Thinking of Oil and Gas: The Iranian Deal

IMG_4439The Iranian deal throws Russia right back onto the world stage. For years all it could boast of was its huge supply of oil and gas which it fed to the industrial powers of Western Europe developing their dependency on it. Things went well for a while as Russia used the money to improve the well-being of its people; to make close friends of Putin into the super-super-rich; and to improve its military which had been down in the dumps.

The United States did not depend on Russian petroleum supplies. We had our own source that included Saudi Arabia which pretty much controlled the price of world oil. The price of oil and gas rose steadily over the years as did the dependency on it. More and more nations including China continually raised their demands.

The price rose to the level that it became financially feasible for a new push for oil in the United States. The cost of pulling oil out of the earth was higher here than in other parts of the world but the gain to be made with the price so high was substantial. Drilling went on full blast.

It reached the point where the United States pretty much became self-sufficient in oil production and had the capacity to become an oil exporter. Then the cost of oil plummeted. On March 15, 2015, the Economist explained why: “Mostly because of increased supply from America—up by 4m barrels a day since 2009. Although most crude exports are still banned, American imports have plummeted, contributing to a glut on world markets. Other producers have decided not to try to curb their production and keep the price up.”

Why did those other producers decide to do that?

The Economist answered: “The Organisation of Petroleum Exporting Countries is dominated by Gulf producers, notably Saudi Arabia. They have huge reserves to cushion the impact of low prices. They also hope that the slump will eventually shut down high-cost production, tightening the market again.” (my emphasis)

Will their strategy work.

Again the Economist answers:  “Probably not. America’s shale production boom is based on new techniques—fracking and horizontal drilling—and unlike “big oil” involves small companies and small projects. These are flexible, meaning they will quickly respond to any price rise. And they are innovative: huge productivity gains still lie ahead.”

USA Today agrees saying there has been no significant cut back in U.S. oil production. The Wall Street Journal  also concurs with some caveats. If the price goes to $60 or above that will be good for most companies in the U.S. and they will survive; if it goes below $45 that won’t be.

Here’s where the Iranian deal comes in. Saudi Arabia. Russia and Iran have three of the top four highest proven oil reserves. The Saudis have just met with the Russians to figure out how to work together on the issue; Iran will meet with the Russians on this soon. The wise men suggest the Iran deal will hurt Russia because more oil will come on the market causing the price to go down more. See here and here and here.

There’s another way to look at this. Saudi is keeping up full production  despite the low prices. It wants to force the producers who need higher prices (USA) out of the market. To push the price down further where it will shut down the American market it needs a buy in from Russia and Iran. Those three working together can cause havoc by driving down the oil prices which will drive down American production.

Iran will go along. The only question is whether Putin can take it. Will an expansion of the war in Ukraine give him the time he needs? There’s a lot more to the Iranian deal than meets the eye. It may not be about the future of nuclear as much as it is about the future of oil.


  1. In other news

    In Rare Case, FBI Tries to Fire Agent Who Shot Queens Suspect
    August21 2015
    WASHINGTON — For the first time in decades, the F.B.I. is trying to
    fire an agent for …

  2. Matt

    attorney John Graham would like
    your Phone number

    He is the attorney handling the
    Boston Marathon bomber appeal
    We spoke on the phone today.

    See Link for full story

    FBI Evidence Proves Innocence of Accused Boston Marathon Bomber Dzhokhar Tsarnaev
    August 17, 2015 |

    FBI Evidence Proves Innocence of Accused Boston Marathon Bomber Dzhokhar Tsarnaev

    Paul Craig Roberts

    I have been contacted by attorney John Remington Graham, a member in good standing of the bar of the Minnesota Supreme Court and the United States Supreme Court. He informs me that acting in behalf of Maret Tsanaeva, the aunt of the accused Tsamaev brothers and a citizen of the Kyrgyz Republic where she is qualified to practice law, he has assisted her in filing with the US District Court in Boston a pro se motion, including an argument of amicus curiae, and an affidavit of Maret Tsarnaeva. The presiding judge has ordered that these documents be included in the formal record of the case so they will be publicly accessible. The documents are reproduced below.

  3. On a lighter note…
    Off-topic, but definitely newsworthy…

    USA Today…today

    Tiger Woods claims share of lead at Wyndham after shooting 65.

    “The sport’s biggest name put himself in position to contend for his first victory in more than two years, one that would send him into the FedEx Cup playoffs.”–lead–wyndham-after-shooting-65/32101027/

  4. Watch top cop Mike Ruppert talking
    about Peak oil and Zbrigniew

    Michael Ruppert – Peak Oil And What’s Next – YouTube
    Video for Ruppert peak oil youtube1:22:37

    Michael Ruppert dedicated his life to the truth and educating people of the way this out of …

    In other news

    We brought Fred the Fed Whitehurst
    to speak at Harvard Law School and
    Bates college.

    Link du jour


    How a Woman Fell in Love With a Convicted Serial Killer
    This Is What a Death Row Wedding Looked like in 1996
    More from ABC News
    Courtesy Rosalie Bolin
    What Life’s Like Married to a Convicted Killer on Death Row

    Aug 21, 2015, 5:20 PM

    Rosalie Bolin says Oscar Ray Bolin is the love of her life, despite the fact that he is a convicted killer on death row.

    “It’s a love that I never experienced before,” Rosalie recently told ABC News’ “20/20.”

    Oscar Ray Bolin was convicted of the 1986 murders of three women, 25-year-old Natalie Blanche Holley, 26-

    2014: Office of the Inspector General Calls for Review of FBI Agent’s Cases

    Rosalie found support from FBI special agent-turned-whistle blower Fred Whitehurst. For over 20 years, Whitehurst has been working to expose corruption at the FBI Crime Lab and one agent in particular, Michael Malone.

    “Anything that Michael Malone touched, any evidence that he touch is not to be trusted,” Whitehurst told “20/20.” It can’t be. The U.S. government agrees with that.”

    Malone, the former senior examiner of hair and fibers for the FBI, was in charge of the hair and fiber evidence sent to the FBI in all three of Oscar’s murder trials.

    He testified that he “was the agent in charge at the FBI lab of this particular case. I was finding a black wool, very dark black wool fiber that showed up in all three cases.” He also linked Bolin by hair to the Collins case.

    But in 2014, the Office of the Inspector General released a report that said, “Michael Malone repeatedly created scientifically unsupportable lab reports and provided false, misleading or inaccurate testimony at criminal trials.”

    The report went on to list Oscar’s case among 52 others that should be reviewed.

    “In my mind, Michael Malone is a serial killer with a lab coat,” Rosalie said. “There have been potentially people who have been executed based upon evidence that Michael Malone handled. That’s frightening.”

    Malone declined numerous requests from ABC News for comment on this report.

  5. Thinking of Oil…and ISIS.

    three weeks ago…

    ISIS Makes as Much as $10M From Oil Smuggling, Officials Say

    This just in…

    ISIS Second in Command Killed in U.S. Airstrike, White House Says

  6. Interesting story. Does anyone know where oil prices will be three years? If Iran gets sanction relief it wants to pump one or two million more barrels per day. That’s why they went to the negotiating table. Are they now going to pump less? A recent report said there was a three million barrel surplus on the market presently. If Iran adds to it and the Shell Artic field with expected 25 billion barrel supply comes on line then one is looking at a 6 to 7 million barrel surplus per day. How much oil would have to taken off the market to boost the price? The Saudis pump 10 million barrels a day. At $100 a barrel their income is 300 billion annually. At $40 a barrel they lose about $200 billion yearly. How long can they hold down the price? Ian Bremer said they were hurting already. They have had to dip into their reserves to run the kingdom. How long can that last? 2. It was only a few years ago that Repub Congressman Bartlett was lecturing us about PEAK OIL. He claimed we were rapidly depleting the limited supplies and would run out soon. How times have changed. Maybe there is so much oil and gas in the world that no cartel can control the price. The law of supply and demand works. Low energy costs are very good for consumers and manufacturers. Could some of the low cost be attributable to weak global economy and the slowdown in China?

  7. It gets curiouser and curiouser….and very interconnected.

    This was in the Wall Street Journal in March:

    Saudi Nuclear Deal Raises Stakes for Iran Talks

    and check this out…

    The Ultimate Nightmare: North Korea Could Sell Saudi Arabia Nuclear Weapons

  8. Matt,

    Don’t forget to keep an eye on the stout, smiling, sociopathic North Korean dictator…..

    Fresh news:

    Seth Rogen and James Franco must be amused. : )

  9. When the end of civilization is your day job…..

    I remember arriving a little late at the Amherst
    College concert hall for an evening performance
    of Berlioz Requiem.
    The strains of the Sanctus greeted me as I
    walked through the foyer, causing
    the hair follicles to stand up on the back of my neck.


    Shrimp fisherman Diane Wilson had the same
    effect on me as I videotaped her talk at Connecting For Change in New Bedford Mass in 2010.