There’s an oil price war going on, and OPEC thinks it can win by not cutting production and pricing out companies producing oil from U.S. shale formations. And now, the Energy Information Administration (EIA) has some charts that show why Saudi Arabia and other OPEC nations are afraid of America’s energy potential.
First off, this graph shows that the U.S. surpassed Saudi Arabia as the world’s largest oil producer in 2013, after decades of lagging behind the kingdom. But in just a few short years, the advent of hydraulic fracturing and horizontal drilling allowed the U.S. to move from the world’s third largest oil producer to the top spot, beating out Saudi Arabia and Russia.
Now, the Saudis rank second in terms of oil production while the Russians rank third.
On top of all that, U.S. oil production has helped to lower demand for Middle Eastern oil and caused prices to collapse. The price collapse, however, has also hurt U.S. producers which is why the Saudis and other OPEC members are keeping production levels high. If the price stays low, it will be harder for U.S. shale producers to compete, therefore increasing OPEC’s market share.
The question is, can OPEC hold this position for any prolonged period of time? If U.S. oil producers continue figuring out more innovative ways to get oil and gas out of the ground, it won’t be long.
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