The Middle East Has A Huge Advantage In The Global Oil Market

Oppenheimer Funds

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The unconventional technology that enables us to extract oil from shale has triggered a boom in American energy.

While North American energy production has exploded, this doesn’t necessarily put the the region on a level playing field as the mega-exporters in the Middle East.

One reason why the Middle East continues to be in a relatively comfortable spot is because cost of production is so low.

Morgan Stanley analysts recently included this chart of crude production costs. Onshore Middle East oil sites are much cheaper to tap than North American shale, which costs about $US65 per barrel to extract. Horizontal drilling and hydraulic fracturing isn’t cheap.

This is a huge advantage, especially as fluctuating prices often make production unprofitable for higher cost sources.

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