The Death of OPEC

At Astute Bloggers, "$50 Per Barrel Oil Is Coming: 'OPEC No Longer Exists In Any Meaningful Sense'."

Bolstered by GOP Electoral Wins, Oil, Gas and Coal Lobbyists Plan Fresh Push Against Climate Rules

At WaPo, "Fossil-fuel lobbyists, bolstered by GOP wins, work to curb environmental rules":

Oil, gas and coal interests that spent millions to help elect Republicans this year are moving to take advantage of expanded GOP power in Washington and state capitals to thwart Obama administration environmental rules.

Industry lobbyists made their pitch in private meetings last week with dozens of state legislators at a summit of the American Legislative Exchange Council (ALEC), an industry-financed conservative state policy group.

The lobbyists and legislators considered several model bills to be introduced across the country next year, designed to give states more power to block or delay new Obama administration environmental standards, including new limits on power-plant emissions.

The industry’s strategy aims to combat a renewed push by President Obama to carve out climate change as a top priority for his final two years in office. The White House has vowed to continue using executive authority to enact more environmental limits, and the issue is shaping up to be a major flash point heading into the 2016 presidential election.

With support from industry lobbyists, many Republicans are planning to make the Environmental Protection Agency a primary political target, presenting it as a symbol of the kind of big-government philosophy they think can unify social and economic conservatives in opposition...

More.

Sheikhs vs. Shale: The New Economics of Oil

At the Economist:

THE official charter of OPEC states that the group’s goal is “the stabilisation of prices in international oil markets”. It has not been doing a very good job. In June the price of a barrel of oil, then almost $115, began to slide; it now stands close to $70.

This near-40% plunge is thanks partly to the sluggish world economy, which is consuming less oil than markets had anticipated, and partly to OPEC itself, which has produced more than markets expected. But the main culprits are the oilmen of North Dakota and Texas. Over the past four years, as the price hovered around $110 a barrel, they have set about extracting oil from shale formations previously considered unviable. Their manic drilling—they have completed perhaps 20,000 new wells since 2010, more than ten times Saudi Arabia’s tally—has boosted America’s oil production by a third, to nearly 9m barrels a day (b/d). That is just 1m b/d short of Saudi Arabia’s output. The contest between the shalemen and the sheikhs has tipped the world from a shortage of oil to a surplus...

Keep reading.

'Peak Oil' Debunked, Again

Love!

At the Wall Street Journal, "The world relearns that supply responds to necessity and price":

It has been 216 years since Thomas Malthus gave birth to the idea that mankind’s appetite for natural resources would outstrip nature’s capacity to supply them. There have since been regular warnings that the world is running out of soybeans, helium, chocolate, tunsgsten, you name it—and that population growth has become unsustainable. The warnings create a political or social panic for a while, only to be proved wrong.

The latest reckoning with reality is the end of the obsession with “peak oil,” which for years had serious people proclaiming that we were entering an era of permanent fossil fuels scarcity. It didn’t work out that way.

That’s a central lesson from this year’s dramatic fall in the price of oil, which reached $69.49 a barrel of Brent crude on Thursday from a June high of $112.12. As recently as early November, when oil hovered at $80, OPEC officials warned they would intervene to hold the price at $70. But Saudi officials conspicuously refused to support an output cut at last week’s OPEC meeting, and Saudi oil minister Ali al-Naimi has made clear that he’d be comfortable with lower prices.

The short-term Saudi calculation is to drive oil prices down to squeeze their geopolitical adversaries and higher-cost producers. That goes especially for their adversaries across the Persian Gulf in Iran, which depends on oil exports for over 40% of its revenues, and where the regime had designed its budget based on $100 oil.

The Saudis also hope to slow the explosive growth of U.S. production, which, thanks to the tapping of domestic shale resources through the combination of horizontal drilling and hydraulic fracturing, has risen to some nine million barrels a day from five million in 2008. By some estimates, the price of oil needs to be as high as $90 a barrel for oil extracted from “tight” deposits such as shale, though oil market research firm IHS believes most tight oil wells have a break-even cost of between $50 and $69 dollars a barrel.

But even if the Saudi move slows U.S. drilling, the International Energy Agency forecasts that U.S. production will still surpass Saudi Arabia’s output of 9.7 million barrels a day, and overtake Russia’s 10.3 million, perhaps sometime next year. This would make America the world’s largest oil producer, which it was from the dawn of the oil age through 1974. Thanks to the fracking boom, the U.S. surpassed Russia as the world’s largest natural-gas producer in 2013.

All this is a useful reminder, as IHS’s Daniel Yergin told us the other day, that “technology responds to need and to price.” It was the same story in the 1970s, when the world responded to OPEC’s embargoes by exploiting new resources in Alaska and the North Sea, and again in the 1980s and 1990s, when offshore drilling became technologically feasible and economically profitable at ever-greater depths. And expect more from where that came, as the frackers continue to figure out how to drive down costs, and if new shale deposits in places such as Mexico, Ukraine and Argentina start to be exploited...

More.

The Global Shakeout from Plunging Oil

From Daniel Yergin, at the Wall Street Journal, "New supply—rather than demand—is dominating the market, and OPEC has been caught by surprise":

The decision by members of the Organization of the Petroleum Exporting Countrieson Thursday not to cut production reflects a profound shift in the world oil market. The demand for oil—by China and other emerging economies—is no longer the dominant factor. Instead, the surge in U.S. oil production, bolstered by additional new supply from Canada, is decisive. This surge is on a scale that most oil exporters had not anticipated. The turmoil in prices, with spasmodic plunges over the past few days, will likely continue.

Since 2008—when fear of “peak oil,” after which global output would supposedly decline, was the dominant motif—U.S. oil production has risen 80%, to nine million barrels daily. The U.S. increase alone is greater than the output of every OPEC country except Saudi Arabia.

The world has experienced sudden supply gushers before. In the early 1930s, a flood of oil from East Texas drove prices down to 10 cents a barrel—and desperate gas station owners offered chickens as premiums to bring in customers. In the late 1950s, the rapidly swelling flow of Mideast oil led to price cuts that triggered the formation of OPEC.

And in the first half of the 1980s, a surge in oil from the North Sea, Alaska’s North Slope and Mexico caused prices to plunge to $10 a barrel. That posed a much greater crisis for OPEC than today: Over those same years, global demand fell by more than two million barrels a day owing to a deep recession, greater conservation and the switch to coal from oil for electricity generation. This time world oil demand is still growing, but weakly.

For the past three years, oil prices hovered around $100 a barrel as disruptions in Libya, South Sudan and elsewhere, and sanctions on Iranian exports, eerily balanced out the production increases from the U.S. and Canada. But the slower global economic growth that became apparent a few months ago was accompanied by weaker demand for oil, just when Libya suddenly quadrupled output to almost a million barrels a day. The result: Prices weakened in September and then tumbled.

OPEC’s decision last week reflects the conviction of its “have” nations—the Persian Gulf countries, with very large financial reserves—that cutting output would mean losing market share, particularly to Iran and to what they see as Iran-dominated Iraq. Instead, they have adopted a strategy of leaving it to the market for now; OPEC is waiting, in the words of Saudi Oil Minister Ali al-Naimi, for the oil market “to stabilize itself eventually.”

It is now clear that the new U.S. production is more resilient than anticipated. There has been a widespread view that at around $85 or $90 a barrel extracting “tight” oil from shale would no longer be economical. However, a new IHS analysis based on individual well data finds that 80% of new tight-oil production in 2015 would be economic between $50 and $69 a barrel. And companies will continue to improve technology and drive down costs...

Still more.

PREVIOUSLY: "Energy Quakes as OPEC Stands Pat."

Energy Quakes as OPEC Stands Pat

Lots going on in energy markets this week.

Here's WSJ, "Oil Stocks and the Currencies of Major Oil-Producing Nations Tumble":

Energy company stocks and the currencies of major oil-producing nations stumbled Friday as OPEC’s decision to maintain crude output levels despite a glut rippled across the globe.

The Organization of the Petroleum Exporting Countries’ decision knocked down U.S. benchmark oil prices on Friday by 10% to $66.15 a barrel, the lowest level since September 2009.

Uneasy investors dumped energy stocks. Among the hardest hit were U.S. domestic oil producers including Continental Resources Co., the biggest producer in North Dakota’s Bakken Shale. Its shares plunged on Friday nearly 20%, to $40.98.

Exxon Mobil Corp. fell 4.2%, BP PLC dropped 5.5% and Royal Dutch Shell PLC lost 7%, all in abbreviated New York trading.

Currencies of most major oil producing nations, including Russia, Nigeria and Canada, weakened. The Russian ruble tumbled almost 3% to an all-time low of 50.57 to the dollar, before recovering slightly. The Mexican peso slid to its weakest level versus the greenback in more than two years. Russia said it would revise or cut government spending.

Pascal Menges, a portfolio manager with Lombard Odier in Switzerland who has shares in U.S. shale oil producers, said OPEC’s decision “created a very uncomfortable situation” for oil companies that must decide whether to curb investments. He predicts the global oil oversupply will decline over the winter and U.S. production growth will slow, preventing prices from falling much more.

If that is the case, he said, the least-indebted North American shale companies should stay profitable. Still, he said, he has cut his fund’s investments in oil producers, moving some of the money to companies that buy and process oil.

This is economic warfare. And frankly, a last gasp from OPEC, as markets will reach equilibrium. Established U.S. producers will keep producing and investing. OPEC's income will decline along with the all of the rest.

According to the article:

Todd Staples, president of the Texas Oil & Gas Association, a trade group, said in a statement that low crude oil prices will impact some U.S. and global operations. Still, he expects prices to eventually stabilize. “We are confident the market will find an equilibrium,” he said.

Keep reading.

'North Dakota has shed its identity as an agricultural state in decline to become an oil powerhouse second only to Texas...'

This is the marquee front-page report at today's New York Times, "The Downside of the Boom."

It's interesting, although caveat emptor. If the Old Gray Lady can smear and destroy the Bakken oil boom, they certainly will. As with any major economic development, folks need to find a nice compromise between private-sector growth and public-sector regulation. As it is right now, it sounds pretty Wild West and laissez-faire.

U.S. Fuel Costs Drop to Historic Lows, Thanks to Shale Oil Boom — And No Thanks to Obama!

According to the Los Angeles Times, increased U.S. energy production, resulting from the shale boom, is forcing a structural change in U.S. energy markets, that --- along with decreased demand --- could result in a long-term decline in fuel costs.

And keep in mind, consumers and business owners have more disposable income with lower energy costs, which in turn boosts spending in other areas, like recreation and job hiring. (Oh, and of course the federal and state governments would raise much more in tax revenues from higher business earnings and job growth, which would reduce pressure to raise taxes --- but don't expect idiot progs to be touting these benefits any time soon).

In sum, a policy focus on expanding the U.S. energy sector would be a huge boom for Americans across the board. Instead, President "I'll Bankrupt the Coal Industry" Obama is looking to crush the energy sector in favor of a climate change legacy for his administration.

Americans opened their eyes to this abuse on November 4th, and if the Dems don't change their ways, they'll be looking at another ass-kicking in 2016.

In any case, see the Los Angeles Times, "Gasoline prices continue to drop":

How low can gas prices go?

In Southern California — and across the country — prices have been dropping for months, placing extra dollars in consumers' wallets. This week the average price for a gallon of regular hit $3.24 in Los Angeles and Long Beach, the lowest in four years, according to AAA. In Orange County, it was $3.19.

Energy analysts say it may go lower.

"We could see gasoline prices in the high 2s," said Amy Myers Jaffe, executive director of energy and sustainability at UC Davis.

Several factors are likely to get prices there, Jaffe said.

Oil production in the United States — driven by the nation's shale oil boom — is increasing. And on the demand side, the sluggish global economy has sent the price of crude steadily down.

In the U.S., where growth has been stronger, demographics and consumer habits are putting downward pressure on demand, analysts said...

The current decline is partly seasonal...

But the nation's shale oil boom should help drive down prices in 2015 across the state, with average prices potentially falling below $3 once next year's summer driving season ends, Kloza said.

"It's going to be a sloppy year next year for oil," he said. "On balance, crude oil prices should be the lowest they've been in four or five years."

The rise in oil production has been so great that the U.S. Energy Information Administration now predicts average daily production in 2015 will reach the highest level since 1972.

Low fuel prices have been a boon to consumers' pocket books, especially working- and middle-class Americans for whom gas accounts for a significant portion of their paychecks.

When prices were around $4 a gallon, Rita Mena paid as much as $80 to fill her Ford Explorer.

On Friday, at an Arco gas station in Boyle Heights, she shelled out $60.

With the extra money, the 32-year-old said, she can buy more of the things she needs, like groceries or diapers for her 2 1/2-year-old daughter, Leilani.

Then there's the luxuries.

"I want to go out more now," said Mena, who works at a downtown L.A. health clinic. "And maybe I could pick up an extra present or something for Christmas."

PREVIOUSLY: "The Geopolitical Consequences of the Shale Revolution."

Governor Jerry Brown Blames Climate Change for California Wildfires

Governor Moonbeam is back.

At the Los Angeles Times, "Gov. Jerry Brown presses message on climate change."

HSBC Cash Withdrawal Limits Spark Fears of Banking Crisis

At Director Blue.

An amazing piece, and I checked Google for more information, and found this at BBC, "HSBC imposes restrictions on large cash withdrawals."

Americans are not going to go for currency and banking restrictions. This ain't Greece or Cyprus. You'll see a huge political backlash. People won't stand for that shit.

The Not So Golden State

At the Economist.

For all Silicon Valley's vibrancy, California can be a lousy place to do business http://t.co/pvv9ZJ6FST pic.twitter.com/BdieOPvz7K

— The Economist (@TheEconomist) January 26, 2014

Appeals Court Rejects FCC Rules on Net Neutrality

At WSJ, "Court Tosses FCC's 'Net Neutrality' Rules: Decision Clears Way for New Fees on Web's Heavy Bandwidth Users":

Though the FCC said it might appeal, the ruling for now means Internet-service providers are free to experiment with new types of pricing arrangements, such as charging content companies like Google Inc. or Netflix higher fees to deliver Internet traffic faster. Or, they could choose to degrade the quality of certain online content unless its creators were willing to pay up.

And a must read piece at Gigaom, "What you need to know about the court decision that just struck down net neutrality."

Incandescent Light Bulb Banned January 1st

At Heritage, "Time to Stock Up on Incandescent Bulbs Before They Go Out Permanently."

Commentary at Lonely Conservative, "The Government Is Taking Your 40 And 60 Watt Bulbs Away On January 1."

Details on the ban at Popular Mechanics, "What You Need to Know About the Lightbulb Law."

Is America Ready to End Prohibition?

Kennedy explains how beer sales remain so highly regulated in the U.S.

Obama Unveils War on Fossil Fuels

It's not just coal, and he didn't campaign on this either.

At Wall Street Journal, "The Carbonated President":

President Obama's climate speech on Tuesday was grandiose even for him, but its surreal nature was its particular hallmark. Some 12 million Americans still can't find work, real wages have fallen for five years, three-fourths of Americans now live paycheck to check, and the economy continues to plod along four years into a quasi-recovery. But there was the President in tony Georgetown, threatening more energy taxes and mandates that will ensure fewer jobs, still lower incomes and slower growth.

Mr. Obama's "climate action plan" adds up to one of the most extensive reorganizations of the U.S. economy since the 1930s, imposed through administrative fiat and raw executive power. He wants to reduce greenhouse gas emissions by 17% by 2020, but over his 6,500-word address he articulated no such goal for the unemployment rate or GDP.

***
The plan covers everything from new efficiency standards for home appliances to new fuel mileage rules for heavy-duty trucks to new subsidies for wind farms, but the most consequential changes would slam the U.S. electric industry. These plants, coal-fired power in particular, account for about a third of domestic greenhouse gases.

Last year the Environmental Protection Agency released "new source performance standard" regulations that are effectively a moratorium on new coal plants. The EPA denied that similar rules would ever apply to the existing fleet, or even that they were working up such rules. Now Mr. Obama will unleash his carbon central planners on current plants.

Coal accounted for more than half of U.S. electric generation as recently as 2008 but plunged to a mere 37% in 2012. In part this tumble has been due to cheap natural gas, but now the EPA will finish the job and take coal to 0%.

Daniel Shrag of Harvard, an Obama science adviser, told the New York Times Monday that "Politically, the White House is hesitant to say they're having a war on coal. On the other hand, a war on coal is exactly what's needed." At least he's honest, though in truth Mr. Obama's target is all forms of carbon energy. Natural gas is next...

Man, he's awful.

Continue reading.

Blue States With High Taxes Are Struggling to Compete for Businesses and Workers

From Arthur Laffer Stephen Moore, "The Red-State Path to Prosperity":

You can tell a lot about prosperity in America by observing the places people are moving to and where they are packing up and moving from. New Census Bureau data on metropolitan areas indicate that the South and the Sunbelt regions continue to grow, while the Northeast and Midwest continue to shrink.

Among the 10 fastest-growing metro areas last year were Raleigh, Austin, Las Vegas, Orlando, Charlotte, Phoenix, Houston, San Antonio and Dallas. All of these are in low-tax, business-friendly red states. Blue-state areas such as Cleveland, Detroit, Buffalo, Providence and Rochester were among the biggest population losers.

This migration isn't accidental. Workers and business owners are responding to clear economic incentives. Red states in the Southeast and Sunbelt are following the Reagan model by reducing tax rates and easing regulations. They also offer right-to-work laws as an enticement for businesses to come and set up shop. Meanwhile, the blue states of the Northeast, joined by California, Minnesota and Illinois, are implementing the Obama model of raising taxes on businesses and the wealthy to fund government "investments" and union power.

The contrast sets up a wonderful natural laboratory to test rival economic ideas.

Yes. More at the link.

And see the Mercatus Center, "Freedom in the 50 States."

Bikini Baristas

Reason's Nanny of the Month:

Background at PuffHo, "Grab-N-Go Bikini Baristas Accused of Performing Strip Shows," and at Seattle Post-Intelligencer, "Bikini baristas arrested after two-month cop investigation."

Low- and Middle-income Residents Are Fleeing California

From Allysia Finley, at WSJ, "The Reverse-Joads of California":

During the Great Depression, some 1.3 million Americans—epitomized by the Joad family in John Steinbeck's "The Grapes of Wrath"—flocked to California from the heartland. To keep out the so-called Okies, the state enacted a law barring indigent migrants (the law was later declared unconstitutional). Los Angeles even set up a border patrol on the city limits. Soon the state may need to build a fence to keep latter-day Joads from leaving.

Over the past two decades, a net 3.4 million people have moved out of California for other states. But contrary to conservative lore, there has been no millionaires' march to Texas or other states with no income tax. In fact, since 2005 California has experienced a net in-migration of households earning more than $200,000, according to the U.S. Census's American Community Survey.

As it happens, most of California's outward-bound migrants are low- to middle-income, with relatively little education: those typically employed in agriculture, construction, manufacturing, hospitality and to some extent natural-resource extraction. Their median household income is about $40,000—two-thirds of the statewide median—and about 95% earn less than $80,000. Only one in 10 has a college degree, compared with 30% of California's population. Roughly 40% of the people leaving are Hispanic.

Even while California's Hispanic population has grown by more than 1.5 million since 2005, thanks to high birth rates and foreign immigration, two Hispanics have moved out for every one that has moved in from another state. By contrast, four Hispanics from other states have settled in Texas and Arizona for every three that have left.

It's not unusual for immigrants or their descendants to move in pursuit of a better life. That's the history of America. But it is ironic that many of the intended beneficiaries of California's liberal government are running for the state line—and that progressive policies appear to be what's driving them away.

Ironic, yes. Surprising, no.

But continue reading, at the link.

Brazil Nightclub Fire

Here's the banner headline at London's Daily Mail, "Security staff 'barred the doors' as desperate people tried to escape Brazil night club inferno which claimed at least 232 lives."

And at the New York Times, "Scores Dead as Fire Sweeps Through Nightclub in Brazil":

RIO DE JANEIRO — A fire ignited by a flare from a band’s pyrotechnic spectacle swept through a nightclub filled with hundreds of university students early on Sunday morning in Santa Maria, a city in southern Brazil, killing at least 232 people, police officials said.

Health workers hauled bodies from the club, called Kiss, to hospitals in Santa Maria throughout Sunday morning. Some of the survivors were taken to the nearby city of Porto Alegre to be treated for burns. Valdeci Oliveira, a local legislator, said he saw piles of bodies in the nightclub’s bathrooms.

Col. Guido Pedroso de Melo, the commander of the city’s Fire Department, said security guards had locked exits, which intensified the panic as people in the club stampeded to the doors. One police investigator at the club, Elizabeth Shimomura, told a television news channel, “It is a scene of horror.”

Survivors described a scene of mayhem as patrons rushed for the main exit. “I only got out because I am strong,” Ezequiel Corte Real, 23, told reporters. He said he helped others escape the blaze.

The disaster in Santa Maria, which is in the relatively prosperous state of Rio Grande do Sul, shocked the country. President Dilma Rousseff canceled appointments at a summit meeting in Chile to travel to Santa Maria, a city of about 260,000 residents that is known for its cluster of universities.

Entirely senseless. You'd think at this point, in the 21st century, this kind of catastrophe would never happen. The doors were locked? Seriously?

Continue reading.

And there's lots more at the Lede, "Fire at a Nightclub in Southern Brazil."

Gas Prices Compound Obama's Agony

Well, it's collapsing all around the Democrat ticket, no doubt.

And here's this, at The Hill, "Obama faces dilemma over gas prices as presidential campaign hits homestretch":

President Obama faces a dilemma as Mitt Romney bashes him over high gasoline prices in the final weeks of their close race.

Obama must decide whether to address the attacks head-on, or stay the course on a messaging strategy that has recently been addressing prices indirectly.

Democratic strategists and other experts argue that three weeks before voters go to the polls, Obama should steer clear of big messaging or policy pivots on gas prices.

“Bringing the issue up this close to Election Day would be self-defeating at this point,” said Paul Bledsoe, an independent consultant who was a climate change aide in the Clinton White House.
Dramatic action on energy appears unlikely before the election even as the campaigns tweak their closing arguments.

White House officials have said in recent months that a release from the nation’s Strategic Petroleum Reserve (SPR) is an option on the table. But speculation about the prospect has dimmed in recent weeks as oil prices have fallen off their summer highs that reached around $100-per-barrel in mid-September.

Prices closed Friday at $91.86-per-barrel on the New York Mercantile Exchange.

Democratic political strategist Michael Stratton said that tapping the SPR would damage Obama.

“Anything with gas prices that would be perceived as manipulative at this point would work against him, and would be perceived by everybody so cynically that it would be ineffective,” he said.

Average nationwide gasoline prices are currently $3.79-per-gallon and have for weeks been setting records for the highest prices on specific days of the year, according to the American Automobile Association (AAA). Prices, though, have been dropping in recent days.

Also, the current national average has been skewed upward by the major recent price spike in California, which saw average Golden State prices jump a half-dollar in a week to reach $4.67 on Oct. 9 before falling back, according to AAA.

Well, it just sucks to be Obama, doesn't it?

At the photo, the ARCO station at the corner of Del Amo and Woodruff in Lakewood, where I fill up on the way home from work. Regular unleaded is $4.47 a gallon, down about 10 cents or so from the last time I filled up over there.