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Many oil analysts have attributed the recent increase in global oil supply to increased production from US shale producers, which has ramped up sharply in the last couple years.
Is the shale boom today on par with the dot-com boom or is it all a power play with OPEC to ensure US energy independence?
I believe OPEC’s objective is to “clean up” the US shale market, and that oil prices will eventually rise – in my opinion though not before early 2016 – when OPEC completes its objective of cleaning up the American marginal market.
The more obvious losers in the current oil climate are Iran and Russia â the former of course being Saudi Arabia’s archrival in the region, and the latter being no great friend of the Saudis’ either.
The pinch to shale may just be “a wonderful byproduct to screwing the Iranians and the Russians. Doing nothing has actually been a really smart move by the Saudis. With every move further down in price, the actions of the Saudis become more closely watched, reinforcing the country’s position as the world’s oil superpower.
Some US producers are surviving right now because they hedged their oil production at $90 a barrel, though these arrangements will eventually expire making life “much more difficult” if not “impossible” for these companies.
So while it is clear to anyone with a half brain today that OPEC is using lower prices as a war against US shale producers, the million dollar question remains: How low can those producers go before they start shutting down?
Maybe it is high time for the US to start subsidizing or somehow helping the US oil producers until OPEC blinks?
Let’s be brutally candid: There is nothing more important to our future international political strategy than the freedom of not having to import our oil from OPEC nations. For those that would question this and bring up the cost factor into the equation, at least consider the cost of this versus the cost of Middle East wars and increased military presence. A quick analysis would find that a proactive support of US lead oil of any/all kinds would cost so much less than the other alternative mentioned and by a significant order of magnitude.
Another option would be to maybe partner with the fringe OPEC members and have them break away from the cartel – which would almost force the remaining core OPEC members to lower prices. This would of course mean getting into bed with strange bedfellows such as Venezuela for example and even Russia – not an OPEC member- but bring OPEC to reconsider their strategy?
At the end of the day, who is the worst of foes in here or better who is going to help us win the Oil war- the biggest commodity play on Planet Earth? Venezuela/Russia or OPEC?
Share your thoughts….