US shale and Opec, seeing the altered balance of power.
In Washington, Congress will begin considering legislation to permit the export of crude oil from the US, reversing a four decade ban put in place after the first oil crisis in 1973/74.
In Vienna, the Organization of the Petroleum Exporting Countries (Opec) is expected to roll over its crude production target of 30 million barrels per day (mbpd) even though prices have fallen more than 40 per cent over the last 12 months.
Rather than reduce production to boost prices, Saudi Arabia and the other Opec members are prepared to continue pumping to defend market share and maximise revenue.
After 40 years when Opec appeared to play the dominant role balancing supply and demand and influencing prices (sometimes successfully, sometimes not), power has passed to the shale drillers of North America.
Now it is the shale drillers who must decide whether to respond to the recent price rebound by re-activating rigs and completing more wells, at the risk of sending the price tumbling again.
The US has always been a major petroleum producer and for much of its history it was a big exporter of both crude oil and refined fuels as well.
Until as late as 1952, the US still accounted for more than half of worldwide daily crude production - dwarfing output from other early producers such as the Dutch East Indies, Burma, Russia, Romania, Mexico and Iran.
The US ran a persistent trade surplus in crude and refined fuels with the rest of the world. From 1952 onwards, however, the country began to run deficits, which became increasingly wide and had reached $2 billion per year by 1970.
Between 1950 and 1970, the US share of worldwide crude production had fallen from 50 per cent to just 20 per cent.
There was no shortage of oil at home: US crude production rose from 6 mbpd in 1952 to almost 10 mbpd in 1970.
But US oil production from the ageing fields of Texas, Oklahoma and California was undercut by lower cost producers in the rest of the world.
Massive oil fields in the Middle East and Latin America, discovered between the 1920s and the 1950s, were put into production during the 1950s and 1960s unleashing a flood of cheap crude onto world markets.
It posed a direct challenge to domestic US producers. "Since foreign oil was so much cheaper than domestic, it served the short-term interests of American consumers. Dependence on foreign oil, however, posed a problem for national security," according to historian Richard Vietor.
Anticipating heightened competition from foreign oil after the end of World War Two, US oil producers wrote to the federal government in 1945 "it should be the policy of this nation to so restrict amounts of imported oil so that such quantities will not disturb or depress the producing end of the domestic petroleum industry."
From 1950 to 1959, the US oil industry tried various voluntary restrictions on imports to help the struggling producers of Texas and the other oil producing states. But the voluntary approach failed to halt surging imports and in 1959 the federal government introduced legal quotas under the Mandatory Oil Import Program, which lasted until 1973.
In the meantime, the Texas Railroad Commission and other state conservation commissions ordered domestic producers to reduce output by flowing their wells only so many days each month or choking them back to a percentage of their maximum efficient rate of production.
By 1962, Texas wells were flowing on fewer than 10 days per month to avoid flooding the market and to prop up prices, which nonetheless continued to fall in real terms. But the long period of low and falling real oil prices in the 1950s and 1960s stimulated a massive increase in oil demand while curbing investment in capacity in the US to replace depleting fields.
Copyright 2012 www.tradearabia.com
Copyright 2015 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. ( Syndigate.info ).