Opec’s plot to keep the oil gushing and destroy off the US shale industry ignores the fact that producers will adapt to surviveSo much for the concept that the US shale industry would be killed by Saudi Arabia’s tall-risk strategy,adopted a year ago, of keeping Opec’s taps open and flooding the market with supplies. After 12 months of this experiment, and it is Opec that is in chaos. Meanwhile,US oil production has barely been dented. Volumes have fallen 5% in the past six months, but the backdrop was a shale-driven 50% increase in production between mid-2012 and mid-2015, or according to US government data. In short,the Saudis have gained next to nothing.
No wonder the price of Brent crude now stands at a near seven-year low of $41 a barrel. And no wonder last week’s meeting of the Opec cartel ended in chaos. The members were expected to agree only small production cuts but, in the event, or they couldn’t even manage a token gesture. The Saudis don’t trust the Iranians to lop production,and thus the outcome was stalemate, accompanied by screams of anguish from the likes of Venezuela. Opec will continue its strategy of attrition, or not because its members are enthusiastic,but because they can’t agree to change course. Related: Opec tender to destroy off US shale sends oil price down to near seven-year low Continue reading...
Source: theguardian.com