How will fracking change world affairs?

[Finny]

What do you think will happen in world affairs if oil and natural gas prices remain depressed for,say, a generation as suggested in the UK article below.

http://citywire.co.uk/wealth-manage...e-could-be-depressed-for-a-generation/a834078

and I know the new administration in the UK has dramatically changed government policies to cut out wind and solar subsidies and loosen regulations in favor of the far less expensive fracking.

As an example, I heard on the radio Saudi Arabia needs oil at about $100/ bbl to balance their budget. Today's price under $40 spells big trouble for them. It is also resulting in dramatic reductions in oil exploration and well operation, but production is still rampant. What will Russia/Putin do?? Will the US extend federal solar subsidies past the end of 2016??

 

[SteamKing]

Springtime for ND and Calgary,
Winter for Putin and OPEC.

It's too soon to tell. China was sucking up all the coal and iron ore it could squeeze out of foreign suppliers, but with the current market instability there and across the world, who knows what the landscape will look like in 12 months or 24 months?

For the short term, there is going to be a lot of pain, with the oil companies starting to lay off workers. The frackers were thought to be vulnerable to lower oil prices, but it seems that some of them are learning to economize their operations, so they can eke out a profit even if the price of oil stays low.

The Saudis are in a big bind, trying to support an extravagant lifestyle while their enemies are surging all around them, particularly in Yemen, Iran, and to some extent, North Africa and Syria.

 

[Finny]

"China was sucking up all the coal and iron ore it could squeeze out of foreign suppliers..."

One wonders what the Chinese are paying for coal based energy,say, the average cost per KWH to produce electricity,compared to oil or natural gas energy now lowered due to fracking supplies.

All I know for sure is that my electric cost per KWH in USA, NJ, have already trended upward..and President Obama has said:

"Mr. Obama outlined his anti-carbon dioxide scheme to The San Francisco Chronicle in 2008: “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”

http://www.washingtontimes.com/news/2014/aug/5/editorial-the-high-price-of-hope/

 

[Finny]

Another interesting outcome could be that Russian and Iranian, both big oil exporters, economies will suffer as oil
prices remain depressed...how can they continue their mischief w/o oil revenues rolling in.

 

[SteamKing]

"China was sucking up all the coal and iron ore it could squeeze out of foreign suppliers..."

One wonders what the Chinese are paying for coal based energy,say, the average cost per KWH to produce electricity,compared to oil or natural gas energy now lowered due to fracking supplies.

All I know for sure is that my electric cost per KWH in USA, NJ, have already trended upward..and President Obama has said:

"Mr. Obama outlined his anti-carbon dioxide scheme to The San Francisco Chronicle in 2008: “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”

http://www.washingtontimes.com/news/2014/aug/5/editorial-the-high-price-of-hope/

Well, fortunately for the Chinese I guess, Obama is not their president.

As far as I can tell, Obama's plan was based more on spite than anything technical or environmental. In the US, coal accounts for just under 40% of total electricity generation. In China, the comparable figure is just under 80%, or about double the proportion in the U.S.:

http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3

https://en.wikipedia.org/wiki/Electricity_sector_in_China

The emissions from coal plants in the U.S. are regulated to a degree unheard of in China, and these regulations are only going to get more stringent. Because the Chinese rely so heavily on coal for generating the overwhelming portion of their electricity, the price will not be affected very much by the drop in crude prices.

In 1996, the Chinese government introduced a law to reform and re-structure the country's electric power generation and distribution infrastructure, because at that time, China's economy was booming and the government wanted to make sure that adequate supplies of electricity were available to keep things humming along. Part of this plan included building huge numbers of coal-fired generating plants, but as recent events have shown, the pollution from the kind of plants China operates is staggering, so alternate means of power generation are currently being explored and developed. Some coal-fired plants around Beijing have been shut down to alleviate the deadly pollution around the capital. Hydro-power and solar power are being pursued actively by the state to offset the loss of generating capacity from coal-fired plants.

Although the Chinese were never part of Kyoto or various cap-and-trade schemes, they got their own stark lesson first-hand in relying too heavily on only one form of power generation.

Another interesting outcome could be that Russian and Iranian, both big oil exporters, economies will suffer as oil
prices remain depressed...how can they continue their mischief w/o oil revenues rolling in.

The Russians are hitting hard times with the price of oil dropping and staying low. Putin's economy runs on having enough oil export revenue coming into pay for his adventures in the Ukraine, and he has used the threat of cutting off natural gas deliveries to Yurp to keep anyone from doing anything to thwart his plans, like using an embargo on trade with Russia or other economic sanctions.

The Iranian deal is also another short-sighted move on the US' part. While the embargo was in place on Iran, they couldn't sell their oil output legally on the world market. A lot of oil from Iran was being stored in supertankers chartered for that purpose. What was an essentially worthless commodity now suddenly has value, since trade with Iran can take place once again. A load of Iranian oil sitting in a supertanker was essentially worthless when sanctions were in place, but now suddenly, all that oil is worth $40 (or whatever) a barrel. That's the definition of a windfall. Whether or not Iran had a nuclear program which was capable of producing a nuclear weapon is now an academic question.

The Iranians won because the economic sanctions got lifted, allowing them to trade again, and oceans of money will start rolling into Teheran. Expect a lot of this money to be funneled out to people and groups opposed to the West, to cause who knows what kind of mischief and villainy. The West lost, because Iran gets to inspect its own nuclear facilities, which may be a convincing sham, but a sham, nevertheless, designed solely to convince weak Western politicians to throw in the towel and concede to letting Iran escape sanctions..

 

[Hornbein]

What do you think will happen in world affairs if oil and natural gas prices remain depressed for,say, a generation as suggested in the UK article below.

http://citywire.co.uk/wealth-manage...e-could-be-depressed-for-a-generation/a834078

and I know the new administration in the UK has dramatically changed government policies to cut out wind and solar subsidies and loosen regulations in favor of the far less expensive fracking.

As an example, I heard on the radio Saudi Arabia needs oil at about $100/ bbl to balance their budget. Today's price under $40 spells big trouble for them. It is also resulting in dramatic reductions in oil exploration and well operation, but production is still rampant. What will Russia/Putin do?? Will the US extend federal solar subsidies past the end of 2016??

The big change in the US is that in the past low oil prices were always seen as good for the economy. Now they say that it is bad. In short, low oil prices are good for everyone except oil itself. Oil has become so dominant in the US that it outweighs the rest of the economy. Or so they say. The stock market says otherwise.

The oil market is tightly controlled by OPEC. Prices are pretty much where they want to be. In my opinion production was increased to reduce prices, thus punishing Russia for the Crimea annexation. Quite successfully, I might add. Today a Russian diplomat sent out a peace feeler. I think what will happen is that Russia will keep Crimea -- they will NOT give it up -- but withdraw from other areas of Ukraine. Indeed, I bet they invaded those undesirable areas in order to have a bargaining chip in these negotiations.

Once Russia withdraws, I expect that production will be curtailed to boost oil company profits and reduce climate change.

Fracking has changed world affairs in that it brought oil companies a huge amount of money, which gives them considerably greater leverage in US politics. Exxon Mobil had 45 billion in profits in 2013, the second most profitable year for a corporation in history. (First was Russia's Gaszprom, which had a few billion more.) Twenty years ago, 1 billion in profit was considered gargantuan. 45 billion is close to political omnipotence.