So, I was having a discussion on another forum where people seem to think Saudi has enough funds/power to win a price war with US Shale. About everyone disagreed with me, but I contented that the US would not only win, but crush Saudi if it came to that. Why? Shale makes up less than 1% of GDP. I dont think people realize this. And its not like oil will stay at $50 a barrel. It will more than likely rebound to $75 in 12-18 months. If they didn't IMO, all we have to do is lift the export ban and watch the tides turn. Anyway, Saudi is 100% reliant on oil. The US is not. The US is VERY diversified. I think this is one of Saudi's last grasp if they are in fact, after market share because of US Shale. Also, I don't even know why it would matter that Saudi has close to 1 trillion in the bank given our GDP. What say you?????
I would say the Saudis can outlast shale oil. Their cost of producing is low $5/barrel vs $60/barrel for shale. However I think the Saudi primary target is Iran and Russia (for supporting Syria). Yes we are diversified and when(more importantly if) the Iranians, Russians & Syrians are broken the price will go back up. At least that is how I think the Saudi power structure sees things. Russia is somewhat of a wildcard. Putin if desperate could make things really messy. I do think Iran can hang on longer than the Saudis think. The next year or so will be interesting.
You have to remember, the actual price for Saudi oil with included budget is over $80. the kicker is that their budget is around $240 Billion and they have about $1 trillion in the bank. I agree about Russia. It wouldn't be out of the realm for them to do something crazy.
I don't think it's targeted at anyone. They tried to cut production in the past and it didn't work plus they lost market share. They're taking a different approach this time. Gain market share, ride out the storm (because they can't really affect prices anyway), and hope to come out stronger when oil rebounds. And it's not a given that oil will go back up to $75/barrel any time soon. It will be interesting to watch although I hate that the Louisiana economy will suffer over this.
Saudi Arabia has the biggest oil reserves in the world. Its cheap oil, too--good quality, shallow, and requires no fracking technology to pump it. Oil reserves are declining internationally, it is a fact. We need to be thinking about this in the long term. Ephemeral price wars don't mean shit. Oil is a commodity and its price will always ultimately reflect supply and demand. In the long term oil prices will go up . . . way up in time. Wars will be fought over oil. Economies will be crushed from lack of it. Great powers will hoard it. Small weak oil producers like Saudi Arabia will not stand a chance and they know it. They will be conquered and occupied for their oil reserves, probably several times. It's why they are pumping like mad and investing their money mainly in the US. Big countries with oil reserves will prosper-- The US and Russia. Rich countries with low reserves will choke--Europe, China. In the long term it makes more sense for the United States to buy cheap Saudi oil now and leave our reserves in the ground for the day when oil can't be bought for any reasonable price. It will be far more valuable in 50 or 100 years than now, in fact it will be vital.
I have always felt it was in our best interests to use up the oil from the rest of the world while keeping our own production low. That way when the world supply runs low we will still have plenty for our own use.
How do How do you see new sources of energy playing into this? It seems like in 50 years, demand we all be much less.
Well, what new sources of energy? Solar, wind, hydro will not replace oil and coal in 50 years or 200 years. It would take an unprecedented technology breakthrough to replace fossil fuels and I just don't see anything happening soon. If somebody could harness the power of gravity and magnetics into an electrical generator, that might do it. Or perhaps the power of anti-gravity and anti-mass. But that technology doesn't exist and the physics are extremely complex just to work out the theories, much less make a device. In the lack of some sort of new electrical generating device, the demand for fossil fuels will grow exponentially. I kind of keep an eye on gravity technology news. If any company even looks like they are developing a workable gravity engine, I'm buying all their stock I can afford.
50 years? Maybe, maybe not. Who knows what technology will bring in 200 years? In 200 years there probably won't be any oil left.
