No End in Sight for Oil Glut, but Producers Keep On Producing
When oil prices started to edge down a year ago, most energy mavens thought the drop would be small and short-lived. Instead, the price of crude has plunged by almost 60% from its 2014 peak—and suddenly looks likely to stay low for months and maybe years to come.
The reason: In the global battle for market share, nobody has backed down. Nobody has even blinked. Not Saudi Arabia, not the U.S., and not even troubled producers from Russia to Iraq. Everyone who can seems locked into pumping as much oil as possible.
Far from going out of business, American oil companies have stunned their global rivals by maintaining or even adding production as U.S. prices nose-dived from $100 a barrel to $70 late last year to, as of Thursday, just above $40. Even more surprisingly, the Saudis have actually increased their production in the face of falling prices, in what analysts say is a pre-emptive effort to keep competitors like Iraq from stealing customers in Asia.
The result is the energy-industry version of trench warfare, with producers all trying to gain an inch of market share no matter the cost. And it is producing winners and losers around the world, luring American drivers into gas-guzzling pickup trucks while sending the Venezuelan economy into chaos. (by RUSSELL GOLD, Wall Street Journal)