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>> They're certainly still obscenely rich, but the power they had over geopolitics via OPEC is effectively gone at this point No, not really. They still have t

>> They're certainly still obscenely rich, but the power they had over geopolitics via OPEC is effectively gone at this point No, not really. They still have the ability to flood the market and cause prices to tank, which would wreak havoc on the US fracking industry.

deagle50 8y ago
I agree with what you said, they certainly can do that and you could argue the last crude crash was motivated by the US boom. The other argument is that Saudi Arabia's main objective is capturing as much profit as possible on all of their reserves before demand falls off a cliff vs strong-arming competition. They don't want to be stuck with huge deposits nobody wants in 30 years. It's their only export and they will stimulate demand as needed to sell every last drop. In this case, undercutting others would be a side benefit.
- singularity2001 8y ago
  > stuck with huge deposits nobody wants in 30 years. isn't them running out of reserves a much bigger risk for them than them running out of customers?
  - deagle50 8y ago
    Well that's the trillion dollar question. Renewable energy adoption and carbon regulation are accelerating. I'm struggling to see a scenario where we run out of reserves in this century. I wouldn't put it past a country almost completely dependent on oil to keep stimulating demand.
aphextron 8y ago
>No, not really. They still have the ability to flood the market and cause prices to tank, which would wreak havoc on the US fracking industry. ...And tank their own profits? Cheap oil is good for literally everyone but the Saudis, that's the entire reason they've cut supplies since the glut of 2014-15. US fracking is already barely at a fraction of capacity right now with how low prices are. It's not an essential industry for us, and our economy is doing fine without it. At this point the US can essentially produce unlimited oil at ~$50/barrel (break even for fracking with current tech [0]) whenever we want. [0] https://www.reuters.com/article/us-usa-shale-kemp/u-s-shale-breakeven-price-revealed-around-50-kemp-idUSKBN1AP25M https://www.reuters.com/article/us-usa-shale-kemp/u-s-shale-...
- seibelj 8y ago
  I always bet on entrepreneurs and free markets over kingdoms and dictatorships. The Sultan got things set up a certain away and assumed nothing would change, while the free West just responds and innovates no matter circumstances.
  - icebraining 8y ago
    They didn't assume that; they have been investing in alternative sources of income for a long time, including in renewables and EVs.
  - brianpgordon 8y ago
    I don't know about all of that. We got lucky to have such rich natural resources within our borders. All of the innovation and entrepreneurship in the world wouldn't have helped much if a bunch of plants and dinosaurs didn't happen to die and get buried in a geologically fortuitous way.
- enraged_camel 8y ago
  >>...And tank their own profits? Cheap oil is good for literally everyone but the Saudis, that's the entire reason they've cut supplies since the glut of 2014-15. Like you yourself said, Saudis are obscenely rich. They can tolerate losses in profits. In contrast, fracking companies in the US can't, at least not without massive government subsidies.
- AnimalMuppet 8y ago
  > Cheap oil is good for literally everyone but the Saudis, that's the entire reason they've cut supplies since the glut of 2014-15. Everyone but the Saudis, and the Iranians, and the Russians, and the Venezuelans.
abawany 8y ago
I think you are right. Their per barrel production costs were < $10 in 2016 and seem to be the lowest of all the producers [1]. When the price per barrel over the last couple of years was under $30, the US fracking industry lost quite a few jobs as I recall. 1. http://graphics.wsj.com/oil-barrel-breakdown/ http://graphics.wsj.com/oil-barrel-breakdown/

deagle50 8y ago

I agree with what you said, they certainly can do that and you could argue the last crude crash was motivated by the US boom. The other argument is that Saudi Arabia's main objective is capturing as much profit as possible on all of their reserves before demand falls off a cliff vs strong-arming competition. They don't want to be stuck with huge deposits nobody wants in 30 years. It's their only export and they will stimulate demand as needed to sell every last drop. In this case, undercutting others would be a side benefit.

singularity2001 8y ago
> stuck with huge deposits nobody wants in 30 years. isn't them running out of reserves a much bigger risk for them than them running out of customers?
- deagle50 8y ago
  Well that's the trillion dollar question. Renewable energy adoption and carbon regulation are accelerating. I'm struggling to see a scenario where we run out of reserves in this century. I wouldn't put it past a country almost completely dependent on oil to keep stimulating demand.

aphextron 8y ago

>No, not really. They still have the ability to flood the market and cause prices to tank, which would wreak havoc on the US fracking industry. ...And tank their own profits? Cheap oil is good for literally everyone but the Saudis, that's the entire reason they've cut supplies since the glut of 2014-15. US fracking is already barely at a fraction of capacity right now with how low prices are. It's not an essential industry for us, and our economy is doing fine without it. At this point the US can essentially produce unlimited oil at ~$50/barrel (break even for fracking with current tech [0]) whenever we want. [0] https://www.reuters.com/article/us-usa-shale-kemp/u-s-shale-breakeven-price-revealed-around-50-kemp-idUSKBN1AP25M https://www.reuters.com/article/us-usa-shale-kemp/u-s-shale-...

seibelj 8y ago
I always bet on entrepreneurs and free markets over kingdoms and dictatorships. The Sultan got things set up a certain away and assumed nothing would change, while the free West just responds and innovates no matter circumstances.
- icebraining 8y ago
  They didn't assume that; they have been investing in alternative sources of income for a long time, including in renewables and EVs.
- brianpgordon 8y ago
  I don't know about all of that. We got lucky to have such rich natural resources within our borders. All of the innovation and entrepreneurship in the world wouldn't have helped much if a bunch of plants and dinosaurs didn't happen to die and get buried in a geologically fortuitous way.
enraged_camel 8y ago
>>...And tank their own profits? Cheap oil is good for literally everyone but the Saudis, that's the entire reason they've cut supplies since the glut of 2014-15. Like you yourself said, Saudis are obscenely rich. They can tolerate losses in profits. In contrast, fracking companies in the US can't, at least not without massive government subsidies.
AnimalMuppet 8y ago
> Cheap oil is good for literally everyone but the Saudis, that's the entire reason they've cut supplies since the glut of 2014-15. Everyone but the Saudis, and the Iranians, and the Russians, and the Venezuelans.

abawany 8y ago

I think you are right. Their per barrel production costs were < $10 in 2016 and seem to be the lowest of all the producers [1]. When the price per barrel over the last couple of years was under $30, the US fracking industry lost quite a few jobs as I recall. 1. http://graphics.wsj.com/oil-barrel-breakdown/ http://graphics.wsj.com/oil-barrel-breakdown/