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Text The price of oil has crashed over the last year and a half. In the middle of 2014, a barrel of crude cost over $100. Now it’s worth just over $30.
Normally, such a collapse would lead OPEC to pump less oil. The idea is that less oil on the market helps keep prices up. But despite a historic fall in oil prices, the Saudi Arabian-led international oil cartel hasn’t budged: The biggest step it has taken so far is offer to freeze production at its current record levels. Production cuts are not on the table.
The big question is, why? One theory is that OPEC simply has less control over the oil market than it used to, thanks to the shale gas revolution. Another possibility is that OPEC wants oil prices to be low precisely in order to drive shale oil producers, which have higher costs, out of business.
Here’s a simpler hypothesis: Maybe the Saudis aren’t cutting production in the face of low prices because huge portions of their oil reserves might eventually become worthless. That’s what James Rowe, an environmental studies professor at the University of Victoria, thinks.
If that happens, today’s oil prices won’t look low — not when there’s an overabundance of an asset that can’t be sold. But oil prices are the lowest they’ve been in 12 years, you say. How could they ever be considered high?
This explanation relies on two related ideas: a carbon bubble and stranded assets. The carbon bubble refers to the fact that energy companies around the world are sitting on five times more fossil fuels than can be burned, the research nonprofit Carbon Tracker estimates. Those assets, worth about $2 trillion, are referred to as “stranded assets.”
So what does that mean for an oil company that controls a state? It might as well sell as much oil as possible while still can.
Saudis can’t sell oil for $100 a barrel, obviously, but Rowe said they “appear to be positioning themselves for the next best option: gobbling up as much of the earth’s remaining carbon budget for themselves before the bubble bursts. Isn’t it better to sell at a lower price than to receive nothing at all from vast unburnable reserves?”
By the time the world has moved on from oil, Rowe said, Saudi Arabia “will have sold what it could while its reserves were still burnable.”
And the country will have moved on as well. Its oil minister, Ali Al-Naimi, has said Saudi Arabia will be a solar exporter by the middle of this century.
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Text DW: John D. Rockefeller heralded a new era in history with Standard Oil. Are the Rockefellers now ending the oil age?
Stephen Heintz: We are hoping to help to finish the oil age. It is time to move away from fossil fuels, and to move as quickly as possible to clean, renewable energy in order to save the planet. The oil age is now coming to its own end.
Text "The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil"
-- Sheikh Zaki Yamani, a Saudi Arabian who served as his country's oil minister three decades ago
Quoted by the Economist, The End of the Oil Age, 23 Oct 2003
originally posted by: pikestaff
The Saudis are pumping oil to stop 'fracking' oil being sold, Saudi oil is cheaper to pump than what 'fracking oil, and oil shale gas cost to produce, plus, 'oil' does not just produce Gas and diesel, but many other industries use its contents, plastics, lubricants, sealants, tarmacadam, paints, I bet there are more I cannot think of.
originally posted by: whatnext21
Someone please explain why gas in southwestern ontario jumped from 82.5 per litre to 93.3 overnight? BS. It takes forever to go down but hours to go up.