Quote:
Originally Posted by ficke
Really? The Saudis are going to take a financial hit and undersell oil to the whole world to try and making fracking in the US unprofitable? Really?? There is no way the Saudis have the money, leverage to do that if they wanted to.
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Yeah... actually they do, and can. It costs the Saudi's around $10 to pump a barrel of oil. Their capacity is about 12.5million bpd. Total world demand for oil is around 89mbpd, of which OPEC oil makes up around 30%.
If the member states of OPEC desire to do this, why do you think they could not?
Nov 27 2014 - During meetings in Vienna, Saudi oil minister Ali al-Naimi told OPEC members that OPEC had to combat the US fracking boom.
If OPEC cut output to raise the price of oil, it would lose market share, he argued.
The way to win would be to allow overproduction to depress prices to the point where they would destroy the profitability of North American producers. And the the US would have to cut production, rather than OPEC.
With Saudi Arabia’s overwhelming power within OPEC, Naimi's argument won against objections from desperate members, such as Venezuela, Iran, and Algeria, which wanted a production cut to push prices back up.
“Naimi spoke about market share rivalry with the United States, and those who wanted a cut understood that there was no option to achieve it because the Saudis want a market share battle,” a source told Reuters to make sure the message got out.
Asked if this was a response to rising US production, OPEC Secretary General Abdullah al-Badri essentially confirmed OPEC had entered the oil war against the American shale revolution.
Reports I have read say that oil will need to drop to around $40 or $50 / bbl to achieve these results. I'm not sure if OPEC members are willing to go that low. Venezuela is already having economic problems that will only get worse as oil prices fall.