Conspiracy hat time: what do you guys think of the idea that the West is intentionally lowering well prices in a bid to harm most of the oil producing countries?
I know the USA and Canada are oil producers and also get affected obviously, but with my conspiracy hat on, I wonder if flooding supply right now could be seen as a net positive for us (in terms of the pressure it exerts on Russia and perhaps our other oil-producing opponents)
It’s actually the opposite right now. The OPEC countries (some, anyway) are keeping supplies high so that prices remain low. Lower prices mean that it makes less economic sense for US and Canadian producers to go “full bore”. Cost to produce in the west is much higher than in the middle east, so lower prices hurt us more than (most) in OPEC.
Seems like it was only yesterday that conspiracy theorists were speculating that the West was intentionally raising oil prices.
Um, no, not the west. The responsible party appears to be Saudi Arabia.
According to this: Washington Post.
The article is really about the impact of lower oil prices globally, however there is commentary on the reason for the lower oil prices. The key paragraph:
Exactly. Recently I heard that if prices go under $75-$80 per barrel it would not be economically feasible to continue pumping from all of the new wells in the upper plains. OPEC, and particularly Saudi Arabia*, have pushed the spot price on US production down to $75.74 as of last week. The next report is due out in an hour.
*Saudi Arabia, as the largest OPEC producer, usually varies its output in an effort to influence prices.
Saudi Arabia also has some of the lowest cost to extract along with sizeable reserves. They can choose high price/high margin or maximizing percentage of the market at low margin.
As a not very conspiratorial plan I could see the Saudis also intentionally flooding the market to bring down the revenues going to ISIS. Selling on the black market, with additional shipping costs, already gets ISIS quite a bit below market pricing. Tanking oil prices have impacted their funding.
Can’t keep up with the conspiracy theories. Not to mention the ones about Obama deliberately causing oil prices to go up (2012) or down (2014).
Who is “the West” and why would you think they have some collective control over major and independant oil and gas exploration and production companies? These companies are market driven and don’t work at the behest of the US or any other government outside of regulations that have been in place with little tangible change for years.
Evil Saudi conspiracy theories aside, it’s not surprising. Oil and other commodities have been rising for nearly a decade. You have had i) wells which have become economical due to,high prices producing oil, increasing supply, therefore lowering prices as well and ii) alternative things such as Natural gas coming to the fore.
It’s economics. The last decade has shown that no country can control oil (or commodity) prices. They can cause temporary spikes or drops. Not manage trends.