Wednesday, January 8, 2014

Fracking Threatens OPEC

From the Globe and Mail:
Prince al-Waleed bin Talal, the Saudi billionaire ... is emerging as an activist in his home country with a rare public challenge to Saudi Arabia’s political elite, whom he believes are recklessly ignoring economic threats posed by shale oil discoveries in the United States.

The Prince makes this point repeatedly in an interview with The Globe and Mail, one of his first since he rattled global oil markets in July by disclosing on his Twitter account a letter to Saudi Arabia’s Oil Minister. The missive warned that the American shale oil boom would soon threaten demand for crude from members of the Organization of Petroleum Exporting Countries.

New shale oil discoveries “are threats to any oil-producing country in the world,” he says.

The Prince explains that Saudi Arabia has shrunk its oil production to 9.5 million barrels a day from 10.2 million barrels to address increased global supply. But he says he is frustrated that the country’s leaders are not moving faster to diversify their economy and investments away from an oil industry that generates most of the nation’s total output.

In less than two years, Prince al-Waleed says, the United States will be producing so much oil that it will be a competing exporter of crude. Oil prices currently hovering a little below $100 (U.S.) a barrel could sink as low as $80 over the next few years and potentially fall even further if more shale oil discoveries emerge in the United States, Europe and Australia.

“It is a pivot moment for any oil-producing country that has not diversified,” he says. “Ninety-two per cent of Saudi Arabia’s annual budget comes from oil. Definitely it is a worry and a concern.”

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