2 MIN READ - An "OPEC licks its wounds all the way to Houston"
update from the Cautious Optimism Correspondent for Economic Affairs and other
Egghead Stuff.
After a failed multi-year predatory pricing campaign to
bankrupt U.S. shale producers, OPEC hosted an extravagant dinner in Houston for
their still-here and still-vibrant American competitors in March.
Although U.S. antitrust and collusion laws prohibit explicit discussion of price-fixing, the wink-and-nod message over steak and wine to U.S. producers was “Why don’t you play along and cut production too and we can all enjoy higher prices?”
(see Reuters article at: https://www.reuters.com/article/us-ceraweek-energy-opec-shale/u-s-shale-and-opec-share-steak-in-uneasy-truce-at-houston-dinner-idUSKCN1GJ04H)
Effectively OPEC’s old story and new strategy have become:
1) We couldn’t beat you (U.S. shale oil)
2) We lost hundreds of billions of dollars trying, pumping
oil at full capacity even as prices fell to $50, $40, $30, and even $26 as our
government budgets rely on $45+ oil simply to run the county (Saudi Arabia)
3) We need to get oil prices back up to $100+ to recoup our
staggering losses
4) So how about informally joining the cartel and
restraining output?
5) Because every time we cut production you guys step in to pump
more oil, frustrating our efforts to raise prices to over $100.
Considering that OPEC was trying to destroy the very same
firms as recently as a year ago, U.S. producers weren’t too keen on
cooperating. Although many pleasantries were exchanged at the dinner, the
message from shale oil exploration and production CEO’s to the press afterwards
was “nothing has changed.”
Good for them.
In other news, Citigroup predicted earlier this month that
the USA will become the world’s largest petroleum exporter next year (defined
as crude oil + refined petroleum product exports).
(read here: https://www.bloomberg.com/news/articles/2018-04-26/citi-says-u-s-may-become-world-s-top-oil-exporter-next-year)
(read here:
Didn’t President Obama famously contend in 2012 that...
“We can't just drill our way to lower gas prices?”
OK if he's right, then ask
yourself where would the price of oil and gasoline be today if the U.S. wasn't adding 10.4 million
barrels-per-day of supply to the world market to counter OPEC’s recent and very
aggressive production cuts?
Very easily over $100 a barrel—again, $5+ a gallon—again.