US Shale Industry Puts OPEC on Notice: We’ll Drill at $40/Barrel

We don’t often write or highlight stories about oil and OPEC. However, there is a connection between the price of oil and the price of natural gas–and there is a connection between OPEC and the price of oil. For more than a generation OPEC has been able to, pretty much single handedly, control the price for a barrel of oil. If OPEC wants the price to go up, they scale back production. Prices to go down–start pumping more. Then God blessed America one more time and gave us the shale revolution. At $100 per barrel, drillers are willing to pump all day long. OPEC (essentially Saudi Arabia) stepped in with a strategy of pumping more to drive the price into the basement in an effort to bankrupt U.S. shale drillers–thereby giving them back their monopoly. Nice people those Saudis. Such great friends to the U.S. (NOT) When prices hit below $30 per barrel, many companies (most) stopped drilling here at home. They can’t make any money on those prices–in fact they lose money. The received wisdom is that you can’t make money pumping shale oil below $70/barrel. But the thing about Americans and American ingenuity is that we tinker and create and experiment. And now we’ve figured out how to make money when the price is low. How low? The shale industry is now sticking its finger in OPEC’s eye and saying that $40 is the new $70 when it comes to the price at which they’re willing to fire up the drilling rigs. So take that OPEC…

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