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More Shale Good News: OPEC Running Scared

For years, American energy companies and political officials hung on every word uttered by their OPEC counterparts. This year, OPEC member states are the ones running scared:

In Vienna, Ryan Lance, chief executive of ConocoPhillips, the third-largest US oil group by production, set out a vision of a global shale oil revolution to chill Opec members’ blood. The US was enjoying its first meaningful growth in oil production for 20 years, he said, and Conoco expected US shale liquids production to grow 150 per cent by 2020.

“Thanks to both shale and the Canadian oil sands, North America could become self-sufficient in oil … by 2025, and even a net exporter,” he said.

Oil consuming states have frequently sounded the death knell for OPEC—and have always been wrong. The cartel wields enormous influence; if it weren’t for Saudi Arabia, Kuwait and the UAE raising output in response to the sanctions against Iran, oil prices would have shot through the roof. Over the next few years, OPEC’s grip on oil markets is unlikely to change much, yet the growth of oil and gas production in North and South America is changing the global energy scene and upsetting the established order.

Privately . . . Opec member states are worried. Paul Stevens, senior research fellow at Chatham House, said expectations had always been that the rise in oil demand over the next 15-20 years would be met by Opec. But shale oil was changing the equation.

“With the technology moving beyond the US, you could foresee a situation where the increase in supply might not be coming from Opec,” he said. “That is bound to concern them.”

New technology and processes like fracking and horizontal drilling have made reserves that analysts and geologists previously thought were unrecoverable newly available and profitable. And that’s cause for some excitement.

Maybe all those people worrying about “peak oil” should have been thinking about “peak OPEC” instead.

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  • Kris

    Drat it all! I guess all of the money OPEC funneled the Greens’ way was wasted.

  • Jim.

    Isn’t OPEC’s oil about half as expensive (or less) than oil shale, to pump and process?

    They’re not going to lose, guys. Their profits will continue to be very impressive, which is bad, as far as the war on terror and the broader Middle East is concerned. They’re just not going to control the game anymore, which is something, a very good something.

  • Mark in Texas

    So now might be a good time for a NAFTA oil tax. The US, Canada and Mexico can each charge $1.00 per barrel tax on oil imported from outside of NAFTA countries. This would have minimal effect on oil prices in the United States since most of the oil that we import is from Canada or Mexico. It would tend to make the price of OPEC oil $1.00 less per barrel on the world market and would provide some protection for US, Canadian and Mexican oil producers against price fluctuations engineered by OPEC.

    If any oil is imported, the taxes collected on it might help with some of the federal deficit, although I expect that the main effect of the tax would be to decouple North America from the global oil market.

  • Wanderer

    “Isn’t OPEC’s oil about half as expensive (or less) than oil shale, to pump and process?”

    Yes. Plus, shale wells peak their first year then decline ~25%/ year afterwards. Conventional wells sustain high production for far longer. So Mead thinks that “Frack! Frack! Frack!” on a hamster-wheel from hell in a solution, when in reality, shale hydrocarbons are a mania, a bubble, which will soon go the way of the South Sea and the tulips.

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