Texas Shale Oil Has Fought Saudi Arabia to a Standstill

Oil suppliers have flooded global markets, driving down prices. Investment in the industry is down, and some high-cost projects in deep waters and other challenging environments have been shelved, but “North America's hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits,” explains Ambrose Evans-Pritchard for the Telegraph. “Revolutionary improvements in drilling technology and data analytics that have changed the cost calculus faster than almost anybody thought possible.” Saudi Arabia had hiked its own production, hoping to drive firms based in other countries out of business. But US drillers are shrugging about oil prices lingering near $40 per barrel. Wildfires in Canada and conflict in Nigeria posed only temporary market disruptions. Meanwhile governments like Venezuela and Saudi Arabia that depend on oil revenues struggle and the threat of instability is high. Evans-Pritchard points out that only systems of high subsidies and entitlements, paid for with oil revenues, have kept some autocratic governments and rulers in power. – YaleGlobal