After OPEC

Plenty of oil, much scope for cost-cutting

BIG companies making big bets on big oilfields, while a cartel of oil-producing states fixed the price to keep itself rich and others, including the oil majors, profitable. That, in caricature, was how the oil industry once ran.

That model now seems broken. On May 13th the International Energy Agency, representing the main oil-consuming countries, said a global oil glut was building, as Saudi Arabia pumped oil frantically in a continuing battle for market share with American shale-oil producers. The shale firms have proved a lot more resilient, and a lot more productive, than the Saudis and other members of OPEC, the producers’ cartel, had expected. Last November, with prices already slipping, OPEC’s members stopped trying to agree production quotas among themselves, sending crude tumbling further. Their hope was that this would force rival producers, especially in the American shale beds, to slash investment. As supply tightened drastically, the oil price would rebound.

This has not happened. Prices have staged only a partial recovery: West Texas Intermediate...

from The Economist: Business http://ift.tt/1JKTe6v