Drowning in Oil

Peak Oil, Where Art Thou?

The catastrophists have been warning for the past ten years of mankind approaching "peak oil"--that is, the time when oil consumption exceeds supply, leading to a drastic global shortage of energy.  Peak oil was supposed to have occurred around now.  Except . . . .

North America to Drown in Oil as Mexico Ends Monopoly

By Joe Carroll and Bradley Olson  
Dec 17, 2013 6:54 AM
Bloomberg News


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. 

Note: the lack of production and supply from Mexico was due to stupid, myopic, misguided protectionist policies in that country.  The shortage was an artificially induced situation, created by bad government. 

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. With U.S. refineries already choking on more oil than they can process, producers from Exxon to ConocoPhillips are clamoring for repeal of the export restrictions that have outlawed most overseas sales of American crude for four decades. 

US oil production has suffered the from the same kind of Malthusian ignorance and misguided protectionism as Mexico.  The US government has systematically locked-up huge oil deposits in no-mining areas.  But developments in new exploration and oil production technologies (such as fracking) has allowed the private sector to boost its production substantially.  The pressure to remove the export restrictions upon oil produced in the US--another stupid, myopic, misguided protectionist policicy--will put the Obama administration in a bind.  Reflexively this is not what the president will like--being a warrior to stop global warming and all.  His best-case-scenario is to have oil priced at $1,000 a barrel so that wind power will become more economic. But that hand can only stop the leaks in the dyke for so long. 

An influx of Mexican oil would contribute to a glut that is expected to lower the price of Brent crude, the benchmark for more than half the world’s crude that has averaged $108.62 a barrel this year, to as low as $88 a barrel in 2017, based on estimates from analysts in a Bloomberg survey. Five of the seven analysts who provided 2017 forecasts said prices would be lower than this year.

The revolution in shale drilling that boosted U.S. oil output to a 25-year high this month will allow North America to join the ranks of the world’s crude-exporting continents by 2040, Exxon said in its annual global energy forecast on Dec. 12. Europe and the Asia-Pacific region will be the sole crude import markets by that date, the Irving, Texas-based energy producer said.

Rats.  Another looming catastrophe bites the dust.  But let's never forget, this catastrophe was the result of illicit government overreach in both the United States and Mexico.  When governments get involved and meddle in areas in which they have no competence or divine warrant, bad things happen.  The unintended, unexpected consequences are the real catastrophe.