Two years ago around this time, a murderous gang of terrorists went on a rampage through the Middle-East leaving mayhem and destruction in their wake. Cities fell, borders were violated and rulers trembled as ISIS hordes emerged out of nowhere and captured a large slice of territory in no time. Most of western Iraq was occupied. Ditto with Syria. Turkey, the other major Middle-Eastern power after Saudi Arabia and Iran, had to take emergency measures to prevent a spillover into its territory. The map of the Middle-East was changed in a brutal manner and it would never be the same again.A few months later another momentous change was in the offing, this time related to commodity markets. Prices of oil, which had bounced back smartly after the 2008/09 financial crisis to stay over $100 per barrel, started crumbling later that year towards October-November 2014. It broke through $100 per barrel and went into freefall after Saudi Arabia, the leader of the OPEC global oil cartel, said it would not intervene to prop up prices by cutting production. OPEC, Saudi officials reasoned, had to defend market share in face of rising American shale oil production and cannot afford a cut. It was widely believed that Saudis wanted to drive the American shale oil producers out of the market and were trying to make them bleed. If Americans cut production, prices will go up and that will benefit everybody, the Saudis thought.One-and-a-half years later, that theory has all but bombed. American oil production has not suffered in a substantial way. Prices have not risen and the wave of bankruptcies of shale companies that was supposed to follow the 2014/15 price fall has not yet happened. In fact, the American shale industry appears stronger than ever and has withstood Saudi Arabia’s efforts to doom its business model.Ambrose-Evans Pritchard in the Daily Telegraph writes how the Texas frackers have fought Saudi Arabia to a standstill. "OPEC’s worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil it has still failed to break the back of the US shale oil industry," Scott Sheffield, former chief of Pioneer Natural Resources is quoted in the article as saying that his pre-production costs in the Permian basin of West Texas has fallen to $2.25 per barrel. "Definitely, we can compete with anything that Saudi Arabia has. We have the best rock," Sheffield tells Telegraph.How did all this happen? To start with shale oil and gas companies have proved remarkably nimble and effective in cutting costs and improving productivity . The decline rate of production for new wells has fallen and rig counts are going up. Break-even costs are less than $40 per barrel in Permian and other basins and a Wood Mackenzie report has estimated that most US shale wells are viable at $60 per barrel. Even if OPEC keeps pumping and prices go lower, US shale appears fit enough to withstand the onslaught. But will Saudi Arabia be able to live with low prices? The kingdom’s finances are already under serious strain and it has been cutting expenditure and boosting spending in select areas in a grand plan to reduce dependence on oil. Low oil prices will only worsen the pain.The face-off between US shale and Saudi Arabia will benefit importers like India. Last year, India saved Rs 54,233 crore on its petroleum subsidy bill on falling prices. The gains this year may not be that much but the subsidy bill will stay low and steady. Oil producing companies will lose but raw material costs will stay low even though the spectacular gains of 15/16 may not be repeated. As Saudi Arabia wilts under low oil prices, India may rise as two friendsturned-foes fight to the bitter end.