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Questions about the viability of Canadian crude oil production from tar sands and shale as oil prices for Canadian crude are at about $17 in Jan. 2016. Western Canadian Select from Alberta traded at about $14 in Jan 2016. Crude oil NY benchmark is at $31, other crude is priced lower if transportation costs and other factors including quality and grade have to be figured in.

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The cost of social stability in OPEC countries is changing the attitude of countries that advised moderation in pricing in the past. Saudi Arabia has committed itself to $129 billon in new spending for public sector jobs, pay increases for state employees, and allowances for the unemployed, to preserve social stability after the democracy protests in the Middle East. This is happening throughout the Arab world and in most OPEC countries. Algeria and Iran have also increased social spending. The oil price that Saudi Arabia needs to balance its budget and pay for this is going up from $68 a barrel in 2010, to $88 in 2011, and $110 in 2015, according to the Institute of International Finance. Merrill Lynch says it is $95 a barrel for this in 2011. This is bringing the moderates like the Saudis and the hawks like Iran and Venezeula together on price issues. In the second week of April 2011, Saudi Oil Minister Ali Al-Naimi, said the Saudis had cut production by 800,000 barrels a day in March because of oversupply in the market. A consultant for Arab Petroleum Investments Corporation which reflects Saudi and OPEC views, says: "OPEC members spending pattern is expected to bear on their oil price preferences and production policy behaviour." The only restraint on price will be that price at some point will affect the global economic recovery and lead to lower consumption and growth, something the Saudis have paid attention to in the past....

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The discount for Canadian crude oil prices, because of higher shale oil output in the U.S. midwest and lack of enough pipeline capacity to get Canadian crude to Gulf Coast refineries, is affecting the Canadian economy. The lower price for Canadian crude was at about $20 per barrel lower than the U.S. benchmark price in April 2013. This discount has reduced Canada's GDP growth for the second half of 2012 by 0.4%, according to the Canadian central bank. The discount was as high as $40 to U.S. benchmark price for Canadian heavy crude in January and Febuary 2013. Continued discount is expected till enough pipeline capacity is created for Alberta's heavy crude to get to Gulf Coast refineries in the U.S.

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Experts at the East-West Center in Honolulu, say China will add about 55 million barrels to its strategic reserves in 2012, which is another factor that will keep oil prices high in 2012. A number of new storage locations are coming on stream to store the additional reserves. China imported 5.57 millon barrels a day in March 2012, an increase of 8.7% from the prior year month. Oil imports for the 1st quarter of 2012 increased by 11% over the prior year quarter, according to China's General Administration of Customs. This is a much faster pace than imports in 2011, which increased by 6%. China is building its strategic reserves to reach a goal of 90 days supply similiar to the U.S. strategic reserves. Lu Tienan, director of China's National Energy Administration, said at a conference in the first week of April that current total oil stocks, including strategic and commercial are enough for 40 days. It is doing this in the face of higher oil prices, because of the threat of sanctions against Iran's nuclear program could lead to a cutoff of Iranian supplies. China's oil imports from Iran were 11% of total imports in 2011, making this an urgent priority for China. Estimates of the East-West Center are for crude oil imports at an average of 5.77 million barrels a day in 2012, an increase of 13% over 2011. International Energy Agency estimates are for China's total oil demand for 2012 to be 9.9 million barrels a day in 2012, an increase of 6% over 2011....

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Sharp drop in oil prices in Dec. 2015.

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As its economy slows and facing high debt levels, China benefits by an estimated $18 billion a month from lower oil prices in 2015. The estimate is from Starfort Holdings, investment and private equity group. The estimates as China benefits from lower prices of all commodities, including oil, are of about $250 billion annually as China replenishes its stocks of commodities. With $12 million barrels imported daily China is a major emerging market beneficiary, along with India, of the drop in oil prices. Continuing pressure on prices from the expected resilience in shale oil production in the U.S. with learning and the development of new production methods means the benefits are likely to continue. China has also not renegotiated price points in deals made earlier at higher prices with China and Venezuela, as it pursues its foreign interests. Stockpiling of grains and edible oils are being increased by 33% in 2015 by $24.7 billion.

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A recent Deutsche Bank study points to the pro-cyclical nature of oil prices in this decade where oil price increases do not lead to decreased worldwide consumption. The IEA forecast is for 1.64 million barrels of oil a day in increased coonsumption in 2013 compared to 2011, which hides a drop in consumption of 640,000 barrels a day in OECD countries. That is offset by higher demand in China, the Middle East and Russia. Middle East consumption is about 80% of consumption in China, and oil price increases lead to higher growth in these countries and Russia leading to increased oil consumption reinforcing a pro-cyclical cycle. What is not clearly understood is how this changes with weaker economic growth. Additional factor to consider is future increasing growth of oil consumption in India, Pakistan, Bangladesh, Indonesia, Vietnam and other developing countries that offset reductions in Chinese consumption as China's growth rate slows.

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On June 30, 2008, oil prices hit an high of $140. Because of the opaqueness of the oil futures markets that help set the price of oil, very little is known about the different players in that market. Because of increasing demands for public scrutiny of such spikes in the market and its effect on the economy, the CFTC has released information about the players in oil trading and futures markets. This list for the period when the prices reached $140 in June 2008 include banks, hedge funds, sovereign wealth funds, pension funds, private investment arms of wealthy individuals, and airlines. Investments related to million barrels of oil were made by 219 investors. The banks include: Goldman Sachs and Morgan Stanley which have played a role in oil markets for a long time. BP and Delta Air Lines as users of oil products. It includes Yale University endowment fund, Singapore's government, hedge funds Brevan Howard and D.E. Shaw & Co., pension funds for Texas teachers, Cascade Investment LLC (the investment firm of Bill Gates), and the Danish pension fund ATP....

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The lower oil prices in 2015 helps lower the current account deficit, which reached 7.9% in 2013, to 5% projected for 2015. Inflation is projected at 6.8%. GDP growth of 3.5% is expected for 2015. Turkey imports oil amounting to about 6% of GDP making for a large impact. Weakness is in the area of manufacturing, as Turkey's high tech exports are only 2% of manufactured exports, according to the Economist. About 1% of Turkish students have advanced computer skills. With problems in Brazil and Russia, money flowing into emerging markets is giving Turkey a second look after the emerging markets crisis in early 2014, when the lira slumped and interest rates had to be increased. The economy is recovering in 2015 from that situation. Two major beneficiaries of lower oil prices in emerging markets are India and Turkey in 2015, as both economies struggled with a large oil import bill.

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Oil prices drop below $38 by mid-December 2015, as the Saudis continue to push prices down further by continuing production increases. No change is planned for 2016 and analysts expect low oil prices into 2016. At $38 a barrel it becomes uneconomical for most shale oil producers to operate in the U.S. About 50,000 jobs are lost in Texas and 250,000 jobs worldwide. This is a boost for large oil importers such as India, Japan, and Europe. China also stands to benefit from low oil prices. Nigeria, Venezuela, Iran and Russia have the most to lose from an extended period of low oil prices. Politics in the Middle East also may play a part in decisions as the Saudis oppose intervention in Syria and Iraq by Russia and Iran. Rising shale oil production in the U.S. could also be one of the additional targets of Saudi policy. One consequence is that OPEC is divided with the Saudis going their own way.

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Achievements of Elvira Nabiullina as central bank chief in Russia since 2013 are the reducing of US dollar reserves from 40% to 11%of $600 billion in Russian reserves shifting to hold most of its reserves in euros, gold or renminbi Chinese currency. She also implemented the alternative to SWIFT the global bank messaging system, and changed the payments infrastructure to process credit card transactions in the country so departure of Visa and Mastercard had minimal effect.

In this way this highly respected banker has protected Russia's economy from western sanctions, says NYT. She is trusted by president Putin and was adviser to Putin in 2012, minister of economic development before that when Putin was prime minister. When Russia suffered an economic crisis in 2014 as oil prices fell sharply and Saudis increased oil production, the ruble fell. Nabiullina increased rates to 17%, and the economy shrank till it stabilized with inflation down to 4% by 2017.

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High oil prices have reduced oil demand by about 8% compared to last year. The EIA looks at gas demand average for 2017 to 2019 and finds that in late February 2022 it was 99% of this average, in May it was 93% and June 95%. US refineries have cut production by 800,000 barrels a day since the pandemic began causing oil shortages, and shale oil companies are reluctant to make the investments to scale up production.

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Daniel Yergin of consultancy firm IHS describes the geopolitical disputes in the Middle East between Russia, Saudi Arabia, and Iran that are leading to likely continued oversupply of oil in 2016, keeping prices in the $30-$40 range. Saudi Arabia is not likely to change its policy of going after market share, Venezuela is affected but lacks a voice in OPEC decisions, Russia continues its policies in Syria and Iraq under the Putin government affecting other Sunni states, and Iran following the lifting of sanctions is likely to ramp up supply to make up for its lost market share- all leading to an extended period of low prices. This situation benefits China, the European Union countries, India, Turkey and the U.S. in a period of slow economic growth in 2015-2016. Russia looks to use this period of low oil prices to shift to domestic industry after a period of rising imports when oil prices were high. The Saudis seeing their interests in the region threatened by Iran and Russia, and dissatisfied with the foreign policy of president Obama, see a policy of pushing for market share as appropriate in the current geopolitics of the region....

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India's inflation rate declined to 4.4% in Nov. 2014 and 5% in Dec. 2014. Price pressures are moderating throughout the economy. With lower oil prices in 2015 and long term trend for lower prices the outlook has improved for controlling inflation. The central bank governor Rajan cut rates by one quarter of a percentage point in Jan. 2015 and indicated further rate cuts are ahead to boost economic growth. The financial markets reflect a 1% decline in interest rates and the stock markets were up 2% in Jan. 2015

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A study and analysis in the One Earth journal for climate change action shows oil companies owe about $209 billion annually to pay for damage caused from climate change. The leading companies accounting for about 10% of global emissions are Gazprom and Saudi Aramco. These companies have benefited greatly from the oil price surge. The US and European oil majors who also have profited greatly from the oil price surge come next. Further distorting the effects of wars, financial crises since 2010, the war in Ukraine creates price surges from which oil companies benefit while the vast majority of people in the world are affected by a cost of living crisis made worse by higher energy prices. This is what is important to keep in mind as the US under president Biden prepares to play a leadership role in correcting these unneeded and bad distortions on how it affects the lives of workers and families in the US and Europe, as well as in Asia, Latin America, Africa. ...

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The Saudi government announced sharp cuts in spending and subsidies to cut the deficit in 2016. The deficit in 2015 was about $98 billion or 367 billion riyals , according to Al Arabiya Saudi news channel. In 2016 the budget is designed to cut the deficit to $87 billion or 326 billion riyals. The 2016 budget is for 840 billion riyals, compared to 975 billion riyals in 2015. Saudi Arabia's foreign exchange reserves of $640 billion could be exhausted at this rate by 2020, experts say. Actions being taken by the government include increasing the price of some grades of gasoline sold domestically by 50%, as subsidies are being cut. The drop in oil prices to about $35-$40 is hurting Russia, Saudis and Venezuela. The Saudis have increased defense spending for conflicts in Yemen, and in other areas, as they oppose Iran and Russia in the Iraq- Syria conflict.

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Rising food prices in China have pushed China's consumer price index to a two year high of 5.1% in November, 2010. Rising prices of cooking oil have hit Chinese who live on small incomes the hardest. Food represents about one third of the CPI, but it accounts for 75% of the index's rise. Chinese housing prices have gone up significantly making it hard for new homeowners, now that food and fuel prices are following. The National Developmment and Reform Commission announced a 3.77% rise in retail gasoline prices, to about $3.50 a gallon, an increase of 11% in about one year. Wholesale soyabean oil rose 23% in 2010 to about $1451 a metric ton, with most of the rise since July. China's government response was to impose price controls, asking the largest producers to cap retail prices through March 2011. It also quintupled the fine to 5 million yuan, or $750,000. And the government auctioned off millions of metric tons from its strategic national reserves in Xinjiang and Shandong. But price controls are discouraging production. One mid-size producer in Shanghai, says he has deactivated half his plant, instead off maximixing output ahead of the Lunar year in February. His warehouse is filled with 20,000 boxes of unsold oil, with the production date Nov 23, around the time price controls went into effect and a large grocery distributor halved his order. Edible oil is the third biggest packaged food outlay for ordinary Chinese, after yogurt and milk, and it has a big impact on the lives of the average family....

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As OPEC members met again in June 2015 for the first time since the meeting in November 2014, there is a sense that OPEC no longer exerts the same influence on oil prices. There are 4000 oil companies in the U.S., says one U.S. State Department official, even if OPEC were to cut production the cuts could be matched by shale oil producers in the U.S. quickly increasing output. This is the new reality, say experts. OPEC expects to keep production at the same level of the current production ceiling of 30 million barrels a day in place for the 7th meeting in over 3 years. Algeria and Nigeria, both hurt badly by the drop in oil price, have called for cuts but failed to persuade the Saudis. With Russia unwilling to join a coordinated production cut, there is not much talk about doing this. The Saudis and Iraq have continued to pump more oil, with April 2015 production of 30.84 million barrels a day the highest monthly average since 2012. Other factors also remain in the minds of the Saudis and other producers such as the United Arab Emirates, Kuwait, Qatar- policies on climate change, use of less energy and more from friendlier sources for the same amount of economic output demonstrated by countries such as Germany, advances in technology, energy saving transitions in emerging markets such as China and India....

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Analysts fear an oil shock in 2012 similiar to that in 2008. There is similiarity in the situation now and in 2008- as in 2008, the surge in oil prices comes at a time of higher tensions with Iran and shrinking spare capacity. Spare capacity is at 2.5 million barrels a day on average for January and February 2012, according to the Energy Information Administration. This compares with 3.7 millon barrels a day for the same period in 2011. Part of the reason is that global oil demand is increasing in 2012 by 1 million barrels a day, to 89 million barrels a day. Technical and political problems have shutdown another 750,000 barrels a day. The problems begin to kick in during the second half of 2012. The U.S. ban on dealing with the Iranian central bank for oil trades starts in June 2012. According to the International Energy Agency, the EU embargo and U.S. sanctions will take 1 million barrels a day of Iranian crude out of the market. The result will be that demand exceeds supply by the third quarter by 1.1 million barrels a day, according to the U.S. Energy Information Administration. Use of existing reserves in Europe, the U.S. and other countries will make up the gap. The effect will be to put pressure on oil prices. May Brent crude on the ICE Futures Europe exchange was up to $125.81 a barrel, on March 16, 2012, and prices for April delivery were at $107.06 a barrel on the New York Mercantile Exchange....

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Shale oil producer spending in the U.S. is forecast to drop by 3%, but this will still add one million barrels a day of additional shale oil production. Prices are now at about $45 a barrel and shale producers are cutting back on production rigs in operation with the 40% decline in oil prices. The EIA expects oil production to reach an average of 12.1 million barrels daily in 2019 from an average of 10.9 barrels a day in 2018. This suggests there will be additional supplies and continued downward pressure on oil prices. The situation is favorable for the U.S. and countries such as India which benefit from lower oil prices.

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Khalid al-Falih, chairman of Saudi Aramco, says at the World Economic Forum in Davos, on Jan. 26, 2016- "If prices continue to be low, we will be able to withstand it for a long, long time." With $630 billion in foreign currency reserves the Saudis are following a long term policy of full production. Gasoline subsidies are being reduced, IPO of Saudi Aramco being discussed to raise additional capital, and other steps being taken to plan for long term oil prices. Flexibility for a change in policy is diminished with the addition of Iranian oil production to supplies following the lifting of sanctions. The events in 2015-2016 of Russian bombing campaign in Syria, and the cutoff of diplomatic relations with Iran, have worsened the standoff with Iran and Russia in the Middle East conflict. As a result it appears that the Saudis are settling down for a long term policy of full production which would keep oil prices low for the long term. India, Japan, China, the U.S. and the European Union, Turkey and other countries benefit from low oil prices when their economies need a boost in 2016-2017....

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Commodities prices hit a low in June before the second Greece election on June 16, with lower unemployment numbers in the U.S. and growth of 6-7% in India and China. Still average prices of oil in 2012 of $115 a barrel are higher than the level in 2011. And corn prices dropping to $5.25 a bushel are still high compared with prices earler. Corn farmers in the U.S. are adding to acreage. The relatively lower prices also give more room for smaller stimulus by central banks to stimulate growth. Freeport-Mining CEO, Richard Atkinson said in a presentation that the growth is coming on top of a bigger baseline for China, India and Brazil. China's copper consumption went up by about 6 million tons a year, averaging 13% growth a year in the period 1995-2010. Now even with slower growth at 6% a year, by 2025 he estimates China's copper consumption at 9 million tons per year. This is a structural change that is supporting commodity prices, says Amrita Sen, analyst at Barclays Capital.

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A plan appears to have been put in place by the U.S. and the European Union countries to strengthen the American position in negotiations with Iran underway in Istanbul. The impact on oil prices and on U.S. and E.U. growth as a consequence of higher oil prices, especially when the eurozone countries faced lowed growth, was one of the ways Iran hope to blunt the tightening of sanctions against Iran's nuclear program. It now appears from information released by the International Energy Agency that a plan was implemented by the Saudis in recent months to build up reserve supplies. At the same time a similiar effort was being implemented to increase production in Iraq and Libya so that it would add to reserves added by the Saudis. Daily output from OPEC countries increased by about 1.4 millon barrels in the Sept 2011- March 2012 period, as the confrontation with Iran took shape with increasing pressure using sanctions on Iranian oil, according to the IEA. Of this 1.4 million barrels a day increase, one third is from the Saudis and the rest from Iraq and Libya, according to IEA. In March 2012, OPEC oil production increased by 135,000 barrels a day to 31.4 million barrels, mostly from higher output in Iraq. The Saudis have filled up domestic oil inventories and placed an additional 10 million barrels of oil in storage close to markets in Europe and Japan. This suggests that this was part of a quietly implemented plan in cooperation with the U.S. and the EU countries to increase the effectiveness of sanctions and protect global oil supplies from disruptions; even as the U.S. pressured Japan, S. Korea, India and other countries to reduce purchases of Iranian oil. The economies of India, the EU and other countries were already beginning to feel the impact of higher oil prices in the 1st quarter of 2012....

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One of the favorable factors for Iraq in recent years was the surge in oil production, adding 1 million barrels a day to reach 3.3 million barrels a day. It surged to an average of 3.7 million barrels a day in December 2014 after a deal with the Kurdish region in northern Iraq for an additional 550,000 barrels a day in exchange for Kurds getting a 17% share of federal revenues. This helped Iraq overcome other problems. The drop in oil prices has led to a 40% drop in revenues and the invasion by Islamic State in a loss of some production.The federal budget of $101 billion planned revenues is based on an oil price of $56 and exports of 3.3 million barrels a day, resulting in a $20 billion deficit. It assumes $10 billion in new tax revenues which may be hard to achieve with a lack of strong central government. Experts on Iraq's oil industry say large investments are needed to offset declining oil production from older oil fields in southern Iraq. Oil exports were 2.5 million barrels a day in 2014, and experts say even this will be hard to achieve for 2015. Investments could come from western oil companies, but Iraq and the Kurdistan region are behind in payments to oil companies. Iraq is considering issuing bonds for $10-$15 billion....

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Inozemtsev of the Institute of Post-Industrial Studies in Moscow, asks the question wht if the Russian economy shows no growth in 2017, and 2015-2016 become the beginning of a serious downturn. If oil prices remain low for an extended period as now looks likely with factors such as shale oil technologies, Iranian oil, and Saudi policy, playing an increasingly long term role, Russia could face some of the problems former finance minister, Alexei Kudrin, other business leaders including head of Sberbank, warned about. A major problem that Inozemtsev points to is the change in the business climate for foreign investment in 2012-2016 as the Russian economy looks more inward, and the departure of many foreign companies. During the period 2000-2008, a major boost to the economy came from foreign investment which brought with it management and technological improvements. No emerging market country, including China, can have a bright future without access to new technologies and investments from foreign investment. The current period starting in 2009 stands in sharp contrast to the earlier period with the Russian economy lacking the boost from foreign investment, facing capital outflows, and international conflicts creating a long term effect on oil prices. Russia needed time to move its economy away from commodity dependence through technological improvements and investment, yet this does not appear to be happening, raising serious questions....