re: Oil Wars: Why OPEC Will Win

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The US could play all day.

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I think you're arguing just to argue, but your operating from a fundamental misunderstanding of the situation. The US is not playing and is not in a price war with SA. Rather US energy companies are in market competition with SA. No one has ever argued that SA is going to bring down the US economy and as you alluded to lower oil prices are traditionally good for our economy.

However the energy industry is going to see losses and it may cause a negative overall effect on our economy for a while if it entangles banks holding the bag on bad loans. Energy producing states are also going to be strained.

SA did not increase production and tank prices. They simply are refusing to cut production (and cede market share) in the face of an oversupplied market. They won't cut their production in order to prop up prices if non-OPEC members are just going to come in and pick up the slack in production and eventually drive prices down again.

SA is going to keep producing at the same rate (it's not like they are losing money) and let the market decide the price. People speculate that the price will eventually stabilize around $75-85/bbl, but that we could see $50 oil for an extended period before then. This will cause capital expenditures on exploration in the US to decrease and you will not see the same rate of growth of production.

In addition to new exploration, some current US production will become unprofitable. That will not happen in SA. Their production will always be profitable. The lowered prices will allow them to maintain or grow market share by simply continuing their output.

What do you think SA is doing that is wrong? What do you think that the domestic energy companies can do to stop SA?

For the price to go back up, demand will have to increase or supply reduced.