
Texas Is About to Create OPEC’s Worst Nightmare - selimthegrim
https://www.bloomberg.com/news/articles/2018-11-21/opec-s-worst-nightmare-the-permian-is-about-to-pump-a-lot-more
======
lykr0n
Texas is in a funny place. They are pumping oil like crazy, but they are
building wind like crazy as well.

Look at the City of Austin and the amount of renewables year over year:
[https://data.austintexas.gov/Utilities-and-City-
Services/Gen...](https://data.austintexas.gov/Utilities-and-City-
Services/Generation-by-Fuel-Type/ss6t-rumq)

You can see a real-time chart of energy mix here:
[https://austinenergy.com/ae/about/environment/renewable-
powe...](https://austinenergy.com/ae/about/environment/renewable-power-
generation)

Most days renewables are 50% of electricity consumes. I pay a bit extra for
100% wind- and it's not that much more than 50/50\. I could easily see Texas
being a majority renewables while at the same time exporting more and more
Oil.

~~~
hnphillipj
You should know that oil is hardly used for elec. gen in developed countries.
They are only indirect competitors - through the automobile.

~~~
munk-a
You in fact shouldn't know this as the EIA reports that 3,239,699 barrels of
petroleum products were consumed in august of this year alone for electrical
generation in the US (source
[https://www.eia.gov/totalenergy/data/browser/index.php?tbl=T...](https://www.eia.gov/totalenergy/data/browser/index.php?tbl=T07.03B#/?f=M&start=200001)
)

~~~
hnphillipj
I'll change my comment from not -> hardly.

[https://www.eia.gov/tools/faqs/faq.php?id=427&t=3](https://www.eia.gov/tools/faqs/faq.php?id=427&t=3)

While your number seems like a lot, it's really just a drop in the bucket. The
US consumes close to 8 billion barrels of oil annually. I was, however,
surprised that it was still as high as 0.5%.

~~~
tropo
Hawaii likes to generate power that way. Northern parts of Alaska do too.

------
zackmorris
The best thing we could do from a strategic standpoint is ready these wells
(but not use them), then wait for other countries to exhaust their supplies of
petroleum first.

But what's going to happen is we'll frack everywhere, destabilize our bedrock
and pollute our water, and still encounter a Hubbert peak in roughly the time
it's taken us to ramp up domestic production (probably sometime around 2040).
There's no way to predict an exact date for this though.

Then since Venezuela, the Middle East, Russia, the Baltic states, Canada, etc
have more oil than anyone, we'll be at their mercy again:

[https://en.wikipedia.org/wiki/List_of_countries_by_proven_oi...](https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves)

The best thing we could do from a scientific/environmental/human rights
standpoint is to stop using petroleum for fuel and only use it for
manufacturing and as a bridge to renewable energy. This is
unprofitable^H^H^H^H^H^H^H^H^H^H^H^H unrealistic so we'll burn it all until
externalities can no longer be ignored and the overall prices matches solar.
This happened sometime between 2000 and 2010, but it will take a generation
for the the general public to notice.

In the meantime I'm a typical hypocrite with an 80s Toyota truck like the one
in Back to the Future that gets 15 mpg. YMMV.

------
somberi
A good related article from The New Yorker:

[https://www.newyorker.com/magazine/2018/01/01/the-dark-
bount...](https://www.newyorker.com/magazine/2018/01/01/the-dark-bounty-of-
texas-oil)

Interesting pieces:

In large part because of high oil prices, a disproportionate share of
America’s economic growth over the past decade has come from Texas. The gross
domestic product of the state is $1.6 trillion; if it were an independent
country, its economy would settle in around tenth place, eclipsing those of
Canada and Australia. California, with forty per cent more residents, has a
G.D.P. of $2.6 trillion, but since 2000 job growth in both Dallas and Houston
has expanded by about thirty per cent—three times the rate of Los Angeles.

..

.. Because native Texans were suspicious of outside corporate
interests—especially John D. Rockefeller’s Standard Oil—two local companies
were formed to develop the new field: Gulf Oil and Texaco. (Both companies
have since merged with Chevron.)

..

.. To entice investors to help him drill yet another well, he drew up fake
geological reports indicating the presence of salt domes and stratified-rock
folds, which can trap oil and natural-gas deposits beneath them. The phony
report suggested that, at thirty-five hundred feet, a well could tap into one
of the greatest oil deposits in the world. Once again, a wild prediction
turned out to be true.

------
throwaway5752
Fracked wells have awful production curves. It will be done a few years after
they run out of permian to drill. No gentle dropoffs like traditional
reservoirs. Though, I'm just an interested bystander, so if any petroleum
geologist know of changes that contradict I'm happy to be corrected.

~~~
kthejoker2
Why so gloomy? Something like 6-8 billion barrels in the Permian, we're
talking at least 15-20 years out before it's even remotely an issue. Lot more
short term and medium them effects to consider before optimizing frack jobs.

~~~
rcMgD2BwE72F
[https://assets.bwbx.io/images/users/iqjWHBFdfxIU/izx7rgFSlvy...](https://assets.bwbx.io/images/users/iqjWHBFdfxIU/izx7rgFSlvyQ/v1/660x-1.png)

From [https://www.bloomberg.com/news/articles/2017-08-08/shale-
exp...](https://www.bloomberg.com/news/articles/2017-08-08/shale-exploration-
production-company-earnings-confidence-game)

>Here is the free cash flow after capital expenditure for a sample of 33 E&P
companies, grouped by their main shale basin (all figures compiled by
Bloomberg).

>It doesn't require the closest examination of that chart to see fracking is
very capital intensive, with E&P firms spending way beyond their means even in
the relatively halcyon days of 2012 and 2013. The 14 Permian-exposed companies
in that sample saw their cash burn accelerate over the past 12 months to a
collective $11.5 billion.

------
Synaesthesia
It’s unfortunate that we’re in a glut of oil and the price is going down when
we should be trying to use less oil. We’re not running out any time soon and
there’s lots of coal too, so it could be very dangerous for the planet.

~~~
Tade0
Coal is currently being wiped out by economics in the west and it's past its
peak globally, so there's a silver lining.

------
Kaveren
I'm hopeful that America can further lessen our dependence on Saudi Arabia as
much as possible through this. Alas, the alliance is based around a lot more
than just oil, and the Saudi vision is to shift away from oil reliance, but
I'll gladly take a chink in the armor.

> "Global oil demand has so far absorbed the extra U.S. crude barrels,
> limiting the impact on prices"

This slightly curbs my optimism.

~~~
toomuchtodo
This isn't feasible. The refineries in the US are not designed for the same
oil produced by the Permian basin (the Permian is producing light crude, US
refineries are configured for medium to heavy crude). More importantly, oil is
fungible on the world market; you can't effectively dictate "Oil produced in
America is consumed in America" without drastically regulating the energy
market with public policy (not going to happen).

[https://www.reuters.com/article/us-usa-oil-exports-
study/sha...](https://www.reuters.com/article/us-usa-oil-exports-study/shale-
oil-growth-to-overwhelm-u-s-refiners-fuel-exports-study-idUSKBN1GH188) (Shale
oil growth to overwhelm U.S. refiners, fuel exports: study)

[https://www.cnbc.com/2018/04/17/shale-oil-has-a-refining-
pro...](https://www.cnbc.com/2018/04/17/shale-oil-has-a-refining-problem-and-
morgan-stanley-smells-opportunity.html) (Shale oil has a refining problem, and
Morgan Stanley thinks investors can profit)

If you want to lessen your dependency on middle east energy, switch to
electric cars, trucks, and busses faster.

~~~
mc32
China imports more oil than we do and their demand for energy is only going to
go up. We’re producing more energy domestically and lessening our reliance on
foreign energy, so China has a bigger incentive to change their energy
equation —in addition, their gov can just issue a decree and change policy
with but a little corruption interfering a bit.

~~~
toomuchtodo
We have spent a non-insignificant amount on the Fifth Fleet (25 navy vessels)
to ensure the stable supply of middle eastern oil onto energy markets. That
seems to be of substantial incentive to mitigate our need for oil to drive our
economy.

[https://en.wikipedia.org/wiki/United_States_Fifth_Fleet](https://en.wikipedia.org/wiki/United_States_Fifth_Fleet)

> Well, even a blind pig finds an acorn once in awhile. While working on a
> recent piece on how to cut $1 trillion from the $7-trillion-plus U.S.
> defense budget over the coming decade, I stumbled upon a provocative
> analysis by Roger Stern, an economic geographer at Princeton University. He
> says the U.S. has “mis-allocated” — others might say “wasted” — $8 trillion
> since 1976 protecting the oil flow from the Persian Gulf that fuels much of
> the global economy. Especially since in 2010, when the U.S. was the
> destination of less than 10 percent of the oil flowing out of the Gulf.

> The U.S. has insisted, since the days of the Carter Administration, that the
> oil flowing out of the Persian Gulf is a vital national-security interest of
> the U.S. Beyond that, Presidents and the Pentagon have said, the narrow
> Strait of Hormuz is a vulnerable bottleneck for shipping headed out of the
> Gulf. Any troublemaker — especially Iran — could bring the U.S. and world
> economies to their collective knees by shutting it down by sinking a couple
> of tankers as they pass through. Consequently, the U.S. has poured tons of
> money into the region since then, including three wars. It has bulked up its
> military forces in the neighborhood — including the U.S. Navy’s 5th Fleet,
> headquarters in Bahrain, smack dab in the middle of the gulf — to keep the
> oil flowing.

[http://nation.time.com/2011/04/24/a-question-for-the-
obama-a...](http://nation.time.com/2011/04/24/a-question-for-the-obama-
administration/) (Have we wasted $8 trillion defending the Persian Gulf from a
non-existent threat?)

~~~
mc32
Much of keeping gulf oil flowing is to keep the European and east Asian
economies stable —they are petroleum poor. We get most of out foreign petros
from Canada, Vz and Mx.

No doubt Trump would love to recall rhe fleet, if possible, but it’s not.
Unless he’d like to see chaos in the world economy.

~~~
cronix
> Unless he’d like to see chaos in the world economy.

Like trade wars usually tend to cause?

~~~
mc32
Depends. Sometimes you have cause on your side. In this case we do know China
does not play fair. Nothing weird about it except previous prezes always
crossed their fingers, knocked on wood and hoped others would play fair just
cuz. I’m actually pleased a president finally decided to call it for whst it
is and do something about it and not just talk and take token steps for
publicity and then forget about it.

------
jseliger
There is a pincer: Texas on one side and electric vehicles on the other:
[https://news.ycombinator.com/item?id=18473697](https://news.ycombinator.com/item?id=18473697).

~~~
api
... which is why SA is so determined to diversify its holdings.

~~~
rcMgD2BwE72F
For that t succeed, they'll have to convince the world to buy into Aramco's
IPO – right when EV sales will have crossed the chasm in multiple countries:
[https://valuendow.com/wp-
content/uploads/2018/08/Exhibit-1.j...](https://valuendow.com/wp-
content/uploads/2018/08/Exhibit-1.jpg)

I hope they have good sales reps.

------
protomyth
_Many of them would turn a profit even with crude prices as low as $30 a
barrel._

That is impressive and would seriously undercut a whole lot of nations
including Russia and Venezuela. It really shows the advances and quality of
the oil.

------
mhkool
Less dependency on foreign oil is good for peace since the US will not be
"protecting their interests". And Saudi Arabia having less budget for their
wars is also a good thing.

~~~
Synaesthesia
The US will always seek to control Middle East oil, it’s a huge lever on the
rest of the world.

~~~
rcMgD2BwE72F
For another decade or two, yes.

In the meantime, China is building a global supply chain to provide with world
with solar panels and batteries. And bankrupt all the US companies/banks that
keep investing in fossil fuels. It's all about your investment horizon I
guess.

~~~
kamaal
>>For another decade or two, yes.

If the US stays focussed on mid-east for the next 2 decades, and not counter
China. Or rather just let China be as they are. China will have the world
domination on a platter for the next few centuries.

Oil is the old game. That game probably even ended after the 1990's. The US
has been fighting wrong wars for the past 30 years.

China is quietly, and yet steadily emerging as the next super power. Albeit
like the UK in the past. No intention to fight any direct wars or make
aggressive moves. Instead control the world's oceans, and establish trade
empires. Let the current super power bankrupt itself fighting wars.

------
viburnum
This is a disaster for the climate.

~~~
calvinbhai
how so? Consumption won't go up proportionally to the drop in price of fuel. I
see it as an antidote to the middle east conflict where the developed
countries have a hand in it. If petro nations source of income is affected,
there's a hope that Middle East conflict will end.

------
shmerl
Everyone is now rushing to sell oil, before demand for it will start falling
rapidly.

~~~
jillesvangurp
The Texas oil bubble is fueled by massive debt and very rosy long term
exploitation projections. Too rosy maybe according to some; there's been some
rumors a lot of oil companies in Texas have been overstating their long term
supplies. Either way, low oil prices are a good thing since it cuts off more
the expensive sources as a realistically viable.

It's actually helping to kill off oil investments because why bother if the
prices stay below what is actually profitable. A lot of recent investments
only made sense at 70$+ a barrel. Now that 30$ is on the table, those
investments are effectively under water. The price volatility alone should
scare investors. Imagine it drops another 10$ because Opec throws in the towel
and unleashes the floodgates?

Meanwhile, oil dependence is being addressed by ongoing electrification so
lower demand is going to keep prices low even as supply declines. This ensures
that by the time the shit hits the fan (cheap supplies run out), it won't be
as much of an issue. In 20 years when most transport is electric, the barrel
price for oil will be much less relevant for most. There will still be a need
for oil of course but not at the levels needed today.

------
s_kilk
How about we leave all that shit in the ground where it can't kill us?

------
peterashford
...because the US is the only market for oil, right?

------
dantillberg
The AMP version linked is barely readable on a large display; but the regular
version is at [https://www.bloomberg.com/news/articles/2018-11-21/opec-s-
wo...](https://www.bloomberg.com/news/articles/2018-11-21/opec-s-worst-
nightmare-the-permian-is-about-to-pump-a-lot-more)

~~~
jonatron
The AMP version with Firefox's reader view is great.

------
kapauldo
Does this mean oil will continue do plummet bc of so much supply?

------
liftbigweights
What hyperbolic clickbait nonsense.

> If Saudi Arabia and its allies cut production when they gather Dec. 6 in
> Vienna, higher prices would allow shale to steal market share.

Considering oil prices have gone from near $80 to near $55 in about a month,
I'm guessing they've decided to maintain or even increase production. That is
unless the saudis and the wall st banksters decide to game the market as they
do from time to time. But of course the bloomberg "journalists" wouldn't know
anything about it or investigate that because they are allergic to real
journalism like more establishment media.

> But because the Saudis need higher crude prices to make money than U.S.
> producers, OPEC can’t afford to let prices fall.

The saudis make money on their oil. They don't need higher prices for that and
certainly their oil is more profitable than shale oil. What they need is
higher oil prices to maintain their government budget.

If you want to know what a joke bloomberg is...

The same journalist wrote this today : "Saudi Oil Production Surges to Record
in Early November"

[https://www.bloomberg.com/news/articles/2018-11-21/saudi-
oil...](https://www.bloomberg.com/news/articles/2018-11-21/saudi-oil-
production-said-to-surge-to-record-in-early-november)

If anyone working at bloomberg knew what they were talking about, they
wouldn't be working at bloomberg. They'd be raking in the millions working for
themselves.

~~~
buboard
I also find it weird that bloomberg articles keep popping up and being upvoted
here. It's not exactly clear where bloomberg stands quality-wise (whatever
happened to those tampered chips that nobody found??). Doubly so, because
bloomberg has a tight grip on investors and can directly manipulate markets,
which should make them a target of regulation. I don't even understand why
bloomberg changed its model from being exclusive to pursuing becoming a
mainstream medium.

