Saudi Arabia knew that North American shale production could potentially torpedo their hold on the energy market via oil. So, they decided to trounce the natural gas market by opening the floodgates with petroleum. It didn’t work. The Telegraph now reports that shale production has cut prices so low that they can produce at prices that are lower that what’s required to keep Saudi Arabia’s socioeconomic fabric healthy:
Opec's worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil, it has still failed to break the back of the US shale industry.
The Saudi-led Gulf states have certainly succeeded in killing off a string of global mega-projects in deep waters. Investment in upstream exploration from 2014 to 2020 will be $1.8 trillion less than previously assumed, according to consultants IHS. But this is a bitter victory at best.
North America's hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits.
Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week - with some poetic licence - claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel.
"Definitely we can compete with anything that Saudi Arabia has. We have the best rock," he said.
And yet, Democrats can’t stand this type of energy production. They’ve banned it in New York over trumped up fears about environmental damage. The most insane being that fracking causes earthquakes. It doesn’t. Oh, and that fracking pollutes drinking water. Again,