North America to Drown in Oil as Mexico Ends Monopoly

[Shady]

Looks like we could be on the cusp of an energy revolution in North America. Between massive reserves of new oil and natural gas in Canada and the United States, and now this news from Mexico, North America could completely supplant OPEC in the near future.

The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil fields.

Plagued by almost a decade of slumping output that has degraded Mexico’s take from a $100-a-barrel oil market, President Enrique Pena Nieto is seeking an end to the state monopoly over one of the biggest crude resources in the Western Hemisphere.

The doubling in Mexican oil output that Citigroup Inc. said may result from inviting international explorers to drill would be equivalent to adding another Nigeria to world supply, or about 2.5 million barrels a day.

...

That boom would augment a supply surge from U.S. and Canadian wells that Exxon Mobil Corp. (XOM) predicts will vault North American production ahead of every OPEC member except Saudi Arabia within two years.

http://www.bloomberg.com/news/2013-12-16/north-america-to-drown-in-oil-as-mexico-ends-monopoly.html

This is pretty exciting news, because the energy sector has the potential to vault us into a new era of prosperity, not only in construction and manufacturing, but also technology and innovation. And these jobs can't be outsourced. The energy's here, and so do the industry's employees.

Edited December 17, 2013 by Shady

[bush_cheney2004]

Good news indeed, as cheaper energy will let the good times roll. Bad news for the warmies and alarmists, which is even better news.

I love the smell of petroleum in the morning.

[Bonam]

Good news indeed, as cheaper energy will let the good times roll.

I don't think it will be much/any cheaper. The reason we are talking about huge reserves being available is because the high price of oil justifies extracting oil that is more difficult and thus expensive, to extract. Besides, with the recession over and the world economy resuming exponential growth, demand will grow quickly, keeping price up and likely rising even if we have some supply increases.

[bush_cheney2004]

I don't think it will be much/any cheaper.

We shall see....gas is already significantly cheaper (for the short term) in my region based on market forces. The main fight will be over how to transport and refine the additional production. I would imagine that Dick Cheney loves it when his plan comes together....more oil for all...Ho! Ho! Ho!

Edited December 17, 2013 by bush_cheney2004

[waldo]

I don't think it will be much/any cheaper.

your assessment doesn't jive with any forecasts I've read... the same forecasts that emphasize the heavy crude nature of the Mexican oil, impact considerations for the tarsands, the concern for near term projected ~$85 dollar oil on Alberta revenues/budget forecasts, etc.

nice to read Shady offering his excitement for a projected rise in the Mexican economy... although it's not quite to the level of Texas' governor Rick Perry and his gleeful comments that, "immigration reform is going to be very passe"... I guess that means no need for the border fence, the surrounding moats and stocking them with alligators!

[Moonlight Graham]

This is only exciting if it means reduced gas prices, which I have my major doubts about. On the other hand, the price of gas has been declining (relative to inflation) since near the beginning of the 20th century (minus the US oil embargo of Iran in the early 80's), that is until the Iraq War when gas freaking doubled in price and has stayed there!

http://large.stanford.edu/courses/2010/ph240/bui1/images/f2big.gif

[GostHacked]

your assessment doesn't jive with any forecasts I've read... the same forecasts that emphasize the heavy crude nature of the Mexican oil, impact considerations for the tarsands, the concern for near term projected ~$85 dollar oil on Alberta revenues/budget forecasts, etc.

The price of a barrel of oil is hardly reflected properly in gas prices.

[overthere]

Looks like we could be on the cusp of an energy revolution in North America. Between massive reserves of new oil and natural gas in Canada and the United States, and now this news from Mexico, North America could completely supplant OPEC in the near future.

http://www.bloomberg.com/news/2013-12-16/north-america-to-drown-in-oil-as-mexico-ends-monopoly.html

This is pretty exciting news, because the energy sector has the potential to vault us into a new era of prosperity, not only in construction and manufacturing, but also technology and innovation. And these jobs can't be outsourced. The energy's here, and so do the industry's employees.

Unless Canada gets some customers for our oil other than America, this is not good news at all for our economy as we'll have another strong competitor virtually on our doorstep.

Supply and demand, ya know?

[Shady]

Unless Canada gets some customers for our oil other than America, this is not good news at all for our economy as we'll have another strong competitor virtually on our doorstep.Supply and demand, ya know?

You mean like China and India?

[Wilber]

Refinery capacity has as much to do with gas prices as anything and no new ones have been built in decades. When one goes down for maintenance or a malfunction, prices in that region jump. Diesel prices are effected by demand for heating and jet fuel so it is not unusual for diesel prices to go in the opposite direction of gas prices. Down during the summer driving season and up during the winter heating season.

[bush_cheney2004]

Refinery capacity has as much to do with gas prices as anything and no new ones have been built in decades.

While true in the US, where the number of refineries has actually decreased, total distillate refining capacity has actually increased:

[Wilber]

True but they have barely kept pace with the increase in demand and with fewer refineries producing more, the consequences of one being shut down for any reason are much greater.

[bush_cheney2004]

True but they have barely kept pace with the increase in demand and with fewer refineries producing more, the consequences of one being shut down for any reason are much greater.

U.S. gasoline consumption is actually trending down because of fuel efficiency and retail fuels blending. Refinery downtime for maintenance and summer/winter oxygenated blending mainly results in only temporary supply disruptions.

[Wilber]

It's true that more efficient vehicles are having an impact on consumption but so is the sluggish economy. Refinery shut downs do have an impact on supply and pricing and the fewer refineries the greater the impact. The Cherry Point refinery just south of us is the third largest on the west coast and in 2012, a fire there had a large impact on west coast fuel supply and prices.

[Shady]

I'm all for building new refineries as well.

[Wilber]

Why would oil companies do that? Beside the fact the environmental hurdles are considerable, increasing supply will just lower prices. I don't see oil companies spending more money on refineries in order to reduce profit margins.

[Shady]

Why would oil companies do that? Beside the fact the environmental hurdles are considerable, increasing supply will just lower prices. I don't see oil companies spending more money on refineries in order to reduce profit margins.

They could sell more oil overseas, it wouldn't reduce profits at all, the exact opposite.

[bush_cheney2004]

They could sell more oil overseas, it wouldn't reduce profits at all, the exact opposite.

Yeah, I think this recurring theme is hard for "North Americans" to fathom. The real growth is in "overseas" markets....for many things. For example, Keystone XL is about getting bitumen to Texas for refining and export, not Norte America consumption.

[overthere]

I'm all for building new refineries as well.

Your enthusiasm for creating greater supply of consumer products is not always shared by oil companies. They like to control refinery capacity very carefully. When supply gets tight, margins go up.

Oh and regarding refinery maintenance, I guess they do a lot of that just before long weekends.......

You mean like China and India?

Sure, they pay their bills. Europe too.

[Wilber]

They could sell more oil overseas, it wouldn't reduce profits at all, the exact opposite.

In many if not most cases it would probably be cheaper and easier to build the refineries offshore and just ship the crude. Lower labour costs, lower environmental standards, lower taxes etc.

I see David Black is asking for federal money to try and get his proposed Kitimat refinery going, so it seems industry is only partially convinced shipping refined product to Asia is viable.

[Moonlight Graham]

The price of a barrel of oil is hardly reflected properly in gas prices.

They don't correlate exactly but they still seem to still correlate and both usually go up or down together in some form over the medium/longterm:

http://inflationdata.com/Inflation/images/charts/Oil/Oil_vs_Gas.jpg

[ReeferMadness]

The shale oil & gas were discovered decades ago and most of the technology to extract them has been around for a long time as well. What is new is that we're running out of conventional oil which is why we're now relying on hard-to-get, environmentally dirty (even for the fossil fuel industry!), expensive oil and gas. And before you start popping champagne corks, check out the production decline rates for fracked wells.

[jbg]

This is pretty exciting news, because the energy sector has the potential to vault us into a new era of prosperity, not only in construction and manufacturing, but also technology and innovation. And these jobs can't be outsourced. The energy's here, and so do the industry's employees.

Also exciting is the prospect of our foreign policy not being subject to Arabist distortions. Let them eat their oil and sand.

[kimmy]

This is exciting news if you're in the energy industry, I suppose. But I doubt it'll help gas prices here much. They have gotten us used to paying $1.20 per liter of gas. I doubt they'd let prices drift back down.

-k

[jbg]

This is exciting news if you're in the energy industry, I suppose. But I doubt it'll help gas prices here much. They have gotten us used to paying $1.20 per liter of gas. I doubt they'd let prices drift back down.

Back in the 1950's the same thing happened as "cheap" OPEC and Russian oil flooded the market. That didn't end well.

It would not surprise me if the U.S., Canada and similar countries imposed oil import quotas or tariffs, especially for non-Western Hemisphere sources.