This is a strategic threat to the United States. Saudi Arabia is trying to force the U.S. to be dependent on their oil again because they have lost the sway they once had.
When Saudi Arabia, OPEC’s de facto leader and most influential member, decided at its latest meeting in Vienna to break its recent strategic oil partnership with Russia and adopt a new policy to maximize production levels, oil prices crashed — posting their biggest slide since the Gulf war in 1991.
But even more importantly, this new policy recalibrated global oil markets, giving Saudi Arabia the long-term advantage. This move marks a big change for the world’s largest oil exporter, which has in recent years attempted to manage the global oil markets by altering production levels, while garnering the difficult cooperation of Russia. Crown Prince Mohammed bin Salman has finally decided to pursue a long-term policy that not only preserves and ultimately increases the kingdom’s market share, but also may signal the end of OPEC as a united functioning organization.This decision is very unpopular with most oil exporting countries, international energy companies and American shale producers because collapsing prices will drastically decrease their revenues and, in some cases, force them into bankruptcy.[…]On April 1 or shortly thereafter, Saudi Arabia will most likely surpass Russia to become the world’s second largest producer. But this oil price war won’t end until Saudi Arabia takes back the global production crown from the United States, which should happen within the next two years.
Meanwhile, OPEC was trying to get Texas to join in a production cut by inviting lame-duck Texas Railroad Commissioner Ryan Sitton to OPEC’s summer meeting. That didn’t exactly sit well with either the other members of the Railroad Commission or the federal Energy Department.
If memory serves, everybody is taking losses at $20/barrel, though Saudi Arabia is closest to break-even.
I’ll state the stance I’ve had for years on this. Let them drop the price on crude and let them be the #1 producer and let us consume it for low prices. When it runs out, and it will some day, then let us keep ours for ourselves.
You do realize that once Saudi Arabia becomes The Supplier, the prices won’t stay low, and supplies won’t stay reliable (or don’t you recall the oil embargoes of 1973 and 1979?).
As noted in the article linked to by EggMan, the Saudi move to increase production is the result of the breakup of the Saudi-Russkie agreements. Angry Prince Salman’s sword is pointed directly at the neck of Putin – who absolutely refused to back off production – not Uncle Sam’s.
We might get nicked in the backswing, but it’s a whole new world from the 70’s. Fracking, Canadian oil sands, new discoveries off Newfoundland and Nova Scotia (among others), shale, pipelines. Discoveries will continue and technologies will only improve and cheapen extraction costs over time. Yet even right now there is a certain price point the Saudis know they cannot exceed and that point is, historically, pretty low. And if, by some miracle, Venezuela returns to the real world…
FWIW, I paid $1.80/gal today. That’s about $1 less than exactly one year ago.
>You do realize that once Saudi Arabia becomes The Supplier, the prices won’t stay low, and supplies won’t stay reliable
Of course. When that happens we fire our sources back up. Might be a couple months of lag, but it’s not like we would have to start from scratch.
Wait, wait!! The Koch Brothers will soon be promoting “Creative Destruction” of the domestic petroleum industry, making this All Good!!
Stop your whining.
Yes, but the cost of those runs $50++/bbl. They may have to shut down for a while.