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Wednesday, September 2, 2015

Op-Ed: Saudi Arabia Took a Gamble, and Has Already Lost

From the Wall Street Journal comes an op-ed from Texas comptroller of public accounts Glenn Hegar:
In November 2014, the leaders of Saudi Arabia made one of the biggest bets in history. Their strategy was flawed, and they've already lost. 
In an OPEC meeting that month, Saudi Arabia announced it would maintain high oil-production levels despite falling prices. The Saudis were betting that by keeping prices low they could protect their market share and kill America's energy renaissance-a rebirth driven largely by Texas, which produces 37% of America's oil and 28% of its marketed natural gas. 
The Saudi strategy seemed to make sense. The conventional wisdom was that energy producers working in "tight" shale formations would be squeezed by low prices, since their extraction methods-hydraulic fracturing and horizontal drilling-are more expensive than conventional drilling. So, surely , once that happened Texas would be in serious trouble. 
Columnists at the New York Times and elsewhere SAID the " Texas miracle "WAS fading, or even dead... and some of Them Seemed happy about it.

But an interesting thing happened on the way to the collapse of the Texas economy-it did not collapse.
Click here to read the whole article.

Since he is in Texas, that is the state he focuses on in his article.  But obviously it is the whole shale drilling industry that was the target of the Saudi oil plan.  Do you think the gamble hasn't paid off?  There can be no question it's had a powerful impact on the shale industry, in Ohio and around the country.

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