Oil and the US empire

Discussion of oil prices | K.C. ADAMS

Oil has become a strategic resource in the modern world. Oil is necessary for industrial mass production, transportation and warfare.

A human-centred outlook towards oil regards the resource as necessary for mutual development of all peoples to a modern standard wherein all nations are regarded as equal without reference to size or development, where the rights of all peoples are affirmed and force is not used to settle conflicts amongst nations, and the short and long term consequences of the use of oil on the social and natural environments are important considerations in nation- building.

A capital-centred outlook regards oil as necessary for empire-building to amass and concentrate greater power and social wealth for the dominant Empire from the subjugation of the world’s peoples and exploitation of their resources and work, to restrict competitors’ access to resources, workers and markets, and to suppress all resistance to empire-building through predatory war and other means wherein the short and long term consequences of the use of oil on the social and natural environments are dismissed as impediments to empire-building.

Venezuelan oil workers at state-owned Petróleos de Venezuela SA demonstrate in May 2011 against sanctions imposed by the U.S. after Venezuela asserted control over its resources.

In reaching superpower status and hegemony over the world, the U.S. has built military bases and stationed its naval forces throughout the world to control the production and distribution of oil and increasingly natural gas as well, and restrict access of competitors to these and other resources and to engage in subversion and armed combat to eliminate resistance to U.S. empire- building.

The worldwide deployment of U.S. armed forces is the backbone of its empire-building project. The U.S. military in alliance with corrupt, coerced and bribed governments exercises dictatorship over the world’s peoples, their resources and social wealth. It now seeks to consolidate its hegemony with a pivot to Asia, which requires a strengthened grip on old Europe, and isolation and subjugation of Russia.

Any government that steps out courageously on a path of independence from the U.S. Empire does so knowing that the entire military, political, espionage and aggressive cultural weapons and accumulated social wealth and economic strength and connections of U.S. imperialism will be unleashed against it. The people striving for independence must use the power of their state and mobilize their people in defence of their right to be in the battle against the U.S. Empire. The independent state skillfully and bravely must find ways and allies to deprive the U.S. Empire of the power to deprive the world’s peoples of their independence and right to be.

Venezuelan oil workers at state-owned Petróleos de Venezuela SA demonstrate in May 2011 against sanctions imposed by the U.S. after Venezuela asserted control over its resources.

The striving for independence includes, importantly, the securing of oil if it lacks a ready source and finding buyers if it has quantities for export. The U.S. Empire does not make this an easy task for any people, creating situations whereby nations must rely on the U.S. and be beholden to it. The global U.S. military force attempts to block transportation of oil and other resources from countries striving for independence, which either need oil or want to export it. Within this worldwide blockade, U.S. sanctions on the economies of independent countries are important economic weapons employed in concert with actions of coerced and compliant sycophants against the popular will.

Fortress North America and exercising control over energy resources and their price

The monopoly control of prices is another weapon the U.S. Empire employs against the peoples of the world. To facilitate the manipulation of the price of oil to attack those peoples and states striving for independence that have oil for export, the U.S. Empire has formed Fortress North America combining the three states of Mexico, Canada and the United States. Fortress North America has flooded the world with oil and natural gas, especially from fracked shale in the U.S. and oil sands in Alberta. Both production methods have prices of production well above the current $48 per barrel realized price and both are widely considered harmful to the social and natural environments.

Demonstration in Ottawa, September 26, 2011, against the Keystone XL pipeline.

All the incremental growth of oil in the world in recent years has come from the U.S. and Canada. Saudi Arabia announced it would continue to produce its current amount to maintain a grip on its market share. U.S. oil production has expanded to 9.14 million barrels a day, the highest level since January 1983. Canadian production of crude has climbed to a record 3.5 million barrels a day. Estimates are that one million barrels of oil production per day cannot find buyers at any price and is being stored. Similar frantic expansion has been occurring in the natural gas sector, along with proposals for liquefied natural gas (LNG) refineries for sea transport. Natural gas prices have declined to $3.14 per million British thermal units, down 26 per cent during 2014. Oil and natural gas corridors going east, west and south are at various points of expansion coordinated by Fortress North America, where security of oil and natural gas supply in preparation for war is a major consideration.

The financing of frenetic energy expansion without concern for particular economic or environmental consequences has come mainly from the U.S. government pouring trillions of dollars into the coffers of the largest private financial enterprises far in excess of growth in the economy’s goods and services sector. This excess money supply has subsequently been doled out to the oil, gas, pipeline and LNG developers in chaotic anarchic abandon without consideration of the glut of supply and ensuing destructive consequences. Some of this borrowed money is now in danger of default because of low realized prices and mass layoffs have already been announced in the energy sector. The incoherence of letting loose competing capitalists with easy money in such a sensitive important basic sector of the economy, unleashing anarchy and destruction in production and prices not to speak of the environmental considerations and hostile global politics is a serious indictment of the Obama and Harper dictatorships and their complete disregard for humanity’s future. They are unfit to rule!

Many of the new jobs in the U.S. and Canada since the economic crisis in 2008 have come from the energy sector. The U.S. oil industry has showed 50 per cent employment growth since 2009 almost all from fracking wells and exploration. Now, according to Tom Runiewicz, a U.S. industry economist at IHS Global Insight, if oil stays around $56 a barrel till the middle of 2015 (it has since fallen to $48), a sharp drop of direct employment will occur and companies providing services to the oil and gas industry could lose 40,000 jobs, while oil and gas equipment manufacturers may lay off 6,000 workers. The New York Times reports, “U.S. states dependent on oil and gas revenue are bracing for layoffs, slashing agency budgets and growing increasingly anxious about the ripple effect that falling oil prices may have on their local economies.”

What has driven this expansion in oil and natural gas supply and transportation, quite knowingly at odds with apparent demand and using production techniques considered by many in the sector to be hazardous to the social and natural environments? The first answer would be greed, as energy companies using cheap government supplied money and publicly funded infrastructure have seized millions of dollars in profits at least until realized prices recently fell. The second answer would be a political decision of the U.S. Empire to form Fortress North America to secure oil and natural gas resources in preparation for war and to flood the global market with excess supply to depress prices to attack specifically Russia, Iran and Venezuela.

Meanwhile, Canadian workers have become collateral damage in the U.S. economic aggression against other countries, anarchy of production and subsequent collapse of prices. On January 13, oil sands firm and Canada’s biggest energy company Suncor announced that due to low oil prices, it would be reducing its 2015 budget by $1 billion, holding off on an expansion project and cutting some 1,000 jobs. Other large energy companies have announced similar layoffs.

Oil is presently trading at about $48 per barrel, well below the $74.55 Suncor used when it prepared and released its original 2015 budget. Notably, the Globe and Mail reports, “Suncor did not reduce its production expectations for 2015. It predicts it will churn out between 540,000 barrels of oil equivalent a day and 585,000 barrels of oil equivalent a day this year.” This continued, “churning out” and desperation to complete the Keystone and other pipelines make clear that Fortress North America is not intended to ensure the well-being or security of those who live within its borders or that oil production in Canada is linked to the needs and development of the national economy. Oil production is not planned in any rational coherent manner integrated seamlessly into the broad economy, taking into consideration the social and natural environments. No, oil and natural gas production is one more weapon in the arsenal of the U.S. Empire to feed its insatiable war machine and its aggressive global politics, while the people and their needs are expendable.

Fascist coup d’état in Ukraine

The deliberate production of a glut in oil and natural gas, using methods known to be harmful to the social and natural environments, targets Russia and its natural gas market in Europe and oil sales elsewhere. The aim appears to be not only to weaken those three oil producing states, labelled antagonists to the U.S. Empire, with regard to their export income but also to wean the European energy market away from Russian natural gas and into the orbit of the U.S. Empire eventually to be supplied with LNG from Fortress North America.

People of Crimea celebrate decision to secede from Ukraine, March 16, 2014. (Xinhua)

A major part of this plan has been for the U.S. spy agencies and Special Forces to destabilize Ukraine, which culminated in a coup d’état last February and persecution of and aggression against those regions of Ukraine perceived as close fraternally and politically to Russia. The coup d’état installed a fascist government under the control of the U.S. Empire. The people in Eastern Ukraine rebelled and responded defensively organizing themselves to beat back the assaults of criminal gangs unleashed by the coup forces. They also held a successful referendum in Crimea to break with the Kiev coup regime and rejoin Russia. In response to the Ukrainian resistance, the U.S. Empire together with sycophants in Europe and the likes of Canada initiated a war of sanctions against Russia and stationed increased numbers of U.S.-led NATO troops and weapons of mass destruction near Russia’s borders.

The U.S. Empire has told old Europe in words and actions that it should now rely on energy supplies from Fortress North America instead of Russia. The proposal to supplant Russia as the major supplier of natural gas into Europe, along with the collapse in the price of oil and natural gas and speculative pressure on the Russian currency decreasing its relative value with others, and a broad increase of U.S.-led NATO military forces on Russia’s borders are aimed at regime change in Russia or at least serious disruption and weakening of its independent strength. Monopolies of the U.S. Empire could then move into Russia unimpeded to seize its resources and workers, and suppress any Russian dreams of a stable Eurasian economic cooperative market with Russia in the middle, which now exists in an initial form as the Shanghai Cooperation Organization.

The U.S. Empire believes it can put old Europe more firmly in the U.S. camp through attacking and weakening Russia, and by using its espionage services and Special Forces to create a climate of anarchy and violence throughout Europe that draws it into the U.S. “war on terror.” From a position of strength in Europe and with Russia suppressed, the U.S. Empire could intensify its pivot to Asia to surround China, the Indian sub-continent and South East Asia and bring them under U.S. dictate assuring global dominance of the U.S. Empire.

Empire-building is fraught with grave dangers including the possibility of a catastrophic world war with nuclear weapons. The responsibility of the people is to stop empire-building before the situation spirals out of control. Our social responsibility as Canadians is to disengage Canada from Fortress North America and begin our own nation-building project in opposition to the warmongering U.S. Empire and in unity with the peoples of the world who are striving for independence and the affirmation of their right to be.

The New Year statement of CPC(M-L) reads, “The use of force to settle conflicts amongst nations and overt pro-war propaganda pervade the monopoly-controlled media and Parliament with jingoistic fervour. History demands that the people organize themselves for an anti-war government that removes Canada from the integrated Northern Command, NATO, NORAD and any other participation with the aggressive U.S. military forces and perfidious spy agencies of torture and interference in the sovereign affairs of the world’s peoples. […]

“In 2015, let us build the organizations and voice of the working class movement and people’s striving for empowerment and an anti-war government! All out to make the Committees for People’s Empowerment and Renewal Update a success! Defeat Harper in 2015!”

(With files from TML, RT, NYT, Financial Post, Bloomberg News, Globe and Mail)


Views and Analysis

Evo Morales: U.S. is behind current drop in oil prices

The U.S. is behind the current drop in oil prices as it is aiming to undermine the economies of large petroleum producers Russia and Venezuela, Bolivian President Evo Morales told RT in December.

Morales said that it’s “a pity” that the U.S. remains on a “wrong course” by continuing to use sanctions against its political rivals.

“[The U.S. thinks] we are living 200, 300 or 500 years ago, instead of today. But all the past should remain in the past. The U.S. should realize this,” he told RT‘s Spanish channel.

America is acting like other large empires did for centuries as they “disseminated strife and hatred inside and outside, wishing to establish political control over other nations and to plunder them economically,” Morales said, in an apparent reference to the Spanish conquistadors’ invasions of Latin America. The Bolivian President also denounced Europe for being “U.S. accomplices” in implementing sanctions worldwide.

Morales said that President Obama “should stop imposing sanctions” and pay more attention to America’s internal problems.

“[…] I am sure that the oil prices’ plunge was provoked by the U.S. to undermine the Russian and Venezuelan economies. This is my opinion,” Morales said.

He urged Russia and Venezuela to “join their efforts” in countering the U.S.’ “aggressive policies.”

Morales said, “I am sure the U.S. aggression related to oil price cuts will not last long. Is $60 per barrel a feasible price? Washington is not interested in this. All the U.S. is interested in is an economic assault on some countries to overthrow their presidents. But they will not succeed in this task.”

(RT News, December 19, 2014)


Nicolas Maduro: U.S. conducting oil war to destroy Russia and Venezuela

Venezuelan President Maduro addressing Governors and Ministers, December 22, 2014.

The U.S. is conducting an oil war to destroy Russia and Venezuela, the latter country’s President Nicolas Maduro said on December 9.

One more objective pursued by the U.S. is to destroy OPEC, he said.

“A real oil war is underway,” he said. “Its goal is to destroy Russia, to drive Russia into a collapse as a global power and President Obama admitted the fact in a radio interview today.”

Simultaneously, the current slump in oil prices is also aimed at Venezuela, Maduro believes. “It seeks to turn our country into a colony, to destroy our independence and our revolution with the aid of an economic collapse.”

He recalled that the price of Venezuelan oil totaled $95 per barrel back in September and it plummeted to a mere $48, or by 50 per cent, by the end of December.

“Still, neither Russia nor Venezuela will surrender and we’ll continue our struggle and they won’t overpower us,” Maduro said.

(TASS News, December 30, 2014)


Russian Foreign Intelligence Service: West behind falling ruble and oil prices

The U.S. and its allies are pursuing a regime change policy towards Russia, deliberately introducing sanctions and attacking the ruble through manipulation of world oil prices, the head of Russia’s external intelligence agency has said.

Mikhail Fradkov, the head of the Foreign Intelligence Service (SVR), warned that Moscow is aware of U.S. moves to oust Putin from power.

“Such a desire has been noticed, it’s a small secret,” Fradkov — a former prime minister — told Bloomberg on December 4. “No one wants to see a strong and independent Russia.”

He also attributed the more than 30 per cent drop in oil prices partly to U.S. actions. Lower prices for one of Russia’s main exports places immense pressure on the ruble, which is also suffering from sanctions. The ruble has lost 39 per cent of its value against the dollar as of December 2014.

Foreign investment funds are taking part in ruble speculation via intermediaries, Fradkov said. “Any speculation has specific schemes and the schemes have a number of participants.”

(RT News, December 5, 2014 (excerpts))


A plunge in oil prices has sent tremors through the global political and economic order, setting off an abrupt shift in fortunes that has bolstered the interests of the United States and pushed several big oil-exporting nations — particularly those hostile to the West, like Russia, Iran and Venezuela — to the brink of financial crisis.

[…]

The price plunge may also influence Iran’s deliberations over whether to agree to a deal on its nuclear program with the West; force the oil-rich nations of the Middle East to reassess their role in managing global supply; and give a boost to the economies of the biggest oil-consuming nations, notably the United States and China.

[…]

The price drop, said Edward N. Luttwak, a longtime Pentagon adviser and author of several books on geopolitical and economic strategy, “is knocking down America’s principal opponents without us even trying.” For Iran, which is estimated to be losing $1 billion a month because of the fall, it is as if Congress had passed the much tougher sanctions that the White House lobbied against, he said.

[…]

Venezuela, which has the world’s largest estimated oil reserves and has used them to position itself as a foil to American “imperialism,” received 95 percent of its export earnings from petroleum before prices fell. It is now having trouble paying for social projects at home and for a foreign policy rooted in oil-financed largess, including shipments of reduced-price petroleum to Cuba and elsewhere.

[…]

“It is a big boost for the U.S. when three out of four of our active antagonists are seriously weakened, when their room for maneuver is seriously reduced,” Mr. Luttwak said, referring to Russia, Iran and Venezuela.

The only major United States antagonist not hurt by the drop in oil prices is North Korea, which imports all of its petroleum.

David L. Goldwyn, who was the State Department’s international energy coordinator during President Obama’s first term […] said of the low price of oil […] “it harms Russia and puts pressure on Iran.”

[…]

Another casualty of the price collapse has been Belarus, a former Soviet territory long reviled by American officials as Europe’s last dictatorship. It produces no significant amount of crude oil itself but has nonetheless taken a big hit. This is because its economy depends heavily on the export of petroleum products that Belarus produces using crude oil supplied, at a steep discount, by Russia.

Marwan Muasher, a former foreign minister of Jordan who is now a vice president at the Carnegie Endowment for International Peace, predicted another domino effect in Syria as Russia and Iran find it difficult to sustain their economic, military and diplomatic support for President Bashar al-Assad.

[…]

[F]ormer K.G.B. agents close to Mr. Putin have long believed that Washington engineered the collapse of the Soviet Union by getting Saudi Arabia to increase oil output, driving down prices and thus starving Moscow of revenue.

In many ways, the recent price fall really is the United States’ work, flowing to a large extent from a surge in American oil production through the development of alternative sources like shale.

By offsetting declines in conventional oil production, increases in shale oil output have allowed overall American crude oil production to rise to an average of about nine million barrels a day from five million a day in 2008, according to the United States Energy Information Administration. That four-million-barrel increase is more than either Iraq or Iran, the second- and third-largest OPEC producers after Saudi Arabia, produces each day, and it has put strong downward pressure on world prices.

[…]

(December 24, 2014)


What Are the Military Costs of Securing “Our” Oil?

[…] As bad as the costs of pollution and global warming are, as taxpayers we pay another cost for oil. Each year, our military devotes substantial resources to securing access to and safeguarding the transportation of oil and other energy sources. I estimate that we will pay $90 billion this year [2010] to secure oil. If spending on the Iraq War is included, the total rises to $166 billion.

This year, the U.S. government will spend $722 billion on the military, not including military assistance to other countries, space exploration, or veterans’ benefits. Defending American access to oil represents a modest share of U.S. militarism.

Calculating the numbers isn’t straightforward. Energy security, according to national security documents, is a vital national interest and has been incorporated into military objectives and strategies for more than half a century. But military documents do not attach a dollar figure to each mission, strategy, or objective, so figuring out which military actions relate to oil requires plowing through various documents and devising methodologies.

The U.S. military carves the world up into regions — Europe, Africa, the Pacific, the Middle East, South America and North America — each with its own command structure, called a “unified combatant command.” I arrived at my estimate of military spending related to securing oil by tracing U.S. military objectives and strategies through these geographic commands and their respective fleets, divisions, and other units. I only considered conventional spending, excluding spending on nuclear weapons. […]

U.S. Central Command has an “area of responsibility” which stretches from the Arabian Gulf region through Central Asia and was specifically created in 1980 during the Carter administration because of the region’s oil reserves. Two-thirds of the world’s oil reserves and nearly half of natural gas supplies reside within these twenty countries. Aside from joint training exercises with oil-producing nations, securing oil fields, and a host of other oil-related tasks, the command closely monitors the Strait of Hormuz. Nearly half of all oil transported throughout the world passes through this chokepoint, which has been periodically threatened with disruptions. I estimate about 15% of conventional military spending is directed at supporting the missions and strategies of Central Command, and three-quarters of that spending is related to securing and transporting oil from and through the region, as shown in Table 1.

U.S. Pacific Command ensures transportation of oil, specifically through the Strait of Malacca, one of the two most important strategic oil chokepoints. Fifteen million barrels of oil per day flow from the Middle East and West Africa to Asia. This oil is particularly important to another oil-dependent country — Japan, an important American ally in the region. Pacific Command is the largest of all the commands, covering half of the globe. It is also responsible for the largest number of troops and is an important provider of training and troops to U.S. Central Command. Given information on bases, assigned troops and other indicators, I estimate that about 35% of conventional military spending is required for missions and strategies for this command and about 20% of that amount is needed for securing the transport of energy throughout the region.

U.S. European Command and U.S. Africa Command also have resources devoted to securing access to energy. Initially formed to protect Western Europe, […] European Command is currently postured to project power toward the energy-rich areas of the Caspian Sea, the Caucasus, and the Middle East. Alongside NATO, European Command is increasingly focused on energy security in Europe, especially since the revision of NATO’s Strategic Concept in 1999. Finally, the command was also responsible for overseeing the set-up of the newest command, U.S. Africa Command, which was motivated by competition for newly discovered oil reserves. I estimate that around 25% of the military budget is devoted to military strategies relating to Europe and Africa, and of that, about two-fifths can be attributed to securing oil and energy supplies.

U.S. Northern Command and U.S. Southern Command are responsible for North and South America and the surrounding waters. While Canada, Mexico, and Venezuela rank in the top five countries from which the United States imports oil, I could not find definitive activities connected with either Northern or Southern Command that would justify inclusion in the estimate.

Dividing the military budget according to geographic regions and reviewing activities in those regions leads me to conclude that about $90 billion will be spent this year for securing access to and the transport of oil and other energy supplies.

But that number does not include the vast sums spent on the Iraq War. In spite of the Bush administration’s claims that the United States invaded Iraq because of weapons of mass destruction, evidence points to oil. Since World War II and historic meetings between President Roosevelt and the leader of Saudi Arabia, U.S. policy interests have been focused on establishing a stronghold in the region. Prior to the invasion, the Bush administration had already made plans for the oil industry, and currently, the military surrounds and secures the oil fields.

Since 2003, the Iraq War has cost U.S. taxpayers three-quarters of a trillion dollars, as shown in Table 2. Though spending will decline this year, including the Iraq War brings total spending on securing access to oil to $166 billion. Other analysts might point to the strategic importance of Afghanistan in a resource-rich region, but spending on that prolonged war and occupation is not included in this analysis.

Recently, President Obama appeased the oil industry by opening large parts of the East Coast, Gulf waters, and elsewhere to drilling. […] If production were increased, oil prices may drop. […]

Anita Dancs is assistant Professor of Economics at Western New England College and a staff economist for the Center for Popular Economics.

SOURCES: Energy Information Administration (eia.doe.gov). These estimates are refined and updated from an earlier paper, Anita Dancs with Mary Orisich and Suzanne Smith, “The Military Cost of Securing Energy,” National Priorities Project (nationalpriorities.org), October 2008.

(May 2010)


The global oil market (excerpt)

By Paul Cummings, Dollars & Sense

[… I]t’s impossible to get the whole picture of demand for oil without recognizing one very special oil consumer: the U.S. military. Every tank, armored vehicle, truck, humvee, jet, and missile runs on refined oil, as do most ships. In 2007, the U.S. military consumed about 250 million barrels of oil and 2.6 billion gallons of jet fuel, making it the world’s single largest fuel-burning entity. Without oil the Army and Marines could not maneuver, the Air Force could not fly, and most of the Navy could not sail. The United States would be a paralyzed superpower, unable to project power throughout the world. Since all the other military forces in the world also run on oil, the ability to cut their oil lifelines is a tremendous strategic advantage in any conflict. These factors make oil more than just another commodity. Oil is a weapon, a strategic commodity, a national security resource […]

(July 2008)


The world is awash in oil, I’m hearing. The problem is, it’s fairly expensive oil.

Take for example Canada. The country has managed to increase its production of oil by a million barrels a day over the last decade. But almost all of that increase has come from oil sands. If you consider only conventional crude oil, Canadian production today would be a third of a million barrels a day lower than at its peak in 1973.

Canadian production of crude oil, 1947-2013, in mb/d. Blue: Conventional crude plus lease condensate. Orange: oil sands. (Source: Canadian Association of Petroleum Producers)

Even without counting environmental costs, that stuff’s not cheap. It was profitable when West Texas Intermediate was over $90. But last week [in early December] WTI closed at $66. Here are some of the estimates from the Wall Street Journal:

The break-even price for new oil-sands surface mines is among the most expensive in the world, at around $85 a barrel, according to the Bank of Nova Scotia. Operating costs at existing mines are less than half that amount. But the break-even point for so-called in situ projects, in which bitumen is heated and pumped up to the surface, range between $40 a barrel and $80 a barrel. Such projects represent the majority of future growth.

Or consider the United States, where production has grown 2 mb/d since 2004. More than 3 mb/d of that growth has come from fracking of oil trapped in tight geologic formations. Without tight oil, U.S. production would be down more than a million barrels a day over the last ten years and down 5-1/2 mb/d from its peak in 1970.

U.S. field production of crude oil, by source, 1860-2013, in millions of barrels per day. Source: Hamilton (2014).

Estimates again vary, but prices this low have to severely inhibit new investment in U.S. tight oil. Without continuing new drilling, U.S. tight oil production would quickly fall. And the economics of deep ocean drilling, which has also been important in supporting production in the U.S. and around the world, have become even more difficult at today’s low prices.

Why am I talking about the costs for Canadian and U.S. oil producers? Because if it had not been for the success of Canada and the United States, world production of crude oil would be down overall over the last decade.

World field production of crude oil and lease condensate, 1980-2013, in millions of barrels per day. (Source: U.S. Energy Information Agency (EIA))

Granted, some of the stagnation in global output has been due to geopolitical disruptions, Libya being the most important example. And Libyan production rebounded significantly this fall, contributing to the current excess supply.

But Libya remains a very unstable place. It does not take much imagination to see the recent gains there being reversed again over the next few months. Nor does one have to be an excessive worrier to be concerned about the possibility of geopolitical turbulence in places like Nigeria and Iraq taking out more of their production, which between them accounted for 5.4 mb/d of last year’s world oil supply.

So here’s the basic picture. The current surplus of oil was brought about primarily by the success of unconventional oil production in North America, most new investments in which are not sustainable at current prices. Without that production, the price of oil could not remain at current levels. It’s just a matter of how long it takes for the high-cost North American producers to cut back in response to current incentives. And when they do, the price has to go back up.

(December 2014)

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