Cause you know, everyone is running on solar and wind these days, right?
Not everyone, but a growing number.
It has nothing to do with the global economic slowdown and the glut of oil thanks in part due to OPEC flooding the market ...
Not OPEC, but Saudi Arabia. The why is not really known, Saudi Arabia is not particularly transparent as to why they do things. There is a lot of speculation as to SA's motivations. Originally, the prevailing thought is that SA wanted to drive out American frackers. This has always been dubious because the barrier to entry is pretty low. While it is perfectly conceivable they could do that, and I know some people and have some relatives that aren't sleeping well because of it, when prices go back up there are plenty who could step back in.
There has been speculation that SA is trying to torpedo Russia because of their meddling in the Middle East. This is certainly possible. Especially in light of SA getting cozy with Turkey.
There has been speculation that SA is trying to reign in Iran. This too is possible.
There is speculation that since the Saudi princes have exploded in number from a few dozen to thousands, none of whom seem to know how to do anything but stick out their hands for their share of the oil revenue and pump out even more princes and princesses, that means SA needs to greatly up production.
There is growing speculation that the declining prices for solar and wind means that coal is dead and oil is following it and that means even the cheap to produce oil is going to be under pressure. So produce what you can at the prevailing prices or watch its value drop even more.
Bottom line, no one knows. You can glean what the industry in general is expecting by watching their actions. For a few decades, the oil industry was fearing peak oil. Which is why they weren't building new refineries. It has high barriers to entry and a low margin business. The idea of spending billions of dollars for a plant that they might not be able to keep busy for the decades it takes to amortize the cost was just not appealing. Production of oil sands seemed safe enough that the industry made a huge investment post-hurricane Wilma. In the Beaumont-Port Arthur area, they rebuilt the refineries so they could handle heavy, sour crude like dilbit. They even built a new one. That seems to be dead money now. Not dead-dead, because that equipment can still handle lighter, sweeter crude, it just isn't optimized for it so costs are higher. |
