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From my understanding, over the last decade, shale has become a force to be reckoned with in North America (US, Canada). This is seen as a competitive threat to
by arthurcolle 7y ago
From my understanding, over the last decade, shale has become a force to be reckoned with in North America (US, Canada). This is seen as a competitive threat to other global energy producers. Saudi Arabia and Russia both have sufficient cash reserves to be able to just dump a glut of crude oil on the market at "fair market value" and exist with the depressed prices and are ok with making no money to basically completely dominate the market once tons of highly levered US upstream and downstream oil producers die off with this ongoing period of non-existent demand.
- chasd00 7y agothat's true but the oil is still there and the extraction tech perfected. Maybe the existing players go bankrupt today but when prices come back up someone else will get a loan and turn the wells right back on. Fracking and the other technological breakthroughs have put a price ceiling on oil below which OPEC can afford.
- arthurcolle 7y agoThe oil rights are owned by specific companies. You can't just drill wherever you want - these oil/mineral rights are owned and can be resold, but it's not as easy as you describe.
- s1artibartfast 7y agoI think it is more challenging than you expect. This tactic has likely skuttled or delayed any development projects in the works. Future investors will be more cautious if they think the market can drop out at any time
- nradov 7y agoBut that's nothing new. Oil prices totally collapsed in 1998 and then rebounded several years later. Investors are aware of that possibility and plan around it.
- duxup 7y agoI think that is possible but.... what is the end game? The oil is still there, they ability to extract it exists... so company A goes out of business, but once the countries tire of shooting themselves in the foot and prices rise, Company B will just extract it. At best they spite company A, but didn't change much.... maybe they make a few bucks while company B ramps up. And that all assumes other nations play along... that is not common.
- arthurcolle 7y agoEconomic warfare - end game is causing economic harm to the US and its interests. If everyone loses their jobs in the energy industry in the US, that forces the US to buy oil from foreign entities. The US energy industry cannot exist beyond 3-6 months with sub 20 dollar oil prices.
- duxup 7y agoI'm not sure I follow. Once prices rise again it becomes profitable to extract again....and all Russia got were their own losses... and if other nations don't play along, maybe more losses. Ultimately Russia can't stop the US from having a supply of oil anymore than the US can stop Russia.
- nradov 7y agoThe US oil industry has always been boom and bust. Occasionally everyone loses their job, but then everything comes back a few years later.
- duxup 7y agoYeah it ebbs and flows pretty dynamically. I grew up in an area where oil had been found decades ago. There was mini oil rush and then ... it was discovered to be not as accessible as initially thought. Suddenly the rush was over. It was a very fast boom and bust. For a good 20 years I saw bumper stickers that said something like "Please God give us another chance, we won't screw it up this time." It was a very midwestern sort of self blame for a thing that wasn't anyone's fault. Decades later... they got their shot again and the boom lasted quite a bit longer, until recently.