Saturday, December 6, 2014

Slump In Oil Price, October 1, 2014 -- December 31, 2014: Saudi Arabia Market Share

Saudi Arabia and Market Share


Comment: the slump in the price of oil began in October, 2014, and accelerated in December, 2014, when OPEC announced no cut in production at their Thanksgiving week meeting. The 30-second Saudi soundbite: they made the decision unilaterally, and they were protecting their "market share."

"The world" interpreted this to mean a price war with shale producers in the US and oil sands in western Canada. Interestingly enough, the international press keeps talking about Libya, and back in 2013, OPEC did away with its quota-monitoring committee. I think Saudi has three issues:
  • OPEC members cheating (that's their "real" market share at risk)
  • terrorist nations (Libya, ISIS, Iran)
  • North American energy revolution
The entire US oil and gas industry will suffer; some companies will go bankrupt. But the US will do just fine. On the other hand, one cannot say the same for some OPEC countries like Venezuela.

Links:
US crude oil imports from Saudi Arabia:
  • recent historical 30-second sound bite: 1.5 million bopd
  • August, 2014: 0.1 million bopd
  • September, 2014: 1.0 million bopd 
Back of the envelope calculations:
From the Fitzsimmons link, $138 million per day / 600,000 bopd = $230 / bbl.

Links and Updates
L'Arena, Il Mercenario, Ennio Morricone
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