In a new blog post, American Oil Producers vs OPEC: What Goes Down Will Come Up, Resources for the Future’s (RFF’s) Alan J. Krupnick notes that the Organization of Petroleum Exporting Countries (OPEC) has responded to the shale revolution in the United States by upping oil production (Saudi Arabia, notably) to increase market share and drive down US operator profits, thereby forcing many American producers out of the oil fields.
Krupnick predicts, however, that any Saudi success is likely to be short lived. Ultimately, he writes, “Saudi Arabia's plan to increase its market share may be defeated by the fracking revolution.”
He lists several reasons why US production stands a good chance of enduring this challenge. To cite one example: “Continued low prices are causing much pain among other oil producers, even Saudi Arabia. But, more importantly, even small increases in prices are likely to lead to large increases in US production. As economists would say,” he notes, “the fracking revolution has increased the elasticity of supply.”
Alan Krupnick is a senior fellow at RFF and co-director of RFF’s Center for Energy and Climate Economics.