The Sauds can sell oil at $7 a barrel. Yes they can. But they cannot pay for their system at that price. They are suffering fom declining reserves at the current price. They are using up their savings. Meanwhile we are improving our methods. The Sauds will go broke or will cease being able to fund their own formidable welfare system and will face internal unrest they won’t be able to afford to cope with. The real Saudi floor is way above that $7. They are actually operating NOW below their floor. If they continue operating that way then they will go under as a nation, not a bad outcome. It is in American interest to keep the Saudi price as low as we can. It is highly likely that at the current rate of improvement our break even point will decline below $30 without knocking American oil out of business. $40 oil is enough to keep American companies producing and making their wells more efficient. Rig count has declined drastically but oil production has declined only a small fraction of that as we develop cheaper ways to get oil out of the wells remaining. Free markets favor the society yhay innovates. America and Israel are the most innovative societies on earth. We crimp that when we stomp down on innovation by “protecting.” Most conservatives tend to be free marketers except for whatever industry they are noticing on any given day. They can see the big picture generally but can only see today’s restricted view in particular cases.
“The Sauds can sell oil at $7 a barrel. Yes they can. But they cannot pay for their system at that price. They are suffering fom declining reserves at the current price. They are using up their savings. Meanwhile we are improving our methods.”
We’re improving out methods mostly because of fracking which came about because of the profit incentive of $150/barrel oil.
Take away the profit incentive, production is discouraged. You need to learn to think economically. :)
“The Sauds will go broke or will cease being able to fund their own formidable welfare system and will face internal unrest they won’t be able to afford to cope with. The real Saudi floor is way above that $7. They are actually operating NOW below their floor. “
Ok, I will take your word on that.
“If they continue operating that way then they will go under as a nation, not a bad outcome. It is in American interest to keep the Saudi price as low as we can.”
Not if it ends or discourages US production.
” It is highly likely that at the current rate of improvement our break even point will decline below $30 without knocking American oil out of business. $40 oil is enough to keep American companies producing and making their wells more efficient. Rig count has declined drastically but oil production has declined only a small fraction of that as we develop cheaper ways to get oil out of the wells remaining.”
Ok, I will take your word on that. I did hear a few years back that the break point was $60 per barrel for US producers.
“Free markets favor the society yhay innovates. America and Israel are the most innovative societies on earth. We crimp that when we stomp down on innovation by “protecting.”
No. Historically Tariffs and protection have been a Yuge part of American industry.
“Most conservatives tend to be free marketers except for whatever industry they are noticing on any given day.”
I;m all for free markets here in the US, but not for “free trade” as it’s currently defined. Especially with muslim run cartels...nothing “free market” about them or their oil.
“They can see the big picture generally but can only see today’s restricted view in particular cases.”
I’m a Nationalist, Bill Kristol, Charles Krauthammer, George Will are all “conservatives”. They are supporting Hillary, Nafta, TPP, and any and all such globalist schemes, so I no longer consider myself a “Conservative”.
But I do consider myself well versed in econ, although will defer to you in the minutiae of global oil markets.
Besides, the Saudies want to diversify and not be oil-dependent.