Oily Misunderstandings

    Reading the newspapers on the subject of oil production, gas prices, etc. in an election year can be more misleading than usual, and made even worse by the Iran situation. So in the following paragraphs I will try to make a few points to clear things up.
    Point 1 - Sanctions on the Iranian oil industry will be ineffective. We are using sanctions on Iran to try to force them to desist from their nuclear weapons program or to persuade Israel to not attack or something. The sanctions really are unprecedented in scope, as we are making it difficult to almost impossible to execute bank transactions with Iran. And yet, this is all a charade, though we may not mean it that way. Oil is totally fungible, and the oil Iran pumps will be sold to somebody who will find some way to pay. It may even get resold to somebody else like the U.S. or Israel. Furthermore, let's assume that we were successful in choking off Iran's oil exports, which are nearly 3 million barrels per day out of a world supply of 85 million barrels per day. If we did that, the price of oil and gas would skyrocket, which is exactly what we don't want.
    Point 2 - Saudi Arabia can't make up any shortfalls of production. The Saudis say they can, but they can't. The Saudis have produced 9-10 million barrels a day for the last ten years through thick and thin, regardless of the price of oil. To stay at a level close to 10 million, they are using extraordinary measures to offset their older oil fields, which have declining production. So it is no use pressuring OPEC to try to get them to produce more. OPEC hasn't increased their production any over the last ten years. Prices over $100/barrel are incentive enough for them to pump all they can.
    Point 3 - The U.S. isn't going to get any oil production from "shale oil" in the near or medium term future. Terminology has helped confuse this topic, since we are now getting increased oil production from shale fields in North Dakota and from the Eagle Shale fields in Texas. However, this oil is liquid oil in shale fields, and is now available through a technology known as "fracking", which forces the liquid out through high pressure. This oil is sometimes called "tight" oil, but the key thing to remember is that it is liquid - it flows. Some commentators have said that the U.S. has massive oil reserves in shale fields such as the Green River formation in Colorado, but that oil is not liquid, it is shale rock. It is possible to get oil out of the rock, but you have to cook the rock first. As an analogy, it is easier to get oil out of asphalt than it is to get oil out of shale. At $100/barrel, it is not economically feasible to try to get oil out of shale. The price must first go very much higher. Even then, as you might imagine, the rate at which we can get this oil by cooking rocks will never approach those liquid oil fields where the high pressure oil just gushes up out of the earth. That was the closest thing to free wealth the world has ever seen, and most of those fields are nearly played out.