The United States Is in the Saudi Crosshairs
As I’ve noted previously, there are three distinct targets involved in the Saudi-led move to maintain production levels.
One is certainly U.S. oil production. Soon, it will surpass Saudi production.
The second is the non-OPEC production from Russia, especially as it relates to competition over the Asian market.
The third is simply to keep order in what is already a deepening rift within OPEC itself.
However, His Excellency does not accept my characterization of this as an oil war. At least not publicly.
Sandwiched between Iran across the water and Saudi Arabia to the south, the UAE is used to practicing moderation. That occasionally means they simply duck, especially when U.S. policy interests are affected.
Nonetheless, His Excellency well understands that OPEC is just buying itself a few years with its current actions. With all the attention being accorded to U.S. shale and tight oil, the argument that American production is responsible for the pricing problem is a bit disingenuous.
As I’ve recently noted, the impact of shale at the moment is limited to its effect on American imports. The export of crude from the U.S. is still prohibited. However, U.S. reliance on OPEC imports has been waning for years.
Given the new-found economic impact of oil production back home, I quickly pointed out that the OPEC decision will likely give the new Congress added impetus to liberalize the very exports the cartel fears.
I further suggested OPEC’s major wall is three to five years away, tops. By that time, a combination of alternative production, renewables, and redirected trade will mean the effective end of OPEC’s oil hegemony. Controlling about 40% of the world’s oil is no longer the baseball bat it once was.
Again, nobody disagreed.
So buying time is all that OPEC has left. Of course, the essential battle is far from over. This one will largely take place over Asia, the main remaining market.
Yet, in the course of the war announced last week, the United States, Russia, Europe, and much of the financial world that funds the energy conflict will hammer out a new playing field.
As it stands, I have several more days here in Dubai, followed by sessions in London with the folks who largely fund the energy world. So by the time I return to the states on Dec. 11, I’ll have a pretty clear picture of what is unfolding.
Of course, there’s one other matter of some note: How we are going to make money from all of this?
Because make no mistake, this is going to provide the biggest opportunity in energy investing in decades. And there’s no better place to be than on the ground floor.
I’ll have more on this as it develops.
Check back for my next column on OPEC’s real policy agenda.
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