You need to understand that Saudi and the others don’t have an abundance of cheap oil either. They don’t have the production capability to replace all the recent oil growth the US has had over the past 7 years. Total OPEC surplus production capabilities, which is nearly all in Saudi, is a little over 2 MMBPD.
As an example of what Saudi Arabia spends to produce its next barrel of oil, look at what they spent recently.
$17-billion (significant overruns from estimates) on the Manifa project for 900,000 barrels a day.
Offshore in shallow waters, they built 27 man-made drilling islands, 13 platforms, and 15 onshore drillsites. The project includes 41 km of causeways and 3 km of bridges designed to maintain natural water flow in Manifa Bay. They have worked for over half a century trying to figure out a way to economically produce this lower value, high sulfur heavy oil with high metal content.
They don’t have the capacity to supply the world with “cheap” oil. They don’t have cheap untapped fields, they have expensive stuff like us. The old massive fields that built their empire are well aged and they spend significant dollars on Enhanced Oil Recovery methods like water flood to keep the production from them dropping to fast, but they are dropping. That is why they spend $17 billion to develop a new field with low quality oil.
https://www.saudiaramcoworld.com/issue/196006/manifa-oil.field.under.the.sea.htm
http://www.theoildrum.com/node/9056
http://www.oilandgasnewsonline.com/Article/33782/No_plans_to_raise_output_capacity
The price is not going to immediate jump back up to $100. But it will climb, because nobody has sufficient supply at the cheap prices those outside the industry dream of.
I’m not sure we disagree here. The stuff is getting more expensive all over, not less. That is declining productivity (if you measure output in Bbl not USD).