Can OPEC Kill the U.S. Oil Boom?

[Lodestar]

Oil prices are at five-year lows thanks to OPEC's hands-off attitude. But that alone probably won't be enough to strangle the surge in U.S. oil production.

OPEC's decision to stand pat last week and maintain current crude production levels sent oil prices down to nearly five-year lows on Monday. It also prompted a couple of big related questions: Is OPEC deliberately trying to smother the U.S. oil boom, and will it be able to?
The heavy hitters inside the oil-exporting cartel certainly give that impression. By leaving the taps open and pushing prices down, the idea is to make it less economical to produce oil from fracking, which is more expensive than pumping oil in big, traditional Middle Eastern fields. OPEC's secretary-general, Abdalla El-Badri, said after last week's Nov. 27 meeting that the decision was OPEC's way of answering the glut of light, tight oil unleashed by the U.S. energy revolution. And Iranian officials said that, in backroom meetings, Saudi officials were especially worried by the threat posed by rising U.S. oil production.

Granted, the Organization of the Petroleum Exporting Countries is hardly monolithic. Its decision to keep oil production unchanged is probably less a concerted strategy to dent U.S. output than a reflection that the disparate group historically takes time to reach consensus. OPEC's big producers, led by Saudi Arabia, also want to convince smaller producers to share any pain from output cuts -- something that will be easier after a few more months of relatively low oil prices.


MORE:
http://www.foreignpolicy.com/articles/2014/12/01/can_opec_kill_the_us_oil_boom_shale_prices_saudis

[Sherman A1]

1. Can?

Perhaps. Will their efforts do so? Hard to say, but I suspect not.

[FBaggins]

2. I think you've got it right

They certainly "can" (theoretically)... but it will hurt them far more than it hurts us.

Also... it's likely to have little impact to the average person (apart from lower oil prices). They can theoretically get the price down to a point where shale production dries up, but the price would need to stay quite close to that level for an extended period. If they push prices down to $30/bbl, shale production would dry up fairly quickly... only to shift back into high gear as soon as prices rose substantially from that point.

There's no way that they can get prices back into the triple-digit range without US production ramping back up.