It will not put American oil out of business. American costs are coming down pretty rapidly. There is a shakeup and a reorganization in the oil business as the weaker companies get taken over by the stronger ones. The “break-even” cost for fracking has come down from $60 or so and is close to $40 now. The Saudi keeping the price low by ramping up production is insuring that the ceiling in the world markets is declining continually. That is called “the market” and it works better when not hindered by government actions including “protection” of any kind. As soon as we begin to protect by tariffs or quotas we put a floor on the price of oil and disincentivize American oil from continuing to reduce costs.
“It will not put American oil out of business. American costs are coming down pretty rapidly. There is a shakeup and a reorganization in the oil business as the weaker companies get taken over by the stronger ones. The “break-even” cost for fracking has come down from $60 or so and is close to $40 now. The Saudi keeping the price low by ramping up production is insuring that the ceiling in the world markets is declining continually. That is called “the market” and it works better when not hindered by government actions including “protection” of any kind. As soon as we begin to protect by tariffs or quotas we put a floor on the price of oil and disincentivize American oil from continuing to reduce costs.”
The whole problem with all that is:
1. The Saudi’s can sell oil profitably for ~7$ barrel. Can US producers get that low? Ever? I doubt it.
2. This is NOT a free market, it’s a cartel: Saudi’s set the price, we’re subject to it, whatever they want.
Is it good for America to be in that position?
I don’t think so.
A tariff keeps dollars in America and out of Muslimdom. That alone is a good enough reason.
But it also gives US oil producers the investment money they need to find cheaper ways to produce oil.