“It is not in the interest of OPEC producers to lower their production, whatever the price,” said the Financial Times Ali al-Naimi, the Saudi oil minister since 1995 , personality considered the most influential of the global energy industry. Although the price of oil reached 20 dollars, he said. In the journal Middle East Economic Survey, he says, he says, a barrel of oil will never return to $ 100, then suggesting that current prices would persist over the long term.
P hy such obstinacy? This policy is not suicidal, on the contrary: if Saudi Arabia began to decrease production, “percentage distribution prices on the rise, and the Russians, Brazilians and US shale oil producers take us” , he explains. To drive the point home, the Saudi minister added that Saudi Arabia and the Gulf countries could easily withstand extremely low price of a barrel of oil since production cost is $ 4 to $ 5. Conversely, the US shale oil estimated between 70 and 80 dollars. “They will be injured before we felt any pain.”
Clearly, the Gulf countries absolutely want to avoid the United States become energetically independent, and downright seeking to scuttle an entire sector of the economy. The first world power will it sit idle or she will remember that their safety depends on it? We’ll see, but written by the price trend is very clear
The bill for this low price per barrel may be painful. “The fall in prices of crude death threat billion in 1000 energy projects “as the Financial Times. In the US, oil producers have borrowed approximately $ 500 billion to finance new drilling. How will they repay that debt with a price per barrel less than the cost of extraction?
Much of the timid US economic recovery comes from the oil sector, but now it seems that we should prepare for the bursting of a bubble. Because beyond the fundamental ($ 100 a barrel, which pays shale), now offside, these investments have been excessively encouraged by the zero interest rate the Fed’s policy, just as subprime received the reinforcement of the lower rates initiated by Alan Greenspan after 2001. Never have so many projects have been launched with significant positive real interest rates, which is the normal condition of an economy. Again, the Fed may bite the fingers.
Of course this decline in oil prices automatically increases the purchasing power of Americans, with all the positive effects that come up, but increase household incomes until 2007 did nothing lessened the subprime crash, these values do not work in the same register. We are only at the beginning, but this oil bubble bursts illustrates the evils of state intervention in economy OPEC which is nothing but an oligopoly seeking to control prices (why the WTO and the EU do they undertake no proceedings in defense of competition “free and fair”?), and the Fed imposes its key rate to zero. Both state agencies are run as two trains hurtling toward each other, the shock will hurt.
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