Saudi Prince: Shale “An Inevitable Threat” to OPEC

This week, several news outlets highlighted a letter written by Saudi Prince Alwaleed bin Talal warning that rising shale production from North America is “an inevitable threat” to Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC).  As he further explained, “The world is increasingly less dependent on oil from OPEC countries including the kingdom,” a direct result of increased production in the United States and Canada.

How things have changed.  For years politicians told us that we only have “two percent” of the world’s oil, so as long as we use oil we’ll always be dependent on OPEC.  Now the tables have completely turned: A Saudi Prince is now openly concerned about what North American production will do to OPEC’s market share!

Prince Alwaleed wrote his letter around the same time that OPEC was also starting to realize that, because of American shale production, its market outlook is less rosy: as one OPEC official put it, “Some member countries are really suffering from U.S. shale oil.” A little over a month later, OPEC predicted that demand for its crude oil will be significantly diminished next year (by about by 300,000 barrels a day) due to the North American shale boom.   The International Energy Agency (IEA) sees this trend continuing for years to come: it released a report in May finding that North America will provide 40 percent of new oil supplies by 2018, while OPEC’s contributions will decline to 30 percent, putting North America on the path to being “all but self-sufficient” by 2035.

And it doesn’t stop with OPEC.  In April, the Russian Academy of Science said that crude oil exports from the Commonwealth of Independent States (CIS), including Russia, Kazakhstan and Azerbaijan, could drop 17 percent by 2040 because of increased American shale production (more on that here).

Who would have thought we’d ever have this kind of power over OPEC – and by extension the global oil market?  By the way, this is just the beginning – we’re only a few years into a shale revolution that has transformed our economy for the better and put us on a fast track towards achieving energy security.  And as even the Saudis begrudgingly acknowledge, there’s a lot more where that came from.

Comments

  1. A. S. Mathew says:

    This seems like the repetition of history after the 2nd world war. There was a big shortage for rubber-black pepper and other agricultural products mainly cultivated in the south Asia like Malaysia, Singapore etc due to the bombing destruction in those countries. But those products were available in Brazil and other South American countries. Those countries hoarded wealth in a short span of time, until other Asian and African countries began to plant rubber trees etc. Brazil built very tall buildings of those times. Likewise, the OPEC countries never dreamed about another oil source like shale. The U.S. has the biggest reserve of shale oil, about 1.5 to 2.6 trillion barrels of oil located mainly in Texas, N. Dakota, S. Dakota etc.
    The U.S. now the biggest importer of oil will be turning as an exporter of sweet oil like the Nigerian oil. The import from Nigeria to the U.S. has greatly declined, almost zero now.

Trackbacks

  1. […] Saudi Prince Alwaleed bin Talal describes shale oil prolongation in a United States as “an unavoidable threat” to Saudi Arabia and OPEC, eating into direct for OPEC member nations’ exports and their […]

  2. […] Increasing competition: For decades, Saudi Arabia and the members of OPEC have determined the energy prices. While the Saudis still have the world’s second largest oil reserves plus the world’s largest oil fields, the U.S. has now overtaken the country as the world’s second largest oil producer. In 2013, Saudi Prince Alwaleed bin Talal warned that shale oil production in the U.S. is “an inevitable threat to Saudi Arabia and OPEC.” But the Saudis are not giving up energy control – or U.S. market share – without a fight. First, Saudi Arabia shocked the rest of the OPEC by cutting forward prices for Asian delivery and by increasing oil output slightly in September, at a time when other exporters wanted it to cut back. Shortly afterwards, the country slashed prices again but this time exclusively for the U.S. market. How effective price wars will be in maintaining current competitive positions will be remains to be seen. (Sources: U.S. News, Energyindepth) […]

Speak Your Mind

*