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Big Oil fears shale production more than OPEC

A few months ago, lots of smart people were claiming that Saudi Arabia was keeping oil prices low to help the US squeeze the Russian economy.  I didn’t buy it.  When it comes to making money, the Saudi’s aren’t so benevolent about America’s foreign entanglements.

The Saudi’s didn’t cut oil production earlier in the year, just like they’re not cutting production now- they’ve lost the ability to control global oil prices without taking a MAJOR financial loss.

In the past few years, the US has nearly doubled its oil production, becoming the world’s largest producer.  Global oil reserves are being re-evaluated in the light of shale oil fracking & horizontal drilling technologies.  These technologies were primarily developed and implemented by the small, independent wildcatters…NOT THE MULTINATIONAL OIL COMPANIES.

Big Oil, like OPEC, isn’t cutting production nor are they curtailing inefficient facilities.  Not yet.  They’re waiting to see which of the shale fields have the lowest production costs.  After the weak highly leveraged players go bust and the industry is weary, Big Oil will sweep in and buy the most productive wells.

Why risk drilling for oil when you can buy a proven competitor’s field at a discount?

Be patient.  After the dust settles, there will be some excellent energy stocks to add to your portfolio.


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