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Holland on low oil production costs in Saudi Arabia

Holland on low oil production costs in Saudi Arabia

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ASP’s Senior Fellow for Energy and Climate Andrew Holland was quoted in an article, Declining oil prices benefit Saudi Arabia most: Experts. Speaking about the low oil production cost in Saudi Arabia, Holland said,

Saudi Arabia has signaled to traders and buyers that they are going to defend their market share. Instead of cutting production to keep the prices high, they have decided to produce more and keep their market share… Members of OPEC – Iran, Venezuela, and others – said they would like to have prices higher so they are going to push for it. The Saudis are the ones that will determine where the global prices end up. They have the biggest reserves and the most to gain or lose.

If oil prices fall below $80 per barrel, US shale production will be hurt. If the US producers cannot recover their capitol expenses, they will not continue to drill, says Ed Hirs, energy economist at University of Houston. Thomas Pugh, a commodities economist at Capital Economics, said that the break-even price is around $70 for most US producers in the US, while it is much lower in Saudi Arabia. “American producers are more sensitive to the price change than the big producers in the Middle East,” Holland said.

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