Low Oil Prices Backfire Against US Shale Business
Now that even the New York Times admits that it is Obama’s strategy to bankrupt Russia using their Saudi buddies to collapse the world price of oil, it remains to be seen if that is a sensible strategy to destroy Russia. If Saudi-Arabia can indeed pump up enough surplus oil to keep oil prices below $80 or even $70, it will certainly hurt Russia. But what about the US itself? US oil production for a substantial part is based on the rather expensive process of fracking. The collapse of the oil price could result in wiping out the small margins of the domestic oil production and collapse of the fracking business in the US.
The shale oil and gas bonanza of the past five years in the USA has been built on a foundation of zero Federal Reserve interest rates and huge speculative investment by hungry Wall Street firms and funds. Because of the ultra-rapid oil well depletion, when market oil prices collapse, the entire economics of lending to the shale oil drillers collapses as well. Money suddenly vanishes and debt-strapped oil companies begin real problems… The end of the shale oil bubble would deal a devastating blow to the US oil geopolitics. Today an estimated 55% of US oil production and all the production increase of the past several years comes from fracking for shale oil. With financing cut off because of economic risk amid falling oil prices, shale oil drillers will be forced to halt new drilling that is needed merely to maintain a steady oil output.
Everything the US has done since 2003 is backfiring. There is no better indication that the US is in terminal decline than this never ending sequence of failures. But the US has no choice. Since 1933 it was put on a war path against the rest of the world, following the example of the USSR, ten years earlier. War is the essence of the US…
…and when it will be clear for everybody to see that the US will fail in its objective to subjugate the entire world, the US will fall apart and cease to exist, just like the USSR.
[globalresearch.ca] – William Engdahl: Has Washington Just Shot Itself in the Oily Foot