How OPEC Weaponized the Price of Oil Against U.S. Drillers

[Purveyor]

By Grant Smith Jan 9, 2015 11:25 AM ET

If there ever was doubt about the strategy of the Organization of Petroleum Exporting Countries, its wealthiest members are putting that issue to rest.

Representatives of Saudi Arabia, the United Arab Emirates and Kuwait stressed a dozen times in the past six weeks that the group won’t curb output to halt the biggest drop in crude since 2008. Qatar’s estimate for the global oversupply is among the biggest of any producing country. These countries actually want -- and are achieving -- further price declines as part of an attempt to hasten cutbacks by U.S. shale drillers, according to Barclays Plc and Commerzbank AG.

Crude fell 48 percent last year and has declined 37 percent since OPEC affirmed its output target on Nov. 27. That decision, while squeezing revenues for OPEC members in 2015, aims at preserving their market share for years to come.

“The faster you bring the price down, the quicker you will have a response from U.S. production -- that is the expectation and the hope,” said Jamie Webster, an analyst at consultants IHS Inc. in Washington. “I cannot recall a time when several members were actively pushing the price down in both word and deed.”

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The four Middle East OPEC members are counting on combined reserve assets estimated by the International Monetary Fund at $826.4 billion to withstand the plunge in prices. Petroleum represents 63 percent of their exports. At least 10 calls and several e-mails to the oil ministries of all four countries on Jan. 7 and yesterday weren’t answered.

more...

http://www.bloomberg.com/news/2015-01-09/why-opec-is-talking-oil-down-not-up-after-48-selloff.html

[Vincardog]

1. GOOD cheap gas and put the Frackers out of business

[Purveyor]

3. If it were only that simple. A large amount of taxes, which many municipalities depend on

won't be realized putting quite a strain on local budgets.

Many personal lives are leveraged (overpriced housing/overprices vehicles) on $100 oil also. It should take about a year of these current prices for the real shakeout to happen.

[Vincardog]

7. Cry me a river:THE TIME IS NOW TO ABANDON OIL AND FOSSIL FUELS!

[Purveyor]

8. Just don't plan on 'tubing' down that river anytime soon. Not going to happen. eom

[Vincardog]

9. Just keep on insisting on living in your bleak world.

[Purveyor]

11. And you in your utopic, ain't going to happen...world.

[TheBlackAdder]

2. OPEC is a PRICE FIXING ORGANIZATION - The US Oil Industry ENGAGED IN PRICE FIXING TOO!

The US Oil Industry (and the other world's suppliers) profited off of the price fixing of OPEC.
They relied on a 3rd party organization to establish their income stability and business viability.


The US Industry was complicit in the price fixing so I have no sympathy for their losses.


They enjoyed trillions of dollars in abusive profits from OPEC's actions and their complicity.
These companies fleeced the people of this country and the world for decades, fighting any
other forms of energy in order to maintain their monopoly and stranglehold on American citizens.

===

This is a wakeup call to abandon oil investments and move to alternative energy sources...

THE TIME IS NOW TO ABANDON OIL AND FOSSIL FUELS!

[Purveyor]

4. Of course you know we will end up bailing out 'big oil' if this prices holds.

Of course the same congresscritters that decried the bailout of GM/Chrysler will be the loudest advocates for the oil bailout.

[TheBlackAdder]

5. Just like we'll bail out the Postal Service's $40B Pension System when an Equity Firms raids it. nt

[Purveyor]

6. This 'house of cards' will come tumbling down one of these days, indeed. eom

[cprise]

10. This is the most telling segment...

It wouldn’t be the first time U.S. drillers are caught up in an OPEC battle for market share. In 1986, Saudi Arabia opened its taps and sparked a four-month, 67 percent plunge that left oil just above $10 a barrel. The U.S. industry collapsed, triggering almost a quarter-century of production declines, and the Saudis regained their leading role in the world’s oil market.

Its widely understood (and touted by the power brokers from that era) that the former Saudi expansion in production was the result of an agreement between US and Saudi politicians with the objective to damage the economy of the Soviet Union. (The Soviets had become reliant on oil export revenues.)

So now here we are pretending that the US decision to back a coup in the Ukraine in February 2014 has nothing to do with the sharp downward inflection of oil prices in that same month... This is all supposed to be a move (by OPEC's closest US allies) to retain market share against US producers who can't possibly compete with the former on price. We are supposed to read this garbage and ignore the largest oil producer in the world, Russia, who is known to be a former target of Saudi price wars.

The Saudis can recover market share from the more expensive producers any time they want. So there is no market-based reason for them to squander their dwindling reserves and drive profit margins down. The goals are political, and this article is stupid.