Posted on 12/09/2015 8:12:46 AM PST by SeekAndFind
Saudi Arabia might just bust OPEC by keeping its taps open, but right now the Kingdom's main concern is strangling American shale production.
Read:
Markets had been expecting Opec to announce a new ceiling on production after last Friday's meeting, but analysts at Barclays said the lack of any curbs in its announcement was a sign of discord. "Past communiques have at least included statements to adhere, strictly adhere, or maintain output in line with the production target. This one glaringly did not. "Â they said.
Saudi Arabia needs oil prices of $100 a barrel to balance its budget, but as the world's biggest exporter of crude it is gambling that the low price will knock out the threat posed by so-called unconventional supplies, such as shale.
The chief executive of Saudi Aramco, Amin Nasser, said at a conference in Doha on Monday that he hoped to see oil prices adjust at the beginning of next year as unconventional oil supplies start to decline.
In a sign that US production could dip, Baker Hughes' November data showed US rig count numbers down month-by-month by 31 to 760 rigs.
The story also notes that "Venezuela, in particular, is thought to be suffering badly as a result of the drop in oil prices." But that's what happens when you're a one-industry socialist country which has been neglecting to invest in that industry.
But here in America? The Saudis aren't stupid, so they must understand that our shale oil isn't going anywhere. Sure, a lot of wells will go offline at $40, even more at $30, and the fracking industry might nearly shut down at $20.
And then what? Oil prices will rise, and those shale wells will come back online.
Saudi Arabia has one big advantage. Its crude oil is plentiful, easy to get to, easy to refine, and cheap to transport. That lets Riyadh set a price floor far below anywhere that most anyone else can make a profit.
American shale oil is also plentiful, but it's much harder to get to, harder to refine, and more expensive to transport. But there's so dang much of it that our frackers can set a price ceiling far below OPEC's salad days of $100-plus crude.
Thanks to the cutthroat capitalism practiced in this country, new extraction methods bring that ceiling lower. Fracking once required $100 oil to make a profit. Now some producers can go as low as $50. And that number will continue to shrink.
Until and unless the Saudis can convince Washington to hobble American frackers by law -- and don't think the Democrats haven't tried and won't try again -- then OPEC's salad days aren't coming back for a very long time, or maybe ever.
That is the ONLY reason oil is so low
Fracking may become economically unfeasible because of the law prices, but it should NEVER be taken off the table.
Because as soon as it is, the oil prices will go back from $20 a barrel to $100
I am against protectionist tariffs, but I am EVEN MORE against our own government shooting us in the foot by banning economic activity on our side.
Banning fracking is the anti-tariff. It hurts us instead of them
Excellent!
Why is Saudis always seem to be trying to kill something American?
Is it something we said?
snorkel...snorkel... :-)
Just how long can the Saudi’s and OIC nations afford to keep prices this low? This appears to be a double edged sword that will hurt OIC economies as well, while the fracking industry can readily be resurrected from hibernation status as necessary.
It is time to fundamentally reexamine our relationship with Saudi Arabia.
They fund ISIS. They fund a lot of terrorism.
If we put Iran and Saudi Arabia under sanctions for oil, we would need our in house industry.
Why is that so bad?
Why not leverage our fossil fuel strength against a militant Islamic state that is Saudi Arabia.
We have been told for decades we are dependent on their oil.
This is now demonstrably false.
Sanctions would keep the global price low and hurt ISIS even more.
I saw $1.67 on my way to work this morning (Waterford, MI).
With Saudi Arabia financing Islam’s war against America, why aren’t our oil companies out of there? Obama is on their side, against the energy industry that kept his miserable economy going for the past six years, because he hates our fossil fuel industry.
Both false statements, clear the author doesn't know what they are talking about.
Our Shale Oil is light sweet crude. Most Saudi Arabian crude oil fields are higher in sulfur, many heavier oil.
Is that Michele Bachmann on the pic?
From article:
“Thanks to the cutthroat capitalism practiced in this country, new extraction methods bring that ceiling lower. Fracking once required $100 oil to make a profit. Now some producers can go as low as $50. And that number will continue to shrink.”
With technological advancements, wonder how low that number could go? I’ve heard of new technologies that could make the cost even lower, and I have faith in the innovation of American companies to beat out the Saudis in the long term. Of course it doesn’t help when liberal politicians stand in the way.
Saudis aren’t worried about US Fracking. That’s going to be around for the next 300 years, and they know there isn’t a thing they can do to stop it.
The Saudis are trying to kill the Russia/Iranian axis. Between the two of them, they’ve likely got about 11 more months of capital reserves available to keep their governments going. The Iranians need $140/BBL oil, and the Russians need $100/BBL - just to break even.
The US isn’t a petrostate, and the current owners of fracking assets could be easily picked up cheaply by any number of hedge funds or investment groups that would happily sit on those assets until the price comes back.
This is how bad the news has become. The very notion that the Saudis could hurt fracking is stupid. That the Russians and Iranians can’t take low priced oil much longer, and how it will almost certainly require the two of them to wipe out the Saudis doesn’t cross their minds.
Stupid, stupid people running the media. It’s either that or they are purposefully misleading us.
The Oil will still be there and the Frackers will start up again when the price goes up
The Saudi strategy cannot work in the long run. Most of the cost of fracking, as in conventional oil drilling, is the drilling itself. If fracked wellheads get capped at $20 or $30 or $40/bbl., so what - when the price rises then they get uncapped, no new drilling required.
I am normally against tariffs, but here you have a predatory competitor that is illegally (if they were operating in the US) dumping at below cost. That is clearly a monopolistic practice - but since we can’t shut them down or sue them, then our only alternative to level the playing field is to set a tariff up. Maybe the best way would be to set the rates so that the price plus the tariff is $50. Once the price is above $50, the tariff disappears. This will ensure that we actually have serious R&D funds going into this vital industry.
Only in highly marginal parts of some fields. Other areas were profitable at $30 and even below.
We started using hydraulic fracturing in the 1940s. It was used for decades before we ever saw $100 oil.
Current average breakeven Price in Dunn County, North Dakota is $24.
North Dakota Department of Mineral Resources
https://www.dmr.nd.gov/oilgas/presentations/NDOGCPC091015.pdf
Page 37
Yes, because of various government taxes. You will NEVER see gas below about $1.40/gallon, even at $20/bbl.
Because of taxes, refining costs and transportation there is a floor on prices. Let’s find it!
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