

Saudi Arabia to raise production to maximum levels, escalating oil market battle - adventured
http://calgaryherald.com/business/energy/saudi-arabia-to-raise-production-to-maximum-levels-escalating-oil-market-share-battle

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ytdht
hopefully we will see prices drop a bit... and corporations won't keep all the
profits...

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SliderUp
Ha ha ha.

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PhantomGremlin
I don't Saudi Arabia understands US shale producers, and I don't think the
Saudis will succeed in the near term. I don't think they fully appreciate just
how long it will take them to meaningfully affect US oil production.

Saudi Arabia is an autocratic top down government with a bunch of lucky-sperm
drones of the royal family welding absolute power. Saudi Aramco has a monopoly
on Saudi oil production. That's their mindset in this "oil market battle".

But there isn't a US shale oil monopoly or oligopoly that can respond
rationally to this "escalation". Instead, there are dozens of medium size oil
companies in North America, and hundreds of smaller ones. It's a highly
fragmented industry. They're all in competition with each other to acquire and
develop the best oil and gas properties.

All those companies have CEOs that are well compensated, both in cash and in
stock. The CEOs have all reached the pinnacles of their long careers. They
like getting paid for drilling holes in the ground. The companies all have
directors that are well paid to show up to a few board meetings a year.

Are these shale oil producers all going to decide to fold their hands against
Saudi Arabia? Are they going to dissolve their companies, shut them down, walk
away? Hell no!

With current low interest rates, many of even the most indebted shale
producers have been able to roll over their obligations to 2020 and beyond.
And even if a company fails, there will always be another that will quickly
pick up the assets at a bargain price.

In the long run, US shale oil production will slowly decline as depletion
exceeds investment. And various expensive "conventional" oil developments run
by the US majors and the multinational oil companies will be delayed or
cancelled. But that will take many years.

Things could stay "interesting" in the oil patch for quite some time.

