A missing piece of the puzzle [Dynamics of Cats]

I’ve been puzzling over the rationale for some recent events…

Exxon has a large contract to develop oil and natural gas resources in the Russia.
This can only go forward if sanctions on Russia are lifted, which seems likely to happen in the near future.

But, there is too much oil and capacity to surge produce more oil and gas on the market. If nothing else, the US has well developed capacity which is idling.
The problem, as it has been for the last few decades, is that Saudi Arabia can squeeze new producers out of the market, but increasing production and sharply dropping prices, for a while, which forces higher costs producers off the market.
The the Saudis cut back. Oil prices go up. Profit.

So… for the Exxon deal to be really worth while, in the medium term, the Saudi capacity would have to be curtailed.
Or some other major producer removed from the market.

That, could of course be arranged, given the national security resources of a major power or two.

But that’d be totally evil.

from ScienceBlogs http://ift.tt/2jQS0Dx

I’ve been puzzling over the rationale for some recent events…

Exxon has a large contract to develop oil and natural gas resources in the Russia.
This can only go forward if sanctions on Russia are lifted, which seems likely to happen in the near future.

But, there is too much oil and capacity to surge produce more oil and gas on the market. If nothing else, the US has well developed capacity which is idling.
The problem, as it has been for the last few decades, is that Saudi Arabia can squeeze new producers out of the market, but increasing production and sharply dropping prices, for a while, which forces higher costs producers off the market.
The the Saudis cut back. Oil prices go up. Profit.

So… for the Exxon deal to be really worth while, in the medium term, the Saudi capacity would have to be curtailed.
Or some other major producer removed from the market.

That, could of course be arranged, given the national security resources of a major power or two.

But that’d be totally evil.

from ScienceBlogs http://ift.tt/2jQS0Dx