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

Coral restoration in Guam. U.S. Pacific Fleet / CC BY-NC 2.0

By Erica Cirino

Visit a coral reef off the coast of Miami or the Maldives and you may see fields of bleached white instead of a burst of colors.

Read More
Cracker Lake, Glacier National Park, Montana. Jacob W. Frank / NPS / Flickr

By Jason Bittel

High up in the mountains of Montana's Glacier National Park, there are two species of insect that only a fly fishermen or entomologist would probably recognize. Known as stoneflies, these aquatic bugs are similar to dragonflies and mayflies in that they spend part of their lives underwater before emerging onto the land, where they transform into winged adults less than a half inch long. However, unlike those other species, stoneflies do their thing only where cold, clean waters flow.

Read More
Sponsored
Augusta National / Getty Images

By Bob Curley

  • The new chicken sandwiches at McDonald's, Popeyes, and Chick-fil-A all contain the MSG flavor enhancement chemical.
  • Experts say MSG can enhance the so-called umami flavor of a food.
  • The ingredient is found in everything from Chinese food and pizza to prepackaged sandwiches and table sauces.

McDonald's wants to get in on the chicken sandwich war currently being waged between Popeyes and Chick-fil-A.

Read More
Protesters march during a "Friday for future" youth demonstration in a street of Davos on Jan. 24 on the sideline of the World Economic Forum annual meeting. FABRICE COFFRINI / AFP / Getty Images

By Andrea Germanos

Youth climate activists marched through the streets of Davos, Switzerland Friday as the World Economic Forum wrapped up in a Fridays for Future demonstration underscoring their demand that the global elite act swiftly to tackle the climate emergency.

Read More
chuchart duangdaw / Moment / Getty Images

By Tim Radford

The year is less than four weeks old, but scientists already know that carbon dioxide emissions will continue to head upwards — as they have every year since measurements began leading to a continuation of the Earth's rising heat.

Read More