Saudi Arabia may go broke before the US oil industry buckles

The Telegraph ^ | August 5, 2015 | Ambrose Evans-Pritchard

[Bubba_Leroy]

It is too late for OPEC to stop the shale revolution. The cartel faces the prospect of surging US output whenever oil prices rise.

If the oil futures market is correct, Saudi Arabia will start running into trouble within two years. It will be in existential crisis by the end of the decade.

The contract price of US crude oil for delivery in December 2020 is currently $62.05, implying a drastic change in the economic landscape for the Middle East and the petro-rentier states.

The Saudis took a huge gamble last November when they stopped supporting prices and opted instead to flood the market and drive out rivals, boosting their own output to 10.6m barrels a day (b/d) into the teeth of the downturn.

Bank of America says OPEC is now "effectively dissolved". The cartel might as well shut down its offices in Vienna to save money.

If the aim was to choke the US shale industry, the Saudis have misjudged badly, just as they misjudged the growing shale threat at every stage for eight years. "It is becoming apparent that non-OPEC producers are not as responsive to low oil prices as had been thought, at least in the short-run," said the Saudi central bank in its latest stability report.

[heshtesh]

Some of them are still drilling.

A friend of mine is drilling 20 new wells in NYS just north of Bradford PA.

[chesley]

SA isn’t an anti-Western country?

Not hardly!!

[GeronL]

good luck to them!

[LouAvul]

electric vehicles are becoming viable.

Which? Harley's new electric cycle travels 100 miles and requires a 9 hour charge. That's not a viable "technology."

[PGR88]

Good. And then put a big fence around it when it collapses so no one gets in, or out - and certainly don’t let anyone into the United States.

[Ozark Tom]

A question came to mind after viewing the required price per barrel for each country to break even. Perhaps the true purpose of the Iran deal is to funnel enough money to keep them afloat, until the other M.E. OPEC members succumb to sustained low oil prices. Iran at $130 bbl versus Saudi at $105 bbl to break even on outlays, should be short on funds based on oil sales. What are their reserves? Maybe Donald Trump knows?

[glorgau]

Couldn’t happen to a nicer bunch of people.

[uglybiker]

I have the feeling the Russians hit bottom before the Saudis do.

[mbrfl]

Couldn’t happen to a nicer bunch.

[1010RD]

This is a culture thing. Islam doesn’t create innovative, entrepreneurial societies because it is fundamentally socialist in outlook. The Saudis never had a chance even with Obama. If we can reestablish private property and free markets in energy we’ll outpace the world. There’s no reason we cannot have real growth of 4-8% without inflation, except government. Government at every level is pro-status quo and if you’re coasting you’re crashing.

[mountainlion]

SA has been spending millions in the anti fracking protests and legislation. They like to sell us their oil to pay for their political/religious Mosques in America. I think they will become less powerful and possibility be taken over by west hostile countries like Iran. SA/OPEC are losing their power over oil and more hostile are gaining power.

[Dusty Road]

Texas

[Repeal The 17th]

I have seen some of those old wells in Alabama, Mississippi, and Louisiana
pumping day in and day out while I was on the road for work over the last 40 years.
The cost of the land, the rights, and the drilling was spent a long time ago,
but those wells just keep on producing.
I get out to Texas sometimes, but not very often.
Unfortunately, my state of Georgia has no oil.