EconAir

Saudi Arabia Oil Minister U.S. Oil Production E nergy prices could go up at the same time that energy production could continue to decrease, although not as much as simple supply/demand forecasts would expect (see prior post).   Crude oil prices would have to rise from current $35/barrel level to at least $50/barrel to stabilize production and over $60/barrel to start increasing production.   Similar percent increases would be needed for natural gas. For most shale oil and natural gas producers, virtually all operating revenue is now going to debt payments.   After hedges come off, the number of bankruptcies and “distressed debt” will accelerate in second quarter of 2016.   The companies can continue production but bondholders, lenders and stockholders will suffer even larger losses.   This trend has already started in the junk bond market and the fall of public oil companies’ stock prices. Why Saudi Arabia Misjudged U.S. Oil Production ...

Saudi Oil Minister Introduction: The Fall in Oil Prices in 2015 Crude oil prices temporarily rose because Saudi Arabia signaled that it would cooperate with OPEC and non-OPEC producers to “stabilize” oil prices.   Nothing specific was mentioned.   At the current price and for political reasons, it is unlikely Saudi Arabia and its Persian Gulf allies will cut production or negotiate joint production cuts with other large producers.   The comments are probably an indication that Saudi Arabia might be part of a global reduction in crude oil production if prices go much lower and the political situation in Syria changes. Until recently, Saudi Arabia was seeing the results it wanted.   Some are economic, having to do with the current and future price and production of oil.   The economic targets were shale production in the U.S and tar sands production in Canada.   The geopolitical targets were Iran and Russia.   But unexpected economic and...

Middle East Oil Wells OVERVIEW Outside of the United States and Canada, most of the world’s oil and natural gas is owned and produced by governments or government-dominated companies with minority shareholders. Two examples of the latter, public companies with stockholders, are Petrobras in Brazil and Gazprom in Russia.   But government officials, especially the president, control management and make the important decisions. Production and investment decisions are not made based on financial criteria alone.   Often, internal political or foreign geopolitical factors are more important. Many countries' economies and government budgets depend critically on oil and natual gas revenue from exports. Maintaining internal peace and welfare programs are more important than rational economic considerations. What this means is that production and distribution decisions in these countries are made using different criteria than by private companies in the United State...