My bottom line is that the assumption that <$70-80/barrel oil would kill these fracking companies or induce OPEC to cut significantly just haven't panned out. There was quite a bit of profit margin to be had in the first place and there's still quite a bit of room left for a price war to keep market share.
You're coming to this conclusion a bit too soon. Give it some time. Should global production stay high (and it is not right to blame this all on OPEC as the US could cut production just as easily as anyone - in fact since our production is of higher cost cost a rational argument would swing that direction) there will be a blood bath in the oil industry sometime in 2015.
I note that about a year ago I predicted such a shakeout in mid-2015 and we are right on track. Production costs when looked at by those not getting their salary in some fashion from the companies being looked have shown consistently the very high costs of the fracking operations as well as the dramatic depletion numbers. While some spin the news such as the optimism pundits throwing out numbers indicating that only a small percentage of frackers in places like ND are operating at a loss the real numbers are certainly over 50% at the current WTI price. In addition the drillers are well down the stack of their options from the top prospects and well into the mediocre ones. Thus more dry holes, smaller discoveries and quicker depletion.. and thus higher costs are all they have to look forward too.
Many of the fracking operators in ND who have made millions for their owners and various original investors have never made any profit from selling oil. They have made their money from effective promotion of 'discoveries' which boosted stock prices which they then capitalized on. This is a common tactic in the oil business and has been perfected well over the last 70 years.
The debt issues associated with large percentages of these companies are significant and potentially catastrophic. They are deep in debt... deep... and only access to continuing funds can keep them afloat. It is going to get much harder to find the suckers willing to give them the money if prices stay low. They would never have gotten this money if the return on investments was so horrible and the big money folks were desperately looking for someplace to put it. There is a huge classic bubble in this business (a periodic thing in the oil business as I have seen at least 3 of them) and we are following the standard step by step path to the next crash. And it is going to crash and many will get hammered.
What the Saudi's are doing is merely effective capitalism. They would be stupid to cut production. They have a host of weak competitors (not just American but we are certainly very vulnerable) and they are doing the smart thing and setting up to smash them flat. Unless we can pressure them into changing their tactics (we have a lot less leverage with them than we did 20 years ago) they are going to wipe out a bunch of their competitors and gain market share. Yes prices will eventually rise again as that is the Saudi plan of course, but the damage to our real interests (I am assuming that our real interest is trying to halt the worsening of climate change) are going to be very significant. To wit:
Very cheap oil and gas will promote much greater consumption of same.
It makes fossil fuels more competitive with alternative energies.
Purchasing of large trucks and SUV's is already dramatically increasing (up about 30% overall already in the US). This of course is a long term buy in of such wasteful technology.
Purchasing of hybrids and electrics will likely slow or stagnate as they become much less competitive.
It dramatically raises the prospects of Keystone approval as Canadian Tar sands production will also be really hurt by this situation and the argument will be made that costs "must" be lowered by getting that oil out of rail-cars and into more efficient pipelines.
It significantly lowers the cost of producing and shipping coal.
It will will devastate the economies of a number of countries hanging on the edge with all the attendant fall out that that entails; examples being Venezuela, Nigeria, Angola and the like.
I won't even go into what the effects of our latest election will have when combined with this situation.
At least I can still laugh about the insanity of our various BAU cultures http://www.bloomberg.com/news/2014-11-27/opec-policy-ensures-u-s-shale-crash-russian-oil-tycoon-says.htmlhttp://www.marketwatch.com/story/opec-might-get-the-last-laugh-on-oil-2014-11-28http://wolfstreet.com/2014/12/01/saudi-arabia-declares-oil-war-on-us-fracking-hits-railroads-tank-car-makers-canada-russia-sinks-venezuela/http://online.wsj.com/articles/opecs-war-wont-be-all-over-by-christmas-heard-on-the-street-1417463235?mod=rss_most_viewed_day_asiahttp://www.bloomberg.com/news/2014-11-30/oil-at-40-possible-as-market-transforms-caracas-to-iran.htmlhttp://econbrowser.com/archives/2014/11/a-glut-of-oil