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Seems like OPEC's current strategy is to dump oil onto the market for a low price. This both makes it unsustainable for the competition to drill for oil, and

Seems like OPEC's current strategy is to dump oil onto the market for a low price. This both makes it unsustainable for the competition to drill for oil, and creates a higher demand. Once many of the competing (e.g. Western) oil companies goes bankrupt, OPEC can increase the prices and enjoy both higher demand and increased profit. At that point, it will take a long time before investors feel comfortable investing in oil again in fear of an identical situation. They also push renewables into a similar spot. I was looking for a reference that shows debt vs. market cap of US oil companies, but cannot find it. It didn't look promising for the US oil companies. Anyway, this doesn't have anything to do with peak oil, which we are likely passing these years (for conventional oil). Except we'll likely crash sooner if we increase demand.

saryant 11y ago
This is just a buying opportunity for the big boys like Exxon. They'll snatch up the companies that fail and bide their time. It's not a new strategy—the well-capitalized oil companies do this every time the industry stalls. They call it "prospecting for oil on the floor of the stock exchange." Many shale producers will go bust but others have tightened their belt and become more efficient. The technology itself has also gotten cheaper, allowing those wells to be profitable even at depressed energy prices. More will likely fail but the shakeout will leave the remaining shale producers in a very strong place. The idea that "OPEC can increase the prices" is farcical at this point. OPEC has been in open revolt for a long time and can no longer function as a unified front against the Western consuming countries. Smaller OPEC producers have long ignored the quotas, battling for marketshare while comfortable in the knowledge that Saudi Arabia would lower their production to maintain price targets. The Saudis have grown tired of that role—this current salvo is as much a move against their fellow OPEC members as it is new Western production. This current situation is the Saudi's public recognition that OPEC has failed, the final culmination of a decline that began decades ago. Saudi Arabia is facing the prospect of increased production on several fronts for both geopolitical reasons (Iran) and technological (America, deep sea, Canadian oil sands, etc). When the US tears down export barriers, their situation will become that much more dire as American shale producers will find entire new markets for their oil. Finding markets has long been as significant a task for the industry as finding oil itself. Other investors are certainly fearful of investing in oil but I've been moving more and more of my personal portfolio into energy over the last few months. Given time, energy will rebound.

saryant 11y ago

This is just a buying opportunity for the big boys like Exxon. They'll snatch up the companies that fail and bide their time. It's not a new strategy—the well-capitalized oil companies do this every time the industry stalls. They call it "prospecting for oil on the floor of the stock exchange." Many shale producers will go bust but others have tightened their belt and become more efficient. The technology itself has also gotten cheaper, allowing those wells to be profitable even at depressed energy prices. More will likely fail but the shakeout will leave the remaining shale producers in a very strong place. The idea that "OPEC can increase the prices" is farcical at this point. OPEC has been in open revolt for a long time and can no longer function as a unified front against the Western consuming countries. Smaller OPEC producers have long ignored the quotas, battling for marketshare while comfortable in the knowledge that Saudi Arabia would lower their production to maintain price targets. The Saudis have grown tired of that role—this current salvo is as much a move against their fellow OPEC members as it is new Western production. This current situation is the Saudi's public recognition that OPEC has failed, the final culmination of a decline that began decades ago. Saudi Arabia is facing the prospect of increased production on several fronts for both geopolitical reasons (Iran) and technological (America, deep sea, Canadian oil sands, etc). When the US tears down export barriers, their situation will become that much more dire as American shale producers will find entire new markets for their oil. Finding markets has long been as significant a task for the industry as finding oil itself. Other investors are certainly fearful of investing in oil but I've been moving more and more of my personal portfolio into energy over the last few months. Given time, energy will rebound.