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Originally Posted by Aqua Blue RS/SS
Good question. For one when we produce our own crude at necessary levels, we are able to flood the market and don’t have to rely on the world market near as much or at all. As was the case in late 2020. When there’s no pressure from US production on the world market to help keep the prices in check, Opec and other producers can do what ever the hell they want to control price, especially when they know the US isn’t going to do anything about it.
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IMO, it's more complicated. The US had a ban on exporting oil until 2016. We do not have the port capacity and logistics in place to be a world altering exporter regardless of how much reserves we have in the ground, and both infrastructure build out and subsequent transportation costs money. The OPEC nations have the advantage of geographic proximity and decades of infrastructure in place specifically for export. Their extraction costs are also significantly lower, especially Saudi.
American companies/foreign investors are hesitant to build out because OPEC an open the taps, flood the market, and lower prices to the point our exports would not be profitable. Bust cycle results. OPEC cuts the taps again. Boom cycle results. Extraction is a roller coaster because of that and new developments are risky.
My personal opinion is we'll be using existing infrastructure to as near max capacity as maintenance schedules will allow, which is why I see midstream companies as so investable at the moment. They are largely sheltered from the boom/bust cycle, are a great inflation hedge, and strong dividend providers. Just my opinion, and one from an investing standpoint and not a boots on the ground standpoint, but I'm pretty happy with my returns.