Quote:
Originally Posted by basjoos
I don't expect gas to stay down where it currently is for more than a year or two. At the current low oil rate, hydraulic fracturing and tar sand oil aren't very cost effective. So there'll be a big slowdown in starting new fracked wells and in extending current fracked wells until the price goes back up. Unlike conventional drill oil wells which, once drilled, can produce a steady volume of oil for years, the oil production rate of fracked wells tapers off within months unless they are extended and/or additional fracturing takes place. So supply will drop off until the price rises back up to where fracking and tar sands are again price competitive. Of course if the continued expansion of the sunni ISIS sets off a war with the Shia Iran and shuts down Persian Gulf oil exports, all bets are off and the price could shoot back up much sooner.
|
The proverbial nail has been hit on the head here.
Saudi Arabia ramps up production and cuts prices. Tar sand and shale oil fields have to cut back or lose money since they aren't profitable with low oil prices. Overall production is still about the same, but Saudi Arabia gets a much larger market share and is still profitable at those prices.
If they can keep it up long enough, they may be able to bankrupt competitors that have invested heavily into these alternative oil fields, then they can constrict production and command high prices again. It is strictly illegal in the US, but that's not a concern for the Saudis as they don't have to abide by our laws.