The dismal spectre in the global oil market indicates an epic battle is on, which seems to have shifted the tectonic plates within the Organization of Petroleum Exporting Countries (Opec).
Neither the supply nor price of crude oil is responding to open market forces or any Opec stratagem, it's keeping in step with a set drill established purely by Saudi Arabia. It'll take all the smarts Trinbago can muster to cope with what's being thrown up by the onslaught, especially if it's a protracted affair; for when elephants tussle, the grass gets trampled.
Due to the mammoth size (267 billion barrels) and extremely low extraction costs (U$12/barrel) of its proven oil reserves, plus the fact that it's not operating at full capacity, the middle eastern kingdom of Saudi Arabia effectively has control of enough of the world's oil supply to manipulate the overall flow to its advantage. It won't voluntarily relinquish that edge because, basically, oil is all it's got, meaning, its life depends on its oil income.
Furthermore, considering their deep pockets, the determined Saudis will fight tooth and nail to preserve their share of the oil market to ensure the Western world doesn't overly influence the world economic order again. An October 2014 Deutsche Bank report indicates Saudi Arabia has oil savings of close to U$450 billion stashed away, enough to ride it out for eight years.
Technically, the Saudi Arabian juggernaut could give away its oil for the next 96 months without blinking. It will, once it feels that's the only option to preserve or reinforce its importance on the world stage. Evidently, within Opec it does feel that way.
At the last Opec meeting, it blanked urgent pleas from fellow members who wished to shore up prices by trimming Opec output. In fact, since then it has opened the spigot some more.
Unless some country can succeed in bettering the Saudis' oil production costs and output, Saudi Arabia will continue to call the shots globally.To stay in the oil export game therefore, Trinbago must flex its muscle by being smart enough to read and appropriately respond to the changing tide.
I'm saying this, since, in my view, the Saudis won't relent till they take oil down to US$35 a barrel and make it linger around that new low for at least a year thereafter. They're currently laying a trap for those non-Opec players who, left unchecked, would have permanently snatched away a huge chunk of Opec's traditional market share by turning to their own previously-ignored trove of shale oil and tar sands (oil sand) after oil prices spiked.
The Saudis aim is to chokehold these "upstarts" out of business, because extracting oil trapped in shale rock and tar sands is no longer feasible when oil drops below US$60.
The recent American oil boom will be the first casualty of this Saudi siege. In fact, a significant percentage of US shale oil rigs have stalled already due to falling prices. When the dust is settled, nobody will want to venture into shale oil or oil sands again.
The Arabs won't hesitate to apply the screws if anyone dares. Against that backdrop, it can be argued that Saudi Arabia ignoring the predicament of its fellow Opec members at the recent meeting was merely a ruse designed to show who really rules the organisation.
Upon America being forced to resume large-scale oil imports, Nigeria will be pleased because, currently, shale oil has cut off its US market completely, forcing it to turn to China and India. (See: http://dailyindependentnig.com/2014/10/india-china-replace-us-buying-nigerian-crude-oil/)
America is the largest consumer nation in the world. As the US becomes a net importer of oil again, prices will begin inching upwards once more, eventually to US$80 a barrel and beyond. Even if it takes seven years to get there, Saudi Arabia is prepared and equipped to live with a US$35-40 per barrel oil price. Are we?
In the oil export business, Trinbago is not Saudi Arabia. Saudi Arabia is an elephant. We are peewits.When elephants go berserk, peewits gets trampled...unless they make a quantum leap.
Here, in Trinbago, where it costs a pound and a crown to produce a barrel of oil and takes forever for public sector bureaucracy to implement policy, we must move with greater urgency to trim the fat wherever it exists and lay down the law that non-oil sector investors must be given preferential treatment! Unless I'm hopelessly clueless about these matters?
Richard Thomas
Arouca