Trump’s ‘Drill, baby, drill’ could mean a return of US$35 oil
“I believe I’ll be able to get energy down to 50 per cent – 50 – five-oh – of what it is right now within a period of less than a year.” – Donald Trump
If he drops oil prices by half, Alberta, Saskatchewan, Newfoundland and Canada overall will be in a world of hurt.
The oil industry might hurt, it’s cyclical.
Does everyone else benefit from low fuel costs?
I don’t think the industry has truly recuperated from the 7 year old downturn. This could push many businesses over the edge.
As they say in retail … you’ll make it up in VOLUME. Flow baby flow! Burn baby burn!
Hell … I may even be able to set my thermostat warmer than 61 deg.F this winter, eh?
yes. oil is countercyclical .
i expect a hit piece on the oil industry from CBC even though oil and gas pay 25% of the GDP of soviet clusterfuka stan
“i expect a hit piece on the oil industry from CBC…”
“I expect ANOTHER hit piece on the oil industry from CBC” – fixed it for ya!
On a recent summer road trip It was $30 US to fill the car in Minnesota and Wisconsin and $90CDN to fill it in Alberta etc.
Be thankful you didn’t travel to CA … you might not have been able to afford the trip home.
“Trump does not explain how dramatically ramping up production to see pricing fall by half would be enticing to oil companies. Those companies would see their revenues plummet as a result, while their production costs would rise due to the cost of additional drilling. Essentially, they’d have to produce a lot more barrels to make the same dollars they’re making now, metaphorically cutting their own throats. Nor does he discuss how OPEC might respond to America flooding the market with more barrels.”
Two separate issues. The easier is OPEC. Trump won’t care and OPEC can’t cut production to offset the US because America will simply increase its exports to offset any cut-back by OPEC.
The bigger issue is the oil companies. They won’t be drawn in to carrying Trump’s water (even lower oil prices). But you would be looking at 4 years of low (~$70) prices. One thing Trump would not have much control over is state taxes. I filled up in California and later in Oregon and the price of gas differs by 25% within 50 miles because of a state border.
Well, the other side of this story is if Israel wipes Iran’s refineries off the map, the whole game changes. Technical analysis of oil prices are always subject to political changes that blow the technical analysis off the page.
Trump has to stay alive in order to become President. That might not happen.
Although Trump may cut red tape he can’t bring back Tier I acreage for drilling. The quick story here is that the US was the world’s greatest producer until they pumped all the cheap oil and then were laid low in the 1970’s by the oil embargo. It appeared that geologist M. King Hubbard was correct about peak oil. Protecting the ME was suddenly veryimportant for maintaining oil supply and the US was also running out of natural gas.
Meanwhile fracking which had been in use since the 1950’s was being tested, and tested. Nothing happened until the mid 2000’s with the Barnett Shale in Texas suddenly became a shale gas superstar. All the NGL import plants built for the impending shortage were retooled for export. While premier Clarke in BC was blabbing about all the conditions BC NGL plants would need to agree to, and dreaming of tax revenues, the Americans built.
So now the US is gunning to be the number one NGL producer and Canada hasn’t shipped one cargo, but I digress, since we were talking about oil. Fracking of course also works for oil formations and the turnaround in US production is mind boggling in that the Americans are back to number one oil producer. Incredible really! This bounty led to a price drop and price war with OPEC and was ruinous for all parties. Other than bankruptcy and consolidation it led to the realization that some oil is easier and cheaper to produce than oil in other areas. The cheap stuff is the Tier I stuff which everyone now knows is limited. So I don’t want to write an essay but I think you will understand that cutting regulations will help immensely but it won’t create new ground.
I think you meant to write LNG instead of NGL (natural gas liquids).
Thank you John Chittick, that is true and you are 100% correct – I was writing on an iPad so small screen and not enough coffee, but I indeed meant LNG, of which the US will soon be the world’s greatest exporter. Yet another example of Canada shooting itself in the foot. In my earlier life an earned a B. Sc in geology so as you might be able to tell I love this topic.
The overall trend for commodity prices, including oil, is downward, no matter what Trump may or may not do. Forty plus years of falling interest rates set that trend.
Iran is the wild card. And Israel may very well deal with it.
You can’t just turn on the taps so easily. Any oil out of ANWR will take 6 to 8 years to market, even if Trump manages to kill a lot of the restrictions.
I’ve read that 90% of oil imported into the US is heavy crude. The US produces lots of light crude but has limited deposits of heavy oil. The majority of the heavy crude imports come from Alberta. Now that Alberta heavy oil has increased exports to Asian markets via the Transmountain pipeline the US has to be pay more. A few weeks ago Bloomberg reported that TMX exporting is partly responsible for the US now having considerably lower reserves of heavy oil. US refiners can retool plants for light oil but that’s expensive and refiners do not have big profit margins.
Here’s an article that explains the problem for the US:
Heavy oil shortage spells higher cost for shippers, road builders
May 3, 2024
LONDON/HOUSTON, May 3 (Reuters) – Mexican export cuts and a rerouting of Canadian output are shrinking already limited supplies of heavy crude in the Atlantic basin, driving up refiners’ costs with a likely knock-on effect to industries ranging from shipping and construction to Middle Eastern power plants.
Prolonged OPEC supply cuts and international sanctions on Venezuela, Iran and Russia had already led to shortages of heavier crude, with the complex refineries built to process it, such as those in the U.S. Gulf, struggling to find cheap supplies…
https://www.reuters.com/markets/commodities/heavy-oil-shortage-spells-higher-cost-shippers-road-builders-2024-05-03/
Well it did, but restrictions on Venezuelan heavy crude were dropped by the Biden/Harris “administration” and imports from Venezuela are on the increase.
Venezuela isn’t, or at least hasn’t yet, been able to fill the gap. Venezuela isn’t exactly a US friendly jurisdiction so that’s got to worry American politicians and the refiners. It has been interesting to watch American politicians begging hostile countries for heavy crude while Alberta could have supplied the same product through the keystone pipeline that Biden cancelled. Not that Trudeau is any prize or positive political asset for Alberta and Canada.
Cheap oil is good. Screw Alberta.
That’s what Ottawa did. It screwed Alberta in the pipeline business and so shipment by rail became necessary which is expensive.
I think a realistic translation of what Trump said is:
In the last 4 years there has been a 50 to 100% price increase in much of what people spend their money on. Economic opportunities for many Americans have diminished over this time. The economy will be rebooted by changing the direction of government and by decreasing the size of government. This will increase both supply and demand of commodities such as oil – not much price change, but will rebalance the buying power of Americans. (Workers will spend half as much on energy; newly unemployed louts will have half as much to spend until they come up with the energy to get a productive job.)
I can’t fault Trump for wanting to cut regulations and establish more rational energy policies but shareholders won’t tolerate a repeat of the race to the bottom from flooding the market. In real currency (dollars are on the way out), NG has almost never been cheaper.
And it’s not just price either….it’s energy security.
Given the US is currently producing more oil than any country ever, he’s yet again blowing hot air. Kind of like the Russian war comments on how he can solve it within 24 hours.
Even if US oil production does increase and the price of oil drops, OPEC would just cut production to get the price back up.