So – suppose that the Arabian region (which encompasses Iraq, Kuwait, Saudi Arabia, UAE, Qatar, Bahrain, Yemen and Oman, for this purpose, but excludes Iran) just disappeared suddenly. Vanished in a blink.
From solely the perspective of oil supply, how long does it take for the world to recover back to normal (“normal” defined as Brent oil under $100/barrel and/or gasoline under $4/gallon?)
ISTM that:
[ul]
[li]The world would burn through its emergency fuel reserves within a few weeks or months (such as the United States’ Strategic Petroleum Reserve.)[/li][li]How high would oil prices spike? $300-$500 a barrel? Maybe gasoline hits $6-10 a gallon?[/li][li]Commercial air travel would be severely curtailed, along with truck/automobile transport, and many more people would travel by train than otherwise. [/li][li]Countries that had large reserves of oil shale, oil tar, and oil sands (i.e., Canada and the United States) would immediately exploit them with vigor. [/li][li]There would be an immediate, drastic focus on renewable energy, electric cars, hydrogen cars, etc.[/li][li]Venezuela, Iran, Nigeria, and Russia would get a huge boost to their economies, as the world would suddenly need their oil exports a lot more. A likewise boost to the Scotland/North Sea region, the Texas/southern California/Oklahoma/Alaska regions, the Bohai Bay region of China, etc.[/li][/ul]
Any other effects? How long to get back to normal - 2 years? 5 years? 10 years?
I would say for the US, half a year of disruption until existing fracking wells are unfrozen and in production and new ones are opened up - US can be self-sufficient in oil with those. For the world, maybe a year-two years. And of course the oil prices would become a lot higher. You’re talking about 40% of the world’s reserve oil disappearing, right?
There is a big difference between the “supply” and “the current supply chain”. Short-term disruptions would be huge but the medium and long-term ones not so much. The U.S. and Canada have plenty of oil and natural gas. Some of that is completely untapped and some of it is just wells that are already drilled but currently shut down because they aren’t profitable at today’s prices.
After some dramatic price spikes, there would need to be frenetic activity to reopen domestic wells and petroleum supply chains including the people to do it. All of that exists already. It is just a matter matching the domestic supply with the new demand. The petroleum industry is uniquely qualified to do that type of thing already because it is used to going through boom and bust cycles.
We don’t strictly need any Middle-Eastern oil. The U.S. and Canada have way more oil and natural gas than believed even 15 years ago. It is just a matter of infrastructure and price and a lot of the infrastructure has already been built. Companies are just waiting for the price to rise before they bring it to market.
Interesting, thanks for the info Okrahoma and Shagnasty.
Now how much permission is usually required from local, state and federal governments (of the US) before the oil industry can re-activate dormant wells, or drill new wells, or begin fracking in places where fracking wasn’t already permitted?
Edit: Maybe better put this way, how much power do U.S. local, state, and federal governments have to ban drilling/fracking activities they don’t like? Especially at the national(federal) level, how much power does the POTUS himself have to approve or curtail oil drilling/fracking/shale-ing?
I am pretty sure that at the state level, they have all kinds of power to prevent drilling/fracking in their state. At federal level, I guess the Congress can put any restrictions on it it wants. POTUS can’t though, not without legislation that allows him to do that.
I am the partial owner of 200+ natural gas and oil wells in Louisiana and Texas. As the owner, you don’t generally have any power to turn them on or off. The managing company decides that based on market conditions but, if needed, dormant wells can be turned back on at any time on demand.
Drilling new wells is obviously more complicated but it is probably faster than you think. It takes a couple of months to get the legal rights worked out but the drilling and fracking is very fast. It only takes a few weeks with the newest mobile rigs. Current fracking rigs can drill down 12,000+ feet and spread out about a mile in all directions in just a few days once they are set up.
I only know about Texas and Louisiana but regulations aren’t very arduous. If a reputable company wants to drill with the permission of the mineral rights owners, they can. The only significant local issue is water because it takes a massive amount of it to frack a well and it comes back contaminated. However, as long as they have a way to treat it and put it somewhere, there isn’t much of an issue.
Oil would be the least of your worries. Instantaneous removal of enough of the earth’s crust to take away the oil would result in catastrophic Beaufort 12-force winds of the atmosphere rushing into the suddenly empty space, plus the ocean flooding the vast chasm would be like the biggest tsunami ever.
The OP might be better to reimagine the vision of disappaearance to just the wells running out.
The gulf region is about 1/3 of the global supply of the oil.
It is also a higher quality supply than most sources.
The taking away of 1/3 of the global supply will result in a massive price spike of course.
There is the added problem of the adjusting of the refineries set to take the Gulf oil source and to meet other sources, this I understand can take 6-9+ months of the retooling.
It is thus a question not only of the production but also of the supply chains. By mechanical issues alone it is thus perhaps a year at minimum (as it is a case where everyone will be seeking the same kinds of equipments, etc so the bottle necks can be expected).
Overall it would be replaced probably although it could be expected outside ofthe USA the wealthy countries would turn massivly to the renewables to substitute outside of the transport sectors where the demand is most inelastic.
Looking at just American state level actions is extraordinarily myopic.
There is no way such an occurence would be treated under any nomall processses, contrary to some of the naive replies looking just at the americans.
With a unexplained 1/3 disappearance of oil sources, it is without doubt that the market price would spike to unsustainable levels and until the fear factor was resolved, perhaps over a year, national governments would likely have to nationalize and ration supplies - just like they have in the past in crises.
Under such a situtation, analysing local government permitting is a nonsense approach.
The U.S.'s oil production would be one of the major factors in considering the OP, and State/local regulation is key to this production.
No myopia there.
No it is indeed extreme myopia as it pretends to make a static analysis from a normal situation without taking into account the massive secular change in both the market in price and availability but an immediate technical need for the retooling.
The sudden removal of 1/3 approximately of the oil supply would set off a global financial and economic crisis. The pricing of the petrol would sky rocket.
the local regulation would be swept away in a national emergency situation.
Of course the mobilization of the capital and the technical resources for additional production in a situation like this where there would be a global scramble for them itself is a significant factor, as such an immediate and effective negative spike in supply can historically be certain to set off a financial crisis and likely a global liquidity crisis.
No one, including myself, is arguing your technical points, however redundant they may be, per the upthread comments made by others.
My only disagreement is the terse attitude you display concerning said perceived myopic viewpoint, and your casual dismissal (under the OP’s premise) of the U.S. State and local regulations that govern oil extraction here… As somehow insignificant and trivial.
I don’t know where you hail from, but issues described here in this thread would involve complicated U.S. legalities, from the Federal, State, and local entities… Argued up through the Supreme Court. Not the simple and trivial matter you suggest.
With consumer gasoline prices spiking over $10 a gallon, the Federal government would ride roughshod over any and all attempts to limit energy production by either state or local authorities. Permits and environmental reports would be put on hold as the country tries to recover from a national emergency. Any state or local official that tried to limit energy production in their area, would soon find themselves voted out of office.
And most importantly, the American public would be right behind the Federal government’s attempt to remedy the situation.
Keep in mind, not only are we referring to regulatory restriction concerning environmental and other concerns that might be easily swept away in such a situation, but also business and property owner interests… Not so easily dismissed even in such a crisis, per your above mentioned political pressure, because Federal/State constitutional issues would not be so easily tossed aside, even during a fuel shortage.
