Kurt Cobb, who writes about energy and the environment, has a piece in The Christian Science Monitor about how OPEC is targeting the U.S. shale-oil “revolution.’
Cobb says it was folly for some proponents of U.S. drilling to think that oil would remain above $100 a barrel indefinitely. At $70, U.S. operations aren’t profitable enough to remain at that output level.
To paraphrase Mark Twain: Rumors of OPEC’s demise have been greatly exaggerated.
Breathless coverage of the rise in U.S. oil production in the last few years has led some to declare that OPEC’s power in the oil market is now becoming irrelevant as America supposedly moves toward energy independence. This coverage, however, has obscured the fact that almost all of that rise in production has come in the form of high-cost tight oil found in deep shale deposits.
The rather silly assumption was that oil prices would continue to hover above $100 per barrel indefinitely, making the exploitation of that tight oil profitable indefinitely. Anyone who understood the economics of this type of production and the dynamics of the oil market knew better. And now, the overhyped narrative of American oil self-sufficiency is about to take a big hit.