Quantcast

OPEC Decision Likely to Crash U.S. Fracking Industry

Energy

At its meeting today in Vienna, Austria, the 12 member countries of the Organization of Petroleum Exporting Countries (OPEC) voted to keep their output target unchanged despite a 30 percent slump in the oil price since June, due primarily to the explosive growth in fracking in the U.S. as well as decreasing global demand. While Venezuela made a case for an output reduction, Saudi Arabia, the world's leading oil producer and exporter, pressured to keep it the same.

Despite a slump in worldwide oil prices due mainly to fracking in the U.S., oil-producing nations left their output targets unchanged.

The price immediately declined in response, dropping below $72 a barrel, a price last seen in August 2010.

"There's a price decline. That does not mean that we should really rush and do something," OPEC secretary general Abdallah Salem el-Badri told the BBC. "We don't want to panic. We want to see the market, how the market behaves, because the decline of the price does not reflect a fundamental change."

Russian oil baron Leonid Fedun of OAO Lukoil, the second largest oil producer in Russia, pointed out that the low price of oil will probably lead to a crash in the fracking sector by making drilling for new, constantly less accessible shale oil sources more unprofitable, as the most easily fracked shale formations get tapped out first. And as oil prices drop, fracked oil from shale becomes unprofitable to produce.

“In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” Fedun told Bloomberg News. “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”

The Russian oil sector is less vulnerable than the U.S. sector, due to lower costs and the slide in the ruble that lessens the impact of falling prices in local currency terms, Fedun said, even though output there is likely to fall next year as well.

“The major strike is against the American market,” Fedun said.

YOU MIGHT ALSO LIKE

10 Things You Need to Know About Oil Prices

International Energy Agency: The Party’s Over

Future Investments in Fossil Fuels Look Dim

EcoWatch Daily Newsletter

Teen activist Greta Thunberg delivered a talking-to to members of Congress Tuesday during a meeting of the Senate Climate Change Task Force after politicians praised her and other youth activists for their efforts and asked their advice on how to fight climate change.

Read More Show Less
Ten feet of water flooded 20 percent of this Minot, North Dakota neighborhood in June 2011. DVIDSHUB / CC BY 2.0

By Jared Brey

When Hurricane Michael tore through the Florida panhandle last October, it killed at least 43 people, caused an estimated $25 billion in damage and destroyed thousands of homes.

Read More Show Less
Sponsored
A protestor holds up her hand covered with fake oil during a demonstration on the U.C. Berkeley campus in May 2010. Justin Sullivan / Getty Images

The University of California system will dump all of its investments from fossil fuels, as the Associated Press reported. The university system controls over $84 billion between its pension fund and its endowment. However, the announcement about its investments is not aimed to please activists.

Read More Show Less
Forest fire continues to blaze in Indonesesia on Sept. 18. WAHYUDI / AFP / Getty Images

Nearly 200 people have been arrested in Indonesia over their possible connections to the massive wildfires raging in the nation's forest, officials said this week.

Read More Show Less

By Ngozi Okonjo-Iweala

World leaders have a formidable task: setting a course to save our future. The extreme weather made more frequent and severe by climate change is here. This spring, devastating cyclones impacted 3 million people in Mozambique, Malawi and Zimbabwe. Record heatwaves are hitting Europe and other regions — this July was the hottest month in modern record globally. Much of India is again suffering severe drought.

Read More Show Less
Sponsored
Covering Climate Now / YouTube screenshot

By Mark Hertsgaard

The United Nations Secretary General says that he is counting on public pressure to compel governments to take much stronger action against what he calls the climate change "emergency."

Read More Show Less
A new rule that ends limits for hog slaughtering speeds could increase animal suffering, advocates warn. kickers / iStock / Getty Images Plus

Trump's U.S. Department of Agriculture (USDA) finalized a new hog slaughtering rule Tuesday that environmental and food safety advocates warn could harm animals, plant workers and public health, Reuters reported.

Read More Show Less
Prehistoric and historic walrus skulls, tusks and bone fragments often wash ashore on the southern coast of Snæfellsnes peninsula in Iceland. Hilmar J. Malmquist

A unique subpopulation of ancient walrus in Iceland was likely hunted to extinction by Vikings shortly after arrival to the region, according to new research.

Read More Show Less