OPEC is testing the resilience of the people of the United States. One thing I've learnt over the years is this: When you push the US to the wall, they fight back by innovating. Yes, production from shale is costly but the cost has significantly dropped over the years and is continuing to drop. It won't be long and we would be able to economically produce oil&gas from shale at less than $40. Push them further and see this number drop even more. The resource is there - don't expect Americans to fold their hands and retire to their rooms because of dwindling price - there is still a lot of room to innovate and bring cost of production down. This is what is going to happen eventually and when this happens, I feel sorry for countries like Nigeria that already depend on oil for nearly 80% of their budget.

I hope OPEC knows what it is doing...

Nigeria should wake up. It is not yet too late to diversify our economy. I know Okonjo, Adesina and co are doing something about it though, but I'm not sure how long it will take us to get there.

Lets pray

Just out of curiousity. Are you suggesting that without the USA buying our oils we will all be dead. Humans are what they are for their ability to adapt to any situation. Nigerians will adapt. Oil used to be 10 dollars a barrel and we are still here. Think of the opportunity that comes with any situation... That's how millions are made even in times of wars and disasters

This is a market share war, the target are the North Americans. They forced the market down with excess production. OPEC is not the reason for the oil glut.The plunge in oil prices raises the risk of bankruptcy for U.S. shale players. This a business, their creditors are having sleepless nights already.

atlwireles:
This is a market share war, the target are the North Americans. They forced the market down with excess production. OPEC is not the reason for the oil glut.The plunge in oil prices raises the risk of bankruptcy for U.S. shale players. This a business, their creditors are having sleepless nights already.

The politics and economic policies of the "price war" is well understood. If the americans win it, they will virtually cement not only the dollar as the currency of the new century, but the will dictate the price of most products made on planet earth. Like any battle, there will be causalities and we the mono- economies will be the first.

Nicklee:
OPEC is testing the resilience of the people of the United States. One thing I've learnt over the years is this: When you push the US to the wall, they fight back by innovating. Yes, production from shale is costly but the cost has significantly dropped over the years and is continuing to drop. It won't be long and we would be able to economically produce oil&gas from shale at less than $40. Push them further and see this number drop even more. The resource is there - don't expect Americans to fold their hands and retire to their rooms because of dwindling price - there is still a lot of room to innovate and bring cost of production down. This is what is going to happen eventually and when this happens, I feel sorry for countries like Nigeria that already depend on oil for nearly 80% of their budget.

I hope OPEC knows what it is doing...

Don't feel sorry for Nigeria. It is also full of innovators. There has been intractable corruption in Nigeria due to easy oil money, the puzzle that have made our refineries un-serviceable so that we shall continue to import refined petrol from USA and the politics of sharing oil money leading to violence and deaths.

In the end, this will be a blessing for a peaceful, prosperous Nigeria.

kmariko:


The politics and economic policies of the "price war" is well understood. If the americans win it, they will virtually cement not only the dollar as the currency of the new century, but the will dictate the price of most products made on planet earth. Like any battle, there will be causalities and we the mono- economies will be the first.

There are no victories here for anybody. The American credit market is already signaling distress over the $1.5 trillion debts by Energy companies, with yields rising very quickly, because at these kinds of oil prices you are going to see producers go bankrupt.

atlwireles:


There are no victories here for anybody. The American credit market is already signaling distress over the $1.5 trillion debts by Energy companies, with yields rising very quickly, because at these kinds of oil prices you are going to see producers go bankrupt.

I am only worried that we don't refine crude here at home. If we saved all the money from oil imports and subsidies, we will tolerate oil price of $15 dollars. The artificially high oil price though it benefited our economy, but if largely fed corruption because some people refused to allow our refineries work just to continue fuel importation. As the low oil price persist, we shall again come to our senses and begin looking for ways to build refineries at home rather than merely continue to import our own refined oil because the money is available

cjrane:


I am only worried that we don't refine crude here at home. If we saved all the money from oil imports and subsidies, we will tolerate oil price of $15 dollars. The artificially high oil price though it benefited our economy, but if largely fed corruption because some people refused to allow our refineries work just to continue fuel importation. As the low oil price persist, we shall again come to our senses and begin looking for ways to build refineries at home rather than merely continue to import our own refined oil because the money is available

Honestly, I'm not worried about local refineries. Nigeria's problem is the percentage of government revenue produced by oil. That's a problem this country must correct. An economy of $522B with oil producing about 20% of that GDP, should not depend on oil to finance government spending.

atlwireles:


There are no victories here for anybody. The American credit market is already signaling distress over the $1.5 trillion debts by Energy companies, with yields rising very quickly, because at these kinds of oil prices you are going to see producers go bankrupt.

These I presume are short time losses which could be deemed "acceptable loses" in a Long term war to consign OPEC to history with the attendant 'clout". Its a world driven on oil and the power it confers is unimaginable.

cjrane:


I am only worried that we don't refine crude here at home. If we saved all the money from oil imports and subsidies, we will tolerate oil price of $15 dollars. The artificially high oil price though it benefited our economy, but if largely fed corruption because some people refused to allow our refineries work just to continue fuel importation. As the low oil price persist, we shall again come to our senses and begin looking for ways to build refineries at home rather than merely continue to import our own refined oil because the money is available

In a perfect world I will rather encourage these "illegal" micro refineries by introducing them to new technologies and other refining know hows. What they are practicing remember is home grown without help from the "right" quarters and are doing well.

Now, this is a bit annoying.

We were made to understand that part of the strategies to address the dwindling price of crude and it's effect on FG finances is that the overflogged subsidy wud be further removed next year preparing our minds for increase in fuel price per litre.

If the quality expose here is anything to go by, why shud Nigerians be made to pay more for an imported product that it's cost has fallen tremendously in the international market?

This might be a blessing in Disguise for The next administration in Nigeria, Our economy has to be diversified and fast if oil keeps price keeps falling, there will be no awoof money for politicians to spend on frivolities,Investment in Industrialization,Agriculture and education are the answer for Nigeria.

Agriculture will give us the ability to feed ourselves and avoid excessive importation.

while Quality education will create new jobs and revene, innovations in ICT,renewable energy etc are creating new jobs that were not in existence before in the western nations, Nigerians with our ingenuity and drive can make it happen here too.

And now that chinese middleclass is growing and are demanding higer wages in factories, The manufacturing industry are begining to look for alternatives to china, where cheap manufacturing is available, Nigeria has the population of significant cheap labour to make this happen only if we can sort out our power problems,

I agree with op, lower prices will only force them to innovate. Higher prices brought the shale technology, lower prices will only bring improved shale tech. I believe OPEC should have used a different tactic.

No one should cry for America! we should be concerned on the implication of the falling oil price on Nigeria, The russians may have invented drilling or been the first to drill for crude oil in the world, But the Americans have been the most successful oil men and oil business in the world. They control the technology, are the worlds major producers, and 70% of the world majors are hqtred in the US. If anyone can innovate itself out of a difficult oil situation its the USA, They will do it with tech and business savvy if that fails they can always resort to the time tested strategy of taking it by force "WAR". They can capture any oil rich basin for themselves any day they feel like it.Who can stop them?

Saudi Arabia can be tagged as an axis of evil, and a sponsor of terror that needs to be stopped for world peace, just like they did to Iraq and all their oil wells commandeered. It has happend before while the world watches on, Nothing can stop it from happening again, afterall Osama bin Laden was a Saudi prince!

9inches:
Nigeria should wake up. It is not yet too late to diversify our economy. I know Okonjo, Adesina and co are doing something about it though, but I'm not sure how long it will take us to get there.

Lets pray

[size=14pt]I am glad the USA is trying to ruin the economies of Gulf Arab states. These are countries that do not simply fold their arms like Africans to allow the West ruin them.

The American shale oil producers had banked on OPEC continuously cutting back their own oil production to make room for the American Shale oil to replace OPEC production. What they failed to take into cognizance is the fact that were are not dealing with just corrupt African regimes which can be bought over to ruin their economy.The Arab countries are equally as shrewd as USA.[/size]

I agree with you. US and their high handedness. They seem to be forcing their policing thing on nations, whereas many nations are already fed up of their overbearing attitude. We are all going to see if it stops with(out) a fight. Saudi's oil minister is campaigning for OPEC to combat the U.S. shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers. I will doubt that US does not have even the OPEC in its pockets, just the UN.

They really do not want promising nations to come up or what?

My point in the post is this - OPEC's action is coming a bit too late. Less than a decade ago, the technology for shale extraction was simply too new for exhaustive testing/fiddling and the oil price didn't support this sort of fiddling with technology. The high oil price between 2008 and now had allowed the US to push the limits of the technologies in shale extraction. In this period, we drilled nearly 8,000 horizontal wells in the Bakken (North Dakota) alone and most of the wells are about 10,000 ft deep and another 10,000 ft in the horizontal direction. Over the years, the cost of drilling these wells has shrunk from $15m per well to $7m and some producers are reporting less. The technology is there, the resource is there and the innovators have tested the oil. The part of driving production costs down to improve margins is certainly an easier part. That's what OPEC is missing.

Now, the key is this - how many OPEC nations will survive with oil at <$50? Maybe a handful but the rest, and Nigeria leads this pack will feel the brunt - big time. And if the US finally innovates its way to profitability at $50 or less crude, $50 will become the new norm. Mind you, cheap oil is extremely beneficial to the US economy. Already, economists are projecting that the current drop in oil price has injected an equivalent $75B to the US economy already.

The losers in this OPEC battle will be Nigeria, Russia (everybody wants to screw Russia at this time) and possibly countries like Venezuela, Brazil (with Petrobras' debt burden), etc. Unfortunately for Nigeria, it doesn't look like we saved enough for the rainy days.