Posted on 11/09/2014 6:06:10 AM PST by thackney
Only by overlooking important forces in markets and politics can anyone assert that Saudi Arabia is letting crude prices fall mainly to extinguish competition from North American shale oil.
With oil, the Saudi regime always takes the long view. With security, however, its motivations are more immediate.
The kingdom faces unusually intense threats: Islamic State (IS) militancy in Iraq and Syria, the chance that Iran won’t agree by a Nov. 24 deadline to suspend its nuclear ambitions, terrorist insurrections from restive Yemen, durability of the menacing government of Bashar Al-Assad in Damascus.
Falling oil prices hurt the IS and Iran, exert pressure on Russia to end its support of Assad, and bolster faltering economies in Europe and Asia.
Saudi Arabia therefore has little immediate incentive to defend crude values and wouldn’t suffer greatly if prices ran below current levels for a while. The kingdom might welcome reduced competition from North American supply as a short-term side benefit. But it can’t reasonably see a punishing blow to supply from unconventional resources as a strategic victory. From the perspective of future generations—the characteristically Saudi perspective with regard to oil—that supply serves Saudi interests well. Yes, high-cost unconventional oil represents new competition at the margin of the market. But it also promises to prolong the Age of Petroleum, preserving demand for the kingdom’s economic lifeblood, potentially for many generations.
If Riyadh seriously wanted to fight unto death with shale oil, it would be unsheathing its competitive advantage by dismantling the elaborate subsidies that effectively weld national overheads to the otherwise low cost of producing oil. It’s not doing that.
The enduring threat to producers of oil, unconventional and otherwise, also takes the long view. It’s the off-oil political agenda, proponents of which also understand how oil from shale and bitumen from oil sands promise—in their view, threaten—to extend oil’s dominance in the energy market. From this agenda comes knee-jerk opposition to projects like the Keystone XL pipeline and to operations such as hydraulic fracturing.
Producers shouldn’t let low oil prices confuse them about where real problems reside.
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I really like that analysis. Except it doesn’t explain Islam’s growth, expansion and hegemony from the age of Muhammad at around 700 AD until 1938 when oil was discovered in Saudi Arabia.
So we can make a correlation that the administration are Sunni.
More than 80 years ago, my Dad was drilling in West Texas and had a conversation with a geologist. This was in Wink County on the fringe of the premium basin. The geologist has seen evidence of almost unlimited amounts of hydrocarbons down below, and all that was lacking was the means to get to it.
Your dad saw God’s gift to man, oil.
We have many generations left for us humans to exploit.
Thank you, God.
And as the guy in “The Graduate”said to “Benjamin”: “Plastics.” How much stuff is now made of the stuff!
AND BY THAT YOU SEEM THE SAME AGE AS MYSELF, BORN IN ‘51
I wish. I was already one of those people whom the fans of “The Graduate” mistrusted. But I have been a Dustin Hoffman fan ever since.
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