The Saudi Arabia Oil Refinery Bombing has many wondering if one of the major ways to bring global peace and security is to get rid of both ISLAM and OPEC? Fanatical Religions are at the heart of much of the World’s Problems, while OPEC is responsible for holding the Worlds Oil Prices hostage; Islam controls OPEC and thus the Saudi Arabia Bombings have many connecting the dots.
THE END OF OPEC?
Many feel ‘The End Is Near For OPEC,’ which will result in economies in the United States and Non-OPEC nations getting far better. Why? Well the ‘Writing Is On The Wall’ for OPEC and a little biblical history combined with some OPEC facts helps to explain why.
The Writing Is On The Wall
To start here is where we get the expression ‘The Writing Is On The Wall’ and how it now applies to OPEC.
In 539 BCE, King Belshazzar was having a huge feast to celebrate his riches and the success of the Babylonian world power. As he arrogantly began drinking out of the vessels his father Nebuchadnezzar had taken from the Israelite temple in Jerusalem, a hand appeared out of thin air and began writing the words; ME’NE ME’NE TE’KEL PEʹRES.
The king in a panic summoned his wise men who could not interpret the meaning. According to Daniel chapter 5:1-30, the King finally called Daniel a Hebrew prophet, who went on to tell the king; “This is the interpretation of the ‘writing on the wall.’ ME’NE – God has numbered the days of your kingdom and brought it to an end. TE’ KEL – You have been weighed in the balances and found lacking.
PEʹ RES – Your kingdom has been divided and given to the Medes and the Persians.” That very night the Medes and Persians under the command of King Darius diverted the waters of the Euphrates river and snuck under the gates and into the city, taking Babylon without a fight and killing King Belshazzar.
Oddly enough, this historic biblical account has an interesting parallel for the future of OPEC, the arrogant reigning world power of the Oil industry.
The World Power Of OPEC
Oil drives our planet and our global economy. Without oil we do not have industry, travel, military, food production, or anything else that keeps our planet moving. Thus oil will always be king and no other alternative source of energy will ever replace it under our current world order of greed vs need.
The global oil supply is broken up into two pieces; OPEC and Non-OPEC producing nations. According to the following chart taken from the OPEC website, in 2014 OPEC owned 81% of the world proven oil reserves with 1,206 (basically 1200) billion barrels while the non-OPEC producing nations owned 19% of the world proven oil reserves with 286.9 (basically 300) billion barrels.
Now remember these figures of 300 vs 1200 billion barrels of oil, because those numbers taken from OPEC’s own website are going to play an interesting mathematical role as our discussion continues.
Fracking Threatens OPEC’s Supreme Reign
Like mighty King Belshazzar and the Babylonian world power of the time, OPEC has been the reigning world power when it comes to oil production, while countries like the United States were panicking about the future of it’s oil reserves and resulting economic and military supremacy. The constant threat of global oil shortages throughout the past decades has only furthered OPEC’s ability to hold the world hostage and reign supreme. Past presidents were even talking about drilling in the National parks and wildlife refuges to come up with enough oil to ensure the security of the United States.
Gas prices were at a record high, while America was on it’s knees in a financial recession following the worst housing crisis of it’s history, when according to the New York Times of June 8, 2008, oil was up to $130 a barrel and President Bush was urging Congress to; “Expand oil production by tapping into the extraordinary potential of oil shale. In one major deposit the Green River Basin of Colorado, Utah, and Wyoming there lies the equivalent of about 800 billion barrels of recoverable oil. That’s more than three times larger than the proven oil reserves of Saudi Arabia. And if it can be fully recovered it would be equal to more than a century’s worth of currently projected oil imports. We will take pressure off gas prices by expanding the amount of American-made oil and gasoline. We will strengthen our national security by reducing our reliance on foreign oil. We will benefit American workers by keeping our nation competitive in the global economy and by creating good jobs in construction, and engineering, and refining, maintenance, and many other areas.”
There is an old western adage that says “God created men, but Sam Colt made them equal.” Like Sam Colt’s Revolver changed the west, fracking technology suddenly changed the entire oil production playing field so that in 2014 the United States became the number one oil producer ahead of Saudi Arabia. Yes you read that right… On July 10, 2014 The Institute for Energy Research posted an article online entitled ‘U.S. Overtakes Saudi Arabia and Russia as Largest Oil Producer.’ The article went on to state; “According to the International Energy Agency (IEA) and the Bank of America, the United States is now the world’s largest oil and natural gas liquids producer and will remain so for awhile, overtaking both Saudi Arabia and Russia. U.S. production of crude oil, along with liquids separated from natural gas, surpassed all other countries with daily output exceeding 11 million barrels during the first 5 months of this year. Oil production is soaring from shale formations in Texas and North Dakota using hydraulic fracturing and directional drilling technology. The United States became the world’s largest natural gas producer in 2010, ousting Russia for the top spot. The United States also ranks as the world’s largest producer of oil and natural gas combined. Now, it is also the largest producer of oil and natural gas liquids.”
A July 4, 2014 Bloomberg article said “The U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of energy from shale rock spurs the nation’s economic recovery. Bank of America Corp said. The U.S. production of crude oil, along with liquids separated from natural gas, surpassed all other countries this year with daily output exceeding 11 million barrels in the first quarter. Francisco Blanch, the bank’s head of commodities research, said by phone from New York. “The shale boom is playing a key role in the U.S. recovery. If the U.S. didn’t have this energy supply, prices at the pump would be completely unaffordable.”
Now stop for a moment and think about how significant all of this is. How would you feel if you were OPEC and suddenly the United States one of your biggest customers now had possible reserves of up to 800 billion barrels accessible by fracking and just became the number one producer ahead of you?
Then to add salt to the wound, numerous other countries also surged ahead in oil production further threatening OPEC’S reign of terror. For example on April 9, 2015, CNN ran an article entitled ‘U.K. makes a big oil discovery.’ The article went on to say “Exploration firm U.K. Oil & Gas Investments said Thursday there may be up to 100 billion barrels of oil at an onshore site in south England, near Gatwick airport, a company spokesperson told CNN. That’s more than double the amount of oil pumped from Britain’s energy offshore North Sea fields in the past 40 years.” Whether Britain could pull all that oil out of the ocean floor was irrelevant. Additional news reports started talking about various other countries having oil potential. The point is OPEC’s supreme reign was being threatened, because now it seems everyone has oil.
OPEC Declares War On Non-OPEC
So OPEC now had to formulate a strategy based on very simple business economics. OPEC nations are pulling oil out of the ground for an average of about $10 a barrel production costs while North American producers are pulling oil out of the ground for an average of about $50 a barrel production costs. So OPEC’S strategy was very simple; First flood the market and bring oil down to $40/barrel and watch to see who falls first. The small shale producers of the US and Canada were immediately gone leaving only the large companies to stand and fight.
As oil prices began to fall there was panic talk from various sources about the possibility of oil falling to $15 a barrel which showed a complete lack of basic business understanding. If you are OPEC and you know your competition is producing oil at $50 a barrel, why bring it down to $10 a barrel so you also lose. Instead it would make much more sense for OPEC to next push oil prices down to $30/barrel to take on the larger North American Producers. Yes OPEC is not making as much money, but the fact is they are still making money, while the non-OPEC nations are losing money.
How has this affected countries like the United States? Fortune.com says; “For the last year, it has been relatively unprofitable for oil companies in the U.S. to continue drilling, but many players had hedged their production and sold it forward at much higher prices. This is what has stemmed the steep crash in oil production last year and what has allowed U.S. oil producers to continue pumping at near record levels despite the low prices. But things are getting real now. Oil companies have hedged only 11% of their production this year, according to a recent study of 48 firms published by consultancy IHS Energy. That’s down from the current five-year average of around 60%. Those companies buying hedges for 2016 are currently locking in prices at or around $50 a barrel, a trader with knowledge of the market told Fortune. That stands in stark contrast to the $80 to $100 a barrel hedges that protected oil companies in 2015. At $50 a barrel, those hedges are protecting some companies from the full pain of today’s market, but just barely. To be sure, U.S. oil producers are feeling the impact of low prices, but it has yet to translate into a meaningful reduction in current production. Much of the cuts have been made on the exploration side of the business, which will affect future production levels. For example, the number of rigs currently drilling or exploring for oil in the U.S. is down by around 60% from the same time last year, to 510 rigs, according to the latest figures from Baker Hughes.”
There is an obvious lag when it comes to the oil industry in regards to exploration, extraction, refining, sale and distribution and companies have a reserve of cash to draw from as well as a reserve of oil to sell, but the sustained low oil prices eventually puts serious pressure on the large North American oil producers, forcing them to lay off and cut back to survive.
Now normally it should work itself out following the old expression “the best cure for low oil prices is low oil prices,” so that once the oversupply is used up the demand will once again drive up the prices and companies will start back up again and the process will repeat itself. But OPEC having felt the ill effects of technological advantage will continue to keep prices down in an attempt to completely cripple its competition. That could force producers to turn to Governments for help in the form of subsidies which in turn puts huge economic stress on countries like the United States and Canada who have already gone through a recent economic recession. Alberta for example is in such a bad state that the Federal Government is giving the province $250 million in aid and $700 million total to the country to spur a flagging economy flattened by energy prices. America and the rest of the world’s oil producers are in a downward spiral because of OPEC and it is only a matter of time before the crunch will soon be felt in a very real and negative way in the United States.
What about the possibility of the Non-OPEC nations getting together and forming some sort of entity similar to OPEC or trying to negotiate with OPEC? That is like asking the major drug cartels of Columbia or Mexico to play fair. In the end it all comes down to the cost of production. The simple fact is OPEC has huge reserves sitting within easy reach under the sand in the middle east and thus pulls oil out of the ground far cheaper than anyone else on the planet can and no one else will ever be-able complete on an equal playing field with OPEC in terms of low cost production. Yes Non-OPEC nations now have the ability to tap into vast reserves of oil that equal or exceed OPEC’s reserves, but even with technology, production costs will always be higher ensuring OPEC will always be in control of the global oil market; unless something very drastic is done to change that situation.
Why The ‘Writing Is On The Wall’ for OPEC
On January 12th 2016 The Guardian ran an article entitled ‘Beware the great 2016 financial crisis.’ The article explained. “The world is heading for a financial crisis as severe as the crash of 2008-09 that could prompt the collapse of the eurozone. Analysts at Royal Bank of Scotland urged investors to “sell everything” ahead of an imminent stock market crash. “Developments in the global economy will push the US back into recession,” Edwards told an investment conference in London. “The financial crisis will reawaken. It will be every bit as bad as in 2008-09 and it will turn very ugly indeed.” Fears of a second serious financial crisis within a decade have been heightened by the turbulence in markets since the start of the year. Share prices have fallen rapidly and a slump in the cost of oil has left Brent crude trading at barely above $30 a barrel. The Soc Gen strategist said the US economy was in far worse shape than the country’s central bank, the US Federal Reserve, realized. “We have seen massive credit expansion in the US. This is not for real economic activity; it is borrowing to finance share buybacks.”
Fortunately all those negative news articles are going to be proved completely wrong. Why? Well it is simple logic. Will the United States of America allow itself to go into another serious recession because of OPEC? Considering America is the worlds leading superpower and acts as a global police force securing democracy and freedom and needs oil to stay on top, the answer is an obvious and resounding NO.
So there are two issues OPEC needs to consider in this regard.
1.While OPEC may have cheep oil, the United States is the only country in the world that has continually gone to war over the past century. It has gone to war over oil in Iraq and the Persian Gulf and it will go to war over oil again if it needs to.
2.Another major contributing factor is; The last recession combined with the weak leadership of Obama the President has set up the United States for a more aggressive leader who will not allow the US to go into another recession.
How so? Many feel Obama has a hidden agenda and was voted in out of racial sentiment and not for his abilities to run a country, which has caused almost irreversible damage to the United States and to the world because without America, who holds dictators at bay and protects human rights and freedoms of speech? When a country is at war it needs a soldier to lead and when it is in a recession it needs a businessman to lead. Obama was neither. Yes he is a great orator, but talk is cheep when people can’t feed their families or are being blown up by terrorists. But under a new more aggressive American President, the United States will be more inclined to lead the Nations (including Russia) in an economic or physical war against OPEC, making OPEC play fair or not play at all. Interestingly enough Saudi Arabia made an arms deal with Trump to increase it’s own military power.
The Future Of OPEC:
The Nations used to need OPEC but with technological advantage, the Non-OPEC nations now have equal the oil of OPEC and can function for decades without OPEC. According to the reports we just considered, the Non-OPEC nations had about 300 billion barrels, then Britain discovered about 100 Billion Barrels and the US discovered 800 Billion Barrels which oddly enough equals OPEC’s reserves of 1200 Billion Barrels. Some reports say the US is sitting on trillions of barrels of accessible oil reserves.
So while the Non-OPEC nations could go begging for reasonableness at OPEC’s door, why should they when OPEC has held the world hostage over the past 50 years raking untold wealth at the expense of everyone else.
Going back to our story of Belshazzar and Babylon; Babylon’s walls were impregnable resulting in Belshazzar’s arrogance, and so the Persians cleverly devised a plan whereby they diverted the course of the Euphrates Rivers to that it fell to a manageable depth. While the residents of the city were distracted by Belshazzars great feast, the Persian army waded the river and marched under the walls of Babylon unnoticed.” What happened to Belshazzar, will soon happen to OPEC.
The world no longer needs OPEC, so it is time to take off the gloves and play dirty with OPEC because dirty is all OPEC understands. The smarter business choice for the Non-OPEC nations would be to go in heavy-handed to OPEC and force OPEC to reduce production or face;
1.A global embargo against OPEC.
2.An indirect war against OPEC in the form of hiring an organization to attack OPEC and keep them busy fighting a war while the rest of the world depends on Non-OPEC nations for Oil. (No one will have a problem giving the CIA a little free reign to play dirty against OPEC if it means American’s and Non-OPEC nations can avoid another global recession and keep feeding their families.
3.Or a direct war against OPEC. The Russians have been looking for an excuse to bomb Saudi Arabia for a long time.
Either scenario would be a very simple and brilliant business move as it would raise oil prices in non-OPEC nations spurring their economies while taking away power from OPEC. Straight talking OPEC with those options would at least make OPEC sit up and pay attention. The bombing of a major Saudi Refinery is making the world sit up and take notice.
Whatever the case, like King Belshazzar and the world power of the Babylonians, ‘The Writing Is On The Wall’ for OPEC and it is only a matter of time before someone like King Darius finds a way to bring OPEC down.