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NYT: Some Saudis say kingdom needs to cut production

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The New York Times has an instructive story about the tenuous situation Saudi Arabia is in as oil-producing nations deal with the sudden, precipitous drop in global crude prices. The kingdom so far seems to be willing to ride out the price drop. But other influencers inside and outside the country say it needs to cut production to prop up prices.

“This week, the billionaire investor Prince Alwaleed bin Talal released an open letter to the Saudi oil minister, Ali al-Naimi, criticizing him for saying that lower oil prices were no cause for alarm,” the story says. “In the letter, Prince Alwaleed called the price drop a ‘catastrophe that cannot go unmentioned’ and suggested it could harm the kingdom’s budget.”

(Photo: Saudi oil minister Ali al-Naimi. Credit: Shutterstock)

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Analyst doubts low oil prices will hamper U.S. production

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Whenever a petroleum analyst writes a sentence that begins: “I can still recall when prices collapsed in 1986 …” you know he’s seen just about everything in the global oil market. Michael Lynch has some sage words for those who are predicting slashed U.S. production (and accompanying job losses) owing to the rapidly falling price of crude oil.

Writing in Forbes, Lynch opines (emphasis added):

“Various arguments are being made now about how expensive oil has become to produce and the manner in which this will support prices, but this is much more valid in the long-term. … It is hard to imagine that a multi-billion dollar deepwater platform would be abandoned because of a six-month price drop.

“Other factors will prevent a decline in production from lower oil prices. Companies with contracts renting rigs won’t just cancel them, laying off employees is a near-last resort, and leases must often be drilled in a certain period to hold them. Abandoning wells also has a cost, and oil price drops that are thought to be brief won’t cause many companies to do that.”

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Airstrikes reducing oil revenues for ISIS, report says

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The U.S.-led airstrikes against Islamic State in Iraq and Syria (ISIS) might not have eradicated the extremist group, as President Obama vowed to do. But at least the operation has interrupted the flow of oil money to the militants, according to an analysis in Bloomberg BusinessWeek.

Based on details from an IEA report, the magazine says:

Though the airstrikes have failed to keep Islamic State from advancing in the field, they have apparently succeeded in dismantling its sophisticated oil network, reducing the movement’s ability to make gasoline and diesel for its tanks and trucks and cutting off a vital source of funding. A report from the International Energy Agency in Paris has just estimated that Islamic State controls only about 20,000 barrels of daily oil production, down from about 70,000 as of August. Most of it remains in Iraq.

As BusinessWeek reported in September, at the time, when ISIS had seized oil fields and refineries in swaths of territory in Syria and Iraq, the group was bringing in up to $2 million a day from stolen oil.

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LAT: Chevron spending big to sway election in Richmond, Calif.

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Los Angeles Times consumer-affairs columnist Michael Hiltzik writes about the lengths to which Chevron is going to influence city elections in the city of Richmond, Calif. And it seems that only a student-run newspaper is reporting on Chevron’s spending. ” … leaving coverage of the election to Chevron’s PR organ, the Richmond Standard, could be disastrous for Richmond’s residents. For example, you won’t find a peep about Chevron’s political spending in the Richmond Standard. That’s par for the course: The website’s entire staff, an employee of Chevron’s PR firm named Mike Aldax, told me last month that ‘if you’re looking for a story that’s critical of Chevron, you’re not going to find it in the Richmond Standard.’ “

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Growth Energy: Report proves food vs. fuel myth ‘completely unfounded’

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Ethanol Producer magazine has an explanatory post on the USDA report released last week. Growth Energy, which represents ethanol producers, says the report is further evidence that the “food vs. fuel” debate used to undermine ethanol is flawed. Tom Buis, CEO of Growth Energy, told the magazine: “In report after report, we see that the American farmer can produce an abundant amount of food and fuel. … It is clear that the food and fuel myth is completely unfounded and does a great disservice to the hardworking men and women that help feed the world and fuel our nation.”

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Pentagon: Climate change could present threats to U.S. military

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The U.S. Defense Department has come out with a comprehensive report on the impact of climate change on America’s military. According to The Washington Post’s story on the report, “Drastic weather, rising seas and changing storm patterns could become ‘threat multipliers’ for the United States, vastly complicating security challenges faced by American forces …” Read the full report here.

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Wait. Keystone will hike gas prices, not lower them?

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An editorial in the Great Falls (Montana) Tribune lays out some hard truths about the proposed Keystone XL pipeline that would carry crude oil from Canada to refineries in the American Midwest: “Most likely the oil would be exported from there, doing little to create U.S. energy independence,” the newspaper writes.

“Canada’s National Energy Board anticipates 15 Midwestern states will experience a 10 to 20 cent per gallon increase in gasoline prices if KXL is built. It would happen because an oversupply of Canadian crude now refined for U.S. domestic use will be diverted to KXL for export.”