Don't look now but the oil market is collapsing

[AggregateDemand]

I've read that OPEC lowering oil prices has nothing to do with staying competitive -- it's just Saudi Arabia trying to drive US shale oil companies out of business. It's basically dumping.

It's not dumping. They aren't selling below cost, and they aren't giving Americans price preference to abandon US tight shale. If Saudi Arabia cuts production, along with the rest of OPEC, they are paying to eliminate the glut. If the low price of oil reduces investment in the US, US production decline will pay to eliminate the glut.

This is a common theme in international economics. People take an antagonistic stance against mutually-beneficial trade with the US. We lean on them with the full weight of our economy, and we dare them to double down or to acquiesce. In some ways, this game is the reason oil is so expensive. First were the oil embargoes, countered with CAFE. Then we got into a currency fight with China, which the Chinese countered by traveling the globe to secure resources, though they didn't have the technology to exploit them. Ultimately, the global economy collapsed as commodities prices led to consumer weakness in the US. Nobody won, same story with the oil embargoes.

When it comes to oil geopolitics, the US and Saudi Arabia are on the same team. The US created CAFE 2025 to reduce the cost of oil and reduce our trade deficit. We have no plans to frack for another 50 years so we aren't going to complain if Saudi Arabia wants lower equilibrium price and higher marketshare. Besides, lower equilibrium price put immense pressure on our "friend" Putin, and it may force Iran and Venezuela to allow development by established petroleum corporations. Saudi Arabia and OPEC get more marketshare, the US gets cheap imports and we use fewer off them, China gets cheaper imports to fuel growth, Vlad gets disgraced, which could be more precarious than we realize.

[AggregateDemand]

I've read AD's reply, but I'm not sure I agree with it. Saudi Arabia is selling (relatively-speaking) low cost oil only to North America, but they are raising their prices to their east Asian customers.

But on a broader point, I honestly don't see how Russia is involved with any of this. Russia mainly uses natural gas to screw its client states.

I understand the price discrepancy, but dumping is designed specifically to eliminate a domestic industry in another country. The difference between oil prices is related to transportation and refinery infrastructure.

It's much cheaper for the US to use WTI, Bakken, and Western Select than to get imports from halfway around the world, especially since we don't really export our supplies. The US refinery infrastructure also spent a great deal of money to transition to heavy sour refining equipment to make use of relatively cheap Western Select from the Alberta oil sands.

The US doesn't really need Saudi crude, and US buyers don't want to pay for the shipping, insurance, etc to get the supplies to the US. Therefore, Saudi Arabia must discount the price of their oil. Only the spot price is less. After all of the other expenses, the delivered price is roughly the same.

[AggregateDemand]

Do you think the supply of oil is infinite? We've made some enormous technological advances that allow us to get previously unobtainable oil. Doesn't mean it will last forever.

We can make as much oil as we want. Whether or not bio-crude makes sense from a cost or ecology standpoint is another matter, but we aren't going to run out.

[AggregateDemand]

If that were true, itd be bad news for the US because it would screw our oil geopolitics... But it sounds very conspiracy-ee

We've got 2 trillion barrels of kerogen reserves. We will never run out of outlandish geopolitical energy trumps.