Europe and essentially destroy the whole movement of your region toward democracy and go back to ethnic alliances. We cannot allow him to dictate our future,” Clinton told Yeltsin.

Yeltsin asks US to ‘give Europe to Russia’

One exchange that has been making the rounds on Twitter appears to show Yeltsin requesting that Europe be “given” to Russia during a meeting in Istanbul in 1999. However, it’s not quite what it seems.

“I ask you one thing,” Yeltsin says, addressing Clinton. “Just give Europe to Russia. The US is not in Europe. Europe should be in the business of Europeans.”

However, the request is slightly less sinister than it sounds when put into context: The two leaders were discussing missile defense, and Yeltsin was arguing that Russia – not the US – would be a more suitable guarantor of Europe’s security.

“We have the power in Russia to protect all of Europe, including those with missiles,” Yeltsin told Clinton.

Clinton on Putin: ‘He’s very smart’

Perhaps one of the most interesting exchanges takes place when Yeltsin announces to Clinton his successor, Vladimir Putin.

In a conversation with Clinton from September 1999, Yeltsin describes Putin as “a solid man,” adding: “I am sure you will find him to be a highly qualified partner.”

A month later, Clinton asks Yeltsin who will win the Russian presidential election.

“Putin, of course. He will be the successor to Boris Yeltsin. He’s a democrat, and he knows the West.”

“He’s very smart,” Clinton remarks.

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