Share and Market Share Alike

As Saudi Arabia worries about losing market share to the shale gas revolution in the United States German Chancellor Angela Merkel signaling that Germany is going to pick up the check for the EU bailout is appealing to the rest of the globe to share the pain and do what they can do to stimulate growth. Such is the drama in the oil patch a day after refiners juiced up runs to the highest level since 2007. Is demand coming back and is the world on the verge of a coordinated intervention ahead of this week's elections? And can OPEC find that sharing is caring or will the short-term hawks in the cartel led by Iran look to derail the global economic recovery and their own future just to provide cover for a rogue regime hell bent of securing a nuclear weapon.

Oh how the world has changed. In the 1970's the OPEC cartel convinced that they could rule the world and impose their will on the world cut off supply putting the US on what was supposed to be a fruitless journey towards energy independence. It was a decision that the people with brains would soon regret. The US became more fuel efficient and it took almost 30 year for OPEC to sell us as much oil as they used to sell us in the 1970's.

Now Saudi Arabia fearful of a new world where the United States moves from a world of dependent importer to major exporter will make the OPEC cartel and the future earnings of Saudi Arabia and other OPEC members less certain in the future. The Saudis have grown accustomed to the perception that they pull the strings on the global oil price and rue the day when that perception goes away. Now with the explosive news that now Venezuela holds the largest proven oil reserves in the world, overtaking Saudi Arabia, according to BP Plc. They are feeling their reign as oil king makers to the world falling away.

Oh sure as long as Hugo Chavez is in power the threat that Venezuela will actually take advantage of that new designation is unlikely as Chavez has made the Venezuela oil industry the laughing stock of the world and with the rebound in Iraqi oil the biggest OPEC underachiever. Venezuela oil deposits are was at 296.5 billion barrels at the end of last year ahead of Saudi Arabia's 265.4 billion barrels. Of Course if Chavez gets booted out and you get a free market replacement Venezuelan production could soar in the years to come.

Angela Merkel says that Germany can't save the world economy on its own is making a thinly veiled appeal to governments around the globe that we are going to need more stimulus. Merkel hinted that Germany will use its strength a sign that she may give in on some type of a joint Euro Bond she is signaling it can't be done without a lot of stimulus backing from the US and China.

Yet according to yesterday's Energy Information Agency supply report low oil prices are stimulating a lot of things like refiners and gasoline demand. Refiners ran wild last week driving down gas prices helping gasoline demand surge to the highest level since August. Despite gasoline production surging last week by over 495.000 barrels per day stocks fell by 1.72 million barrels. That is despite the fact that we saw a draw in Cushing Oklahoma by 338,000 barrels a sign that those Gulf Refiners are rejoicing over that cheap Canadian and shale rock oil.  

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Phil Flynn