A gas flame near the Khurais oilfield, Saudi Arabia. PHOTO: REUTERS
Wall Street Journal: Trimming Oil Output Won’t Keep OPEC States Afloat
American frackers have put petrostates like Saudi Arabia under serious pressure, making reform—or revolution—more likely.
Since late last month, when the Organization of the Petroleum Exporting Countries agreed to cut oil production for the first time in eight years, the market chatter has revolved around the bloc’s credibility. The final details of the reduction must still be worked out, leading analysts to wonder: Will the cutback actually happen? Which OPEC members will slash production, and will nonmembers such as Russia join? What does this mean for oil prices?
The answers to these questions will determine whether oil trades at $60 or $40 a barrel, or at some other price. But the deeper importance of the OPEC announcement is being drowned out by the speculation about how the market will move. The proposed cutback is a victory for American oil-field engineering, which has triumphed over OPEC members’ social engineering—with potentially perilous consequences for oil-exporting nations.
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WNU Editor: This WSJ analysis on the impact that fracking has had on oil prices is spot on. I have said it more than once, but the cost of production of US shale has put a ceiling on the price that OPEC can demand for its oil .... which is why even OPEC production cuts are not going to drive the price of oil up in the medium term.
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