Adam Li Khan: Alnuaim Threatens to Burst America's Shale Oil Bubble

In an article in the Saudi Gazette, Dr. Sami Alnuaim discusses OPEC. Alnuaim is a Saudi expert on the Saudi oil business. On its surface, it is merely an article about OPEC's oil strategy. Barely veiled by its superficial appearance is a threat. On behalf of Saudi Arabia, Alnuaim is threatening the United States with the collapse of its oil boom. He says the Saudis could drop the world price of oil to $70 a barrel. Many experts in America have pointed out that a significant percentage of American shale oil production begins to be unsustainable below $90 a barrel.

In other words, whenever they think the time is right, Saudi Arabia could drop the world price of oil and burst the shale oil bubble in America, just as they did to the ethanol industry in the 1980s.

Are they waiting for a better time to bring down the shale oil industry? Are they waiting until much more money is invested before they pull the rug out from under it? Are they waiting until Americans feel overconfident and begin gloating over our new "energy independence?"

Saudi Arabia has the cheapest-to-produce oil in the world. That's the leverage they have over the other members of OPEC and why Saudi Arabia can dictate to them what the world oil price will be. Member nations of OPEC must agree to do what Saudi Arabia says or the Saudis can retaliate by lowering the price so much (by increasing their oil production) that the rest of the OPEC nations go into debt or even collapse.

They have the same power over America's oil industry, and for the same reason. But their power over our energy security and economic vitality only exists because we haven't yet bothered to create true fuel competition in America, even though it would be easy and inexpensive to do. Part of the reason is that some of the immense profit from the oil industry has been used for over a hundred years to prevent competition.

This is ridiculous. If we were already using methanol made from natural gas, Saudi Arabia couldn't touch us. Their ability to influence our economy or our national security would drop to almost nothing. They would have nothing to threaten us with. And as a side-effect of our new fuel competition, our economy would be thriving.

We must — urgently — diversify our fuel portfolio. We must introduce competition.

If our cars were able to burn methanol, the price per barrel of oil would drop below $70 a barrel, completely changing the balance of power in transportation fuel. But it would also hurt the shale oil boom in America because that price is too low for much of that oil to be worth recovering. However, there would be a simultaneous profusion and expansion of other American fuel-producing businesses, and American drivers would save big money at the pump, which means we would have more money to spend on other things, which leads to job creation.

Saudi Arabia would no longer have the ability to threaten the United States. In fact, their repressive regime may well collapse without their massive oil revenue to pay off their subjects. And when fuel prices drop in America, the economy soars. It would greatly increase our national security, it would reduce the amount of money the oil industry has to influence our government, it would help solve our garbage and landfill problem, help people in developing nations rise out of poverty, help prevent mental illness, put fewer military personnel in harm's way, and reduce the amount of pollution and greenhouse gases that are sent into the atmosphere, into the ocean, and into the ground.

It would be such a technically simple thing to do, but the consequences would be world changing. Get involved and let's make this happen. Use whatever resources you can muster to support this goal. Support and promote the Open Fuel Standard and robust fuel competition. Overkill would not be out of line for a goal this significant.