Mike from La., I read the article you posted about Russia saying OPEC doesn't have the influence it used to in controlling oil prices. It made me very nervous reading that, because I'm sure Saudi knows that their influence is greatly diminished. I'm starting to subscribe to the conspiracy theory. For Saudi(and Opec) to regain their influence they have to price everyone out of the market. The way to do it is drive prices to $8. All of the mom and pop producers will be gone. Half or more of the drillers. If oil went to $8 and stayed there for say 3 years, where would FLC, GLM, and RDC be ... I suspect gone, goodbye, don't forget to write. Saudi may very well say you know its worth 3 years of pain for 25 plus years of controlling the market. I'm sure they have discounted the cash flows to say this is what we'll lose and this is what we will gain by taking such action.
I also think the Saudi is the only one with the balls and financial muscle to take such action. A good excuse is for Saudi to say no one else is complying we aren't either. Say they crank up production another million barrels a day. Oil starts rapidly heading for $10. Saudi has the outside investments to sustain lower oil prices. Everyone howls, but Kuwait, Iran, Russia, etc has to also increase their production to make up for short term lost cash flow, all of a sudden we are at $8 dollars a barrel or lower. And then every oil company in the world is screwed. I don't want to think it could happen, but it truly can, and then all of us are SOL. Something to ponder. |
