BY RUSSELL TURNER
MONOPOLY SAUDI STYLE
Anyone who has ever played the game of monopoly understands the goal of the game is to position yourself to acquire valuable assets and drive your competitors out of business. If you are able to drive your competitors out of business, in the end you can charge outrageous amounts for your products and there is little anyone can do to stop you. Games can be fun to play and have no lasting consequences, but in the real world the games played on a global scale can, and will, have consequences all of us will have to live with.
Like most other Americans I enjoy the lower gasoline prices; it allows us to have more disposable income for the other things that we enjoy. But we need to understand what is causing the price to remain low. For many years the organization called OPEC has been calling the shots on the world price of oil. In the past OPEC members have produced about 40 percent of the world's crude oil, but 18 months ago U.S. production began to eat into its market share. With the development of Fracking technology U.S. oil producers became big players in the global crude scene, OPEC has been running scared, and for good reason. Producers in the U.S. essentially became the new "swing producer" on the global production stage. Prior to the U.S. emergence, the Saudis were the key swing producer. Saudi Arabia and other OPEC members have declared war upon the drillers here in the United States; in a recent meeting in Vienna they agreed to not slow production but to increase it by 31.5 million barrels per day. Because of that action the price of crude oil has been in freefall. OPEC is determined at any cost to recover the market share it lost to producers outside the cartel, particularly those drilling for oil in the United States.
Since their action oil has been trading for less than 40 dollars per barrel, and the Saudi’s know that Fracking is more expensive than conventional drilling and the breakeven price is around 60 dollars per barrel. They know that the American drillers have loans that they have to pay and if they can’t they will be forced to go out of business, and that business loss has a huge ripple effect to other sectors of our economy. So far that strategy has worked, as rig counts in the United States have fallen substantially. Currently we are enjoying the positive byproducts of lower oil prices such as lower gasoline prices. We should also be concerned about the decline in tax revenues and the impact on the major U.S. stock indexes. The Fracking technology has made it possible for our nation to be self-sufficient in energy, and if the Saudi’s are successful we will again be at their mercy. The game of monopoly they are playing is very serious, and there are some consequences that many Americans have not thought about.
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