With Texas and the United States pumping out record amounts of oil, how is it that Saudi Arabia can still use its oil as a weapon, and threaten to damage the world economy in a standoff with President Trump, News Radio 1200 WOAI reports.
After the U.S. accused Saudi Arabia of complicity in the disappearance and possible murder of a Saudi journalist, Saudi officials touted the importance of their oil to the world economy, and one analyst suggested oil prices could shoot up to $400 a barrel if the Saudis turned off the spigot.
Dean Foreman, the chief economist of the American Petroleum Institute says, yes, the U.S. does produce more oil than any other country, and domestic production is rising rapidly thanks to fracking technology.
But he tells News Radio 1200 WOAI making up for the potential loss of Saudi crude, and Saudi Arabia remains the largest exporter, even if it isn't the largest producer (it's actually third, behind the U.S. and Russia), would not be something that even the booming Texas fracking fields could pull off.
"In that moment, it is very difficult for the U.S. compensate," he said. "It would take three to six months to continue to drill, to expand infrastructure, and deliver that product to market."
He says there is not a lack of capacity. Foreman says the private industries that run U.S. oil production, unlike the state-owned Saudi Aramco, needs to some guarantee of returns in order to invest in that expansion, something the banks that lend the money would need to see as well.
"The markets are still grappling with the fact that the prices have risen relatively quickly," he said. "And whether it is in the Permian Basin, or in the Bakken up in North Dakota, they need to believe that these prices are going to be around to justify spending the money they need to expand and build."
He says banks and corporations are still dealing with the fallout from failed loans and decisions to invest in oil projects that ended up flat-lining after the late 2014 collapse of oil prices, especially in today's pressure to meet financial goals each quarter.
But he says the booming oil industry in the U.S. is paying off every day for customers at the gas pump.
"U.S. oil prices and fuel prices are still substantially lower than international levels, and way off the peak of where they were in 2008."