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The Almighty Buck Power United States Politics

There Would Be No Iranian Nuclear Talks If Not For Fracking 236

Posted by samzenpus from the frack-baby-frack dept.
Hugh Pickens DOT Com writes "Matthew Philips writes at Bloomberg that US Secretary of State John Kerry landed in Geneva on Friday to begin negotiations with Iran over its nuclear weapons program and there is sudden optimism that a deal is in the offing. But the simple fact is that Iran would not be coming to the negotiating table without the US oil boom. Over the last two years, the US has increased its crude production by about 2 million barrels a day. According to a recent report from the Congressional Research Service (pdf), Iran's oil exports have been cut in half since 2011 (PDF), from 2.5 million barrels per day to a bit more than 1 million today. As a result, Iran has had to halt an equal amount of production. 'I think it's pretty clear that without the U.S. shale revolution, it never would have been possible to put this kind of embargo on Iran,' says Julius Walker. 'Without US production gains, I think we'd be looking at $150 a barrel.' Instead, international prices have hovered around $110, and are less than $100 in the US. According to data from Bloomberg, the combined carrying capacity of oil tankers leaving Iranian ports last month dropped 22 percent from September. 'They're having a very hard time finding buyers,' says Walker. If a deal gets done, the trick will be to ease Iranian oil back onto the broader market without disrupting prices. If not managed properly, flooding the market with Iranian crude could carry its own negative consequences by suddenly making fracked oil in the US unprofitable."
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There Would Be No Iranian Nuclear Talks If Not For Fracking More

There Would Be No Iranian Nuclear Talks If Not For Fracking

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  • CAFE Standards are more important. They are capping demand.

    • Re:CAFE Standards (Score:4, Insightful)

      by Stormy Dragon ( 800799 ) on Sunday November 10, 2013 @03:43PM (#45385601)

      Except no, because of the Jevon's Paradox [wikipedia.org]. Making the use of a resource more efficient actually increases total demand.

      • Driving is pretty saturated (note short term stiffness in gasoline demand) so it seems unlikely this is important. And, the effect has never been shown to increase demand though it may at times make the demand reduction softer.

        • Driving is pretty saturated (note short term stiffness in gasoline demand) so it seems unlikely this is important.

          While that's true in the short term, I don't think that many effects from CAFE standards would be described as 'short term'. There's no reason that demand can't be inelastic in the short term (filling up) and elastic in the long term (auto purchases).

          And, the effect has never been shown to increase demand...

          Never? That's quite an assertion you've got there, son. Care to let the rest of us in on your sources?

          • I see what you are thinking. More cars does not need to mean more driving really. If you already have a 3.5 hour commute, your second car is not going to get a lot of miles on it. In China, where there are many new roads being built, and many people who have no cars at all, cheaper to run cars may speed adoption, but that is not Jevon's Paradox, that is regular growth.
      • It's flawed. It tries to argue that the initial spike in demand (due to obvious decrease in cost) is indicative of a long-term trend. But it's not. It's an impulse response. And in impulse response the steady state is what controls the long term effect. The steady state, in this case, is the natural level of demand.

      • Except no, because of the Jevon's Paradox [wikipedia.org]. Making the use of a resource more efficient actually increases total demand.

        Jevon's Paradox is not a general rule, but an exception to a rule. I doubt if it applies in this case. Do you really think that most people consume more fuel when they buy a more efficient car? Note: They may indeed drive more, but the question is whether they drive enough more to consume even more fuel than if they bought an SUV instead of a Prius.

        • Re: (Score:3)

          by Kardos ( 1348077 )

          You're right, people who already have a car will not change their usage much. It's people who couldn't afford to drive (teenagers, working poor, etc), who switch to driving when it gets cheaper. This is the increase in usage that Jevon's Paradox entails.

          • The problem with that reasoning is that CAFE standards only apply to the fleet average. My 1998 Saturn got nearly 40 MPG on the highway. If gas cost was an issue for me, I had that very affordable option 15 years ago - and there were equally efficient cars before that. Not only that, the efficient cars tended to be cheap: a 1989 Geo Metro was $6,000 and got over 40 MPG.

            Anyway, teenagers and the working poor always had cheap and efficient cars available. Safety standards may have actually made things worse f

    • The exclusion of "light trucks" from CAFE calculations has made that particular argument much less relevant.

    • Re: (Score:3)

      by Kohath ( 38547 )

      The rotten economy has also kept demand from growing.

  • The Law of Unintended Consequence (Score:4, Interesting)

    by rmdingler ( 1955220 ) on Sunday November 10, 2013 @03:37PM (#45385553) Journal
    Like a broken clock that is accurate twice a day, unintended consequences are most often negative.

    • I agree with your general sentiment certainly, however we can look at history and see that our diplomatic success with Iran has *nothing* to do with fracking.

      This is a PR propaganda article.

      Iran has been a Banana Republic for global oligarch companies like Royal Dutch Shell, British Petroleum, Gasprom, etc...

      anti-democratic dictators were installed by special operations work who would give favorable oil trading to the colonial oligarches...

      it has happened **OVER and OVER** through history....

      this is about t

      • "this is about the Arab Spring, the rise of democracy, and the triumph of US diplomacy in the region" .... Yes, But. Likely entirely by happenstance, it's still probable the increase in US domestic production due to fracking played some minor role.

        • it's possible, I can acknowledge that for sure...somewhere far down the chain, I'm sure that public perception that fracking in the US has reduced demand significantly has affected commodities trading...

          you're coming from the right place, so I don't mind talking a bit of semantics, but this topic is easily trolled...

  • My impression is that revolutionaries are not necessarily very good at maintaining infrastructure. Same deal with Venezuela, decades of eating the seed corn and nobody who knows how to keep the black stuff flowing in charge.

    • Re: (Score:2)

      by Trepidity ( 597 )

      Stalin was pretty good at it! Pretty bad at a lot of other things, but crash industrialization of Russia at all costs, that he was pretty solid at. To the extent that rural areas of Russia nowadays have a lot of USSR nostalgia, because the glorious Soviet infrastructure is slowly crumbling and not really being maintained anymore.

    • It depends on the revolution. Stalin is one counter example even if the electrification of the USSR started when Lenin was still around but there are more like Hitler (autobahn), Mussolini (trains running on time, draining swamps infested with malaria, etc).

      The thing is they had the means and/or the allies with the resources to do it. As for Venezuela don't have a clue. Can't they ask the Chinese for help or something?

  • Who says making fracked oil in the U.S. unprofitable is a negative consequence? Fracking has had a negative impact on the environment, and I'd just rather say good riddance.

  • Subsidies. (Score:5, Insightful)

    by SuricouRaven ( 1897204 ) on Sunday November 10, 2013 @03:48PM (#45385645)

    "If not managed properly, flooding the market with Iranian crude could carry its own negative consequences by suddenly making fracked oil in the US unprofitable."

    You know all those people comaining about the money the government 'wastes' on subsidising green energy?

    The government spends a lot more on oil, just less directly. Whole wars have been fought to keep that fuel affordable, and now they are even important enough to engage in market price manipulation to protect their profits.

    • Green energy doesn't compete directly against oil until most people have electric cars.

      Whenever I see someone like you say, "all we need is alternative energy to get rid of our oil usage," I shake my head in disbelief at how horribly you can misunderstand the energy markets............

  • >"Iran would not be coming to the negotiating table without the US oil boom."

    This is a perfect example of how oil has created such a horrible political mess over the years. It has been very dangerous for us to be so dependent on the middle east.

    While I am glad our increased independence is forcing Iran and such to the table, I really wish it were because we accomplished that independence through renewable energy sources. Still, I guess we should take what we can get for now.

    • Re:Table (Score:4, Insightful)

      by MightyMartian ( 840721 ) on Sunday November 10, 2013 @03:57PM (#45385711) Journal

      The sad part is that we're not using some great portion of the profits from oil to work on alternatives. When we run out of oil or its environmental effects become so deleterious that we can no longer justify its use, we will have squandered vast amounts of money and resources.

      • Re: (Score:2)

        by khallow ( 566160 )

        The sad part is that we're not using some great portion of the profits from oil to work on alternatives. When we run out of oil or its environmental effects become so deleterious that we can no longer justify its use, we will have squandered vast amounts of money and resources.

        The implication here is that there is no better use for those profits on oil than to find alternatives to oil. Or rather I should say, to find more alternatives than the vast assortment we already have. I think that is deeply in error.

        The problem is threefold. First, we already have huge investments in alternatives to oil and related industries. Second, oil remains too cheap for the alternatives to be viable and isn't sufficiently harmful to preclude its use on your other stated grounds. Third, when oil

  • China could easily pick up the slack.

    • Where are the Chinese oil fields? How much of the world supply of oil does China produce?

      I don't think for a second that China could "pick up the slack".

  • Money Talks (Score:3)

    by germansausage ( 682057 ) on Sunday November 10, 2013 @04:05PM (#45385759)
    The moral of the story is Money Talks. An embargo is toothless if we have to keep buying Iran's oil. Once we can get our oil without them, the embargo starts to bite hard. The mullahs are looking at what happened in Egypt and Tunisia and Syria, and they can do the math. About 60% of their population is under 30. They are young, educated and unemployed, which is the recipe for social unrest and political instability. The sanctions are making an already bad problem much worse. If they have to choose between obtaining nuclear weapons, or regime survival, they will make the obvious choice.

  • Misleading article...the whole context is wrong...

    First off, the collusion in the oil industry is not fully known, so we are just guessing when we talk about 'global supply'

    2nd, the US does not get its oil from Iran...our demand/supply is tagentially not directly related

    3rd and most importantly for this PR propaganda of a TFA: It was a **decrease in demand** not fracking!

    If the US automakers hadn't **killed the electric car** there would have been at least an **equal drop in demand**

    Fracking has *nothing* t

    • 2nd, the US does not get its oil from Iran...our demand/supply is tagentially not directly related

      Oil is a commodity. Every barrel the United States doesn't buy from country A is a barrel that country A gets to sell instead of Iran.

      3rd and most importantly for this PR propaganda of a TFA: It was a **decrease in demand** not fracking!

      Perhaps the truth is both an increase in supply due to substitution with fracked gas and a decrease in demand due to CAFE and foreign counterparts.

      • Oil is a commodity. The sky is blue.

        that doesn't mean you have a point...you have *half* a point...your argument has only one leg to stand on...

        Every barrel the United States doesn't buy from country A is a barrel that country A gets to sell instead of Iran.

        wrong...you are ignoring important distinctions leading to a reductive argument

        the global energy industry is not like AP Economics...the concept of supply/demand you illustrate above is about on the level of trying to talk quantum entanglement by comment

        • Re: (Score:2)

          by tepples ( 727027 )

          The US can import oil from certain suppliers for very cheap compared to others

          I'm interested. Where can I read more about these suppliers that give discounts to the United States so that I don't make the same mistake?

          Fracking does not produce the oil that becomes gasoline

          Correct. Hydrofracturing doesn't produce anything. It does help extract natural gas, a product that can substitute for gasoline in CNG-converted cars. It's not an overnight substitution, as converting a gasoline vehicle to CNG isn't cost-free. But over time, as fleets of CNG bi-fuel vehicles are deployed, the substitution effect reduces gasoline demand.

          • You can also convert natural gas to diesel using Fischer-Tropsch. However that requires infrastructure to do it.

            AFAIK fracking is about more than natural gas however.

          • I'm interested. Where can I read more about these suppliers that give discounts to the United States so that I don't make the same mistake?

            check out Aamaco...wholly owned subsidiary of Saudi Aramco ;)

            then check out who Bush Sr. was partying with on 9/11 :P

            • check out Aamaco...wholly owned subsidiary of Saudi Aramco ;)

              Never heard of "Aamaco". There's "AAMCO", an automotive transmission repair company. There's "Amoco", which used to be Standard Oil of Indiana and became part of BP a decade and a half ago. But Wikipedia's article about Amoco mentions nothing about Saudi Aramco. Its article about Saudi Aramco does, however mention Saudi Aramco's origin in a joint venture between the companies that became Chevron and Texaco, which later drew investment from what is now ExxonMobil. Between 1973 and 1980, however, the Saudis a

    • Re: (Score:2)

      by Kohath ( 38547 )

      If the US automakers hadn't **killed the electric car** there would have been at least an **equal drop in demand**

      Someone should tell all the Tesla and Leaf drivers their cars are dead.

  • Increased supply is only part of the equation.

    US oil consumption has dropped down to mid 1990's level: http://www.eia.gov/countries/country-data.cfm?fips=US#pet [eia.gov]

    The trend of declining oil consumption should continue due to factors such as:

    - continued underemployment
    - aging population
    - urbanization
    - improved vehicle fuel efficiency

    Also, Iran knows that if Republicans come back to power, Israel will be able to dupe the US into attacking Iran. It is prudent for Iran to negotiate a deal with an administration t

    • Also, Iran knows that if Republicans come back to power, Israel will be able to dupe the US into attacking Iran. It is prudent for Iran to negotiate a deal with an administration that is capable of negotiating (and isn't Israel's puppet).

      Since the Carter Administration, every President has said we need to negotiate a peace between Israel and Palestine, the middle east, etc. Every. Last. One. Don't give me that "the republicans..." bull... it's been everyone for the past 20 years. And with every new Presidency, nothing happens. America loves to say it'll get everyone to the negotiating table, and then they... don't. Even Jon Stewart from the Daily Show, who happens to be Jewish, says the US is impotent when it comes to Israel.

      Also, how stupi

    • I think we're going to see a surge in the prevalence of natural gas-powered ICE vehicles as well, plus a gradual rise in EVs.

      I'll ignore your silly Republican-baiting.

  • Problem? (Score:4, Interesting)

    by girlintraining ( 1395911 ) on Sunday November 10, 2013 @04:20PM (#45385867)

    flooding the market with Iranian crude could carry its own negative consequences by suddenly making fracked oil in the US unprofitable."

    And this is a problem how, exactly? Fuck the frackers. Gimme my cheap gas. I'm sick of you bastards charging so much... you're squeezing the poor and putting our economy in the crapper. Cheap gas = fast economic recovery, not this stagnant crap.

    • This article is complete bullcrap. There is no way the 1-2 million barrels per day that Iran produces is going to flood anything. US oil production is FOUR TIMES that of Iran's most optimistic max. Add in what's going on in Canada as well and the premise is flat out preposterous.

  • $150 a barrel (Score:5, Insightful)

    by twistedcubic ( 577194 ) on Sunday November 10, 2013 @04:44PM (#45386039)
    Quote: 'Without US production gains, I think we'd be looking at $150 a barrel.'

    This is the bubble where ideology and proof are one and the same.

  • Bad Headline, and there's more going on. (Score:5, Interesting)

    by Ralph Spoilsport ( 673134 ) on Sunday November 10, 2013 @04:47PM (#45386059) Journal
    Fracking doesn't have major effects on oil prices, and won't until cars run on natgas. Iran's oil production peaked years ago, and that's an open secret. They will not be increasing oil production, ever. What fracking does do is crush the market for natgas. And it just so happens that BTU for BTU, Iran has more natgas than Saudi Arabia has oil. Iran is in a suboptimal energy spot. They know that their carbon fuels will eventually run out. They need to have alternatives in place to keep the lights on before things get out of hand. The standard response has been "Nukes". Also, nukes can help make nuke weapons, which kept the USA at bay.

    Well, the USA is falling apart. Therefore the need for nukes isn't quite as extreme as it once was. Also, Germany and Denmark are pointing towards how an advanced society can operate without nukes or carbon, and in a place as sunny as Iran, this becomes a kind of no-brainer.

    Iran's biggest worry is their biggest asset: The South Pars gas field. The Europeans want it BAD as an alternative to Russian natgas, and the Americans would love to take it away from Iran, just cuz the Americans are a bunch of greedy dicks who'd love to stick it to the Russians, and screw the Iranians in the process. As long as South Pars stays underground, the Russians have their captured market (Europe) and Iran has money in the bank. As long as Iran was banging the nuke drum, the Americans were able to keep their psychotic fear machine rolling. Now that the USA Empire is entering late afternoon, they can afford to play nice with them and their pointy little all american bullet headed saxon mother's sons. Franking is crushing the natgas market, but everyone knows franking is a temporary solution, so Iran will hold that Ace of South Pars and cash big time when they will need the money to transition to solar. At that point the USA will be in some kind of tizzy tea party dipshit media freak show - probably with Britney Spears running as a Republican and (fill in name of faceless bureaucrat) on the Democratic ticket and some frothing tool of the Koch guard as a third party spoiler.

    Ya gotta look at this stuff with a longer term view...

  • Very incomplete article (Score:4, Informative)

    by apharov ( 598871 ) on Sunday November 10, 2013 @04:54PM (#45386109)
    While the drop in Iranian exports is certainly a sum of many things, the article completely fails to mention the EU sanctions. Notice the very sharp drop in the export volume graph mid-2012? That's the sanctions coming fully to force in July 2012: http://en.wikipedia.org/wiki/European_Union_sanctions_against_Iran#Sanctions [wikipedia.org]

  • Awful, Awful, Awful (Score:4, Insightful)

    by brit74 ( 831798 ) on Sunday November 10, 2013 @05:07PM (#45386229)
    The argument in the summary is absolutely awful. Here's why:

    First, let's start with two facts, and let's assume they are true: "the US has increased its crude production by about 2 million barrels a day" and "Iran's oil exports have been cut in half since 2011 (PDF), from 2.5 million barrels per day to a bit more than 1 million today". The implication in the summary is that Iran's oil production was reduced because the US increased oil production. Let's think about this for a second. This argument would make sense if all three of these claims were true: (1) Iran and the US were the only oil producers in the world, (2) The US was the only oil consumer in the world, (3) US oil consumption remained stable over the past two years. None of these claims are true. First, oil is a global commodity - there are plenty of producers and plenty of consumers. To put this in context, the global oil production is about 80-90 million barrels per day ( http://en.wikipedia.org/wiki/List_of_countries_by_oil_production [wikipedia.org] ). So, why would it be true that an increase in 2 million barrels per day in the US would lead directly to a 1.5 million barrel reduction in Iran? Even worse, the US does not purchase any oil from Iran.(though there could be indirect effects, for example, a reduction in US oil purchasing could result in other nations purchasing more oil from Saudi Arabia or Canada, thus reducing their need to buy from Iran). If this is an indirect effect, then we would expect all oil-producing nations (*not* just Iran) to have a small reduction in oil sales (i.e. Saudi Arabia and Canada and Venezuela and other net-oil-export nations would all share in the decline).

    In short, it's absolutely absurd to tie an increase of 2 million barrels/oil per day in the US to a 1.5 million barrel/oil per day sales reduction in Iran. These two things don't have any cause-and-effect relationship. They are merely correlated in time. (And I'd bet $100 that if the US never did any fracking, Iran would see the exact same decline in oil production.)

    I can see the political implications of making this claim though: it allows (pro-oil) Republicans to pretend that fracking (which they support) resulted in forcing Iran (the country they hate) into a weaker position which pressures them to negotiate with the US. This allows them to take credit for Iran coming to the negotiating table while also undermining any anti-fracking talk. In short: if you damn liberals try to stop fracking, you're helping "Death to America" Iran. Why do you hate freedom?

  • the sanctions on iran have artificially raised the price of crude, transferring trillions of dollars from consumers to producers

  • Making fracking unprofitable (Score:3)

    by he-sk ( 103163 ) on Sunday November 10, 2013 @05:33PM (#45386417)

    How is making fracking unprofitable a negative thing?

  • The Ayatollahs and the House of Saud should increase their funding of the various North American Green groups. Without green group obstruction, we'd have another huge new source of oil in ANWR, we'd be almost done with the Keystone Pipeline, and we would have vast new production offshore.

    Also useful to Ayatollahs and the Saudi royals:

    - Boko Harem terrorist attacks threatening to destabilize oil production in Nigeria
    - Socialist nationalization of oil production facilities in Venezuela under Chavez and Madur

  • They seem to have forgotten the link in their little plan there. We don't buy oil from Iran! So us producing more has a very diffused effect on how much Iran sells. Almost nobody buys from them actually. In fact, if the US buys less, other countries can afford to buy more oil for a lower price and there's more to go around so that drops Iran's oil outputs to the people that do buy them but it's so delayed and diffused that the correlation isn't as solid as this article makes it out to be.

  • Rouhani is why (Score:5, Interesting)

    by Kingston ( 1256054 ) on Sunday November 10, 2013 @08:20PM (#45387359)
    The main reason Iran is negotiating on weapons is that the Iranian people elected president Rouhani. They were sick of Ahmadinejad clownish posturing and hostility to just about every other nation. Sanctions are having wearing effect on Iranian families and they didn't see an improvement in future as long as a leader like Ahmadinejad ( although he was not standing again ) was in power. The Iranian people elected a moderate with a mandate to improve Iran's foreign relations and that is what is happening. We will see a lot more of this in the months to come and more of Israel's attempts to derail any agreements.

  • In fact, I think it would be great if fracking and oil sands projects were unprofitable.

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