The new dynamics of international crude oil price
Likewise, a Reuters news report from November 2016 details how in shale fields across America, production costs have almost halved since 2014. The Saudi strategy of flooding the market with oil and depressing prices has not only failed to kill the U.S. shale oil business, instead, the ensuing price war of the last two years has made shale oil a stronger competitor than before, capable of surviving even the current low price environment. The report mentions the example of shale oil fields in the US state of North Dakota where the average breakeven cost per barrel of shale oil had fallen to $29.44 in 2016 from $59.03 in 2014.
All this should be welcome news for a country like India overwhelmingly dependent on imported crude oil for its domestic consumption. It may, however, be less than welcome for a state like Kerala that depends so much on remittances sent home by its migrant workers toiling in the oil-exporting middle-eastern countries. As for many of OPEC’s members, their economies are just not capable of surviving for long with oil price holding below $70 a barrel. It is therefore likely that once the international oil economy rebalances around shale oil, a new set of winners and losers will likely emerge. The important question is, will India be among the winners? Also, will Kerala be among the losers?