Usually that would be a rhetorical question, but the global oil glut is forcing the Saudis to reduce investments in future oil production:
Investments have been cut by $200 billion this year and will drop another 3 percent to 8 percent next year, marking the first time since the mid 1980s that industry cut the spending for two consecutive years, Prince Abdulaziz said in a copy of his speech for delivery to energy ministers in Doha Monday. Nearly 5 million barrels a day of projects have been deferred or canceled, he said in the remarks.
Just like high oil prices can’t last, a prolonged period of low prices is “also unsustainable, as it will induce large investment cuts and reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise,” the prince said in the remarks. “As a responsible and reliable producer with long-term horizon, the kingdom is committed to continue to invest in its oil and gas sector, despite the drop in the oil price.”
It’s true that oil prices can’t stay low forever — although we might not yet have seen just how low they can go. China’s economy is stumbling, and despite what looks like a strong US Q4, American consumers remain tapped out. Europe, another big oil user, sits at the edge of the abyss.
So we probably haven’t seen the end of cheap oil.
Prince Abdulaziz might be a little too optimistic though if he thinks things will ever go back to the way they were in the Kingdom during the days of $100-plus oil. American frackers developed fields which have since been taken out of production, but which can be brought back into production more quickly than the Saudis can un-curtail (is that a word?) their longterm investments.
As I’ve written here before, the Saudis can stay profitable at a lower price floor than we can, but American frackers have dramatically lowered the price ceiling.