OPEC lost its war with American oil
Daily Caller:
The OPEC countries underestimated the ability of US oil companies to innovate and become more competitive. They were able to drive their cost down to a level where they could make money at the lower price in places like the Permian Basin in West Texas. They have found even more oil in the Wolfcamp formation in the same area. OPEC made the mistake of listening to Democrats on energy production in the US rather than looking at the innovation and creativity of American businesses.
Two years ago, Saudi Arabia and the other OPEC nations declared an oil war with America.There is more.
On November 30h OPEC will meet to admit they have lost that conflict.
At this month’s meeting OPEC will try to decide about the possibility of a global production cut or even a freeze in crude oil production in order to raise prices. The speculation about this conference is the fact that the production increase war failed and OPEC is on the verge of extinction.
The Saudi’s and OPEC thought by flooding world markets with oil, they could eliminate competition and also put oil companies in America out of business. Having done so, they would gain a larger market share and reassert their power to control global economies. There is no question that many people lost billions of dollars in this power play by the OPEC countries. The mistake that OPEC and the Saudis made, in my opinion, was the failure to understand the resolve of American oilmen. This foreign effort did shut down production, closed down a number of rigs drilling for oil, and in some cases, caused companies to go out of business. While successful in the short term, Saudi Arabia and OPEC may have paid a very high price for this war
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Saudi Arabia, who was the leader of this war, didn’t count on the possibility that Saudi Arabia and many of the OPEC nations would see the devastation to their own economies. The revenue loss from the reduced sale of crude oil put enormous pressure on the financial reserves of all the OPEC nations. The International Monetary Fund, IMF, said earlier this year that a drastic reduction of oil revenue could create such a significant problem for Saudi Arabia that this once mighty nation could be bankrupt by the year 2020.
Other nations in OPEC like Venezuela and Nigeria are probably already bankrupt, and the remaining members of OPEC are rapidly moving towards their own bankruptcies if oil doesn’t get above $60 a barrel. The “Independent” projected that Russia, if oil prices continued to stay low, would run out of financial reserves by the end of 2017.
How ironic that just two years ago Saudi Arabia thought they could conquer the world by driving down prices, and now they desperately need prices to go up in order to have a chance of survival.
One thing that will not be talked about publicly at this meeting is Donald Trump and his election as President of the United States. I believe his commitment to making America energy independent as quickly as possible will impact the decisions of the OPEC ministers. In 2014 the Saudis said the reason they did not lower production was in order to protect their market share in the US. If Mr. Trump is correct, then the Saudis and the rest of OPEC will have no market share in the United States. With Mr. Trump in office, I have no doubt that American oil companies will increase drilling and production because the President will want them to compete for market share in the world markets. He will want American oil companies to compete directly with OPEC and Russia.
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The OPEC countries underestimated the ability of US oil companies to innovate and become more competitive. They were able to drive their cost down to a level where they could make money at the lower price in places like the Permian Basin in West Texas. They have found even more oil in the Wolfcamp formation in the same area. OPEC made the mistake of listening to Democrats on energy production in the US rather than looking at the innovation and creativity of American businesses.
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