HAVE YOU HUGGED A FRACKER TODAY? Cheap Crude Is Hell for Oil’s Old Guard.

We live in a new oil reality. Production is surging around the world, and supplies are coming from a number of new places (read: from outside of the oil cartel OPEC). Crucially, the price of a barrel of oil today is less than half of what it was three years ago, and $50 seems to be the new market equilibrium for crude. North America, and in particular the United States, has emerged as the biggest winner in this global transition, but this new reality has produced a large number of losers, too. Petrostates—countries whose regimes have grown fat on oil revenues—have adapted poorly to changing market conditions, and as Bloomberg reports the future looks dim for this category of producers. . . .

The collapse of crude prices hurt everyone in the business of supplying oil, but it was especially painful for petrostates, whose national budgets require a strong oil price to stay in the black. In an attempt to prod prices in the upward direction, OPEC and its ilk cobbled together a weak consensus in order to collectively reduce supplies, but that strategy has been wholly ineffective thus far. Prices remain stubbornly low, while petrostates are ceding valuable market share to upstate producers like America’s frackers. Meanwhile, OPEC members are openly bucking their commitments to cutting production. The cartel’s ability to influence the global market has never looked weaker.

I’m so old, I can remember when anyone who dissented from “Peak Oil” dogma was called a shill for Exxon, and when our own President Obama mocked Sarah Palin for thinking that we could “drill our way out of” our energy problems.