Some people may think that Saudi Arabia’s decision last week to maximize oil production to bring down prices and bankrupt US shale oil producers is something like an April Fool’s Day joke. However, this is obviously not the case. Collective amnesia also appears to have affected the Saudi authorities, as well as other members of the Organization of the Petroleum Exporting Countries (OPEC), on what catastrophic consequences Saudi Arabia’s recent attempt to destroy the US oil industry in 2014-2016 has had. the price war with Russia could be much worse for Riyadh and the cartel.

The last time the Saudis tried this strategy in 2014, there was a much better chance of success than it is now. At the time, it was widely believed that US shale producers could not produce oil on a sustainable basis at a cost of less than about 70 USD per barrel for the Brent variety. Riyadh also had record-high foreign assets reserves of 737 billion USD in August 2014, which gave the Saudis a real chance to maneuver in maintaining their currency attachment to the dollar and covering the huge budget deficits that would arise from the fall in the price of oil through overproduction. Moreover, at this time, Russia was only one interested observer on the sidelines of the cartel.

Saudi Arabia was so confident in its plan that in October 2014, during meetings in New York between Saudi officials and other senior figures in the world oil industry, she revealed that she was ready to tolerate Brent prices between 80-90 USD per barrel for one to two years. This turned out to be a 180-degree reversal from the previous understanding by other OPEC members that Saudi Arabia is their leader, doing everything it can to maintain high oil prices to boost the cartel’s prosperity. Nevertheless, at a meeting in New York, Saudi Arabia made it clear that there were two clear goals in pursuing its overproduction strategy. The first was to destroy (or at least slow the progress of) the emerging US shale industry, and the second was to pressure other OPEC members to contribute to supply discipline. This was significantly different from the acceptable price range previously referred to by Saudi oil minister Ali Al-Naimi as “100 USD, 110 USD, 95 USD” per barrel.

Within just a few months of adopting this strategy of destroying the US shale industry in the US, however, it became clear to them that they had made the terrible mistake of underestimating the ability of the US shale sector to reorganize. It turned out that many of the largest operators of drilling projects were able to make decent profits over Brent prices between 35-37 USD per barrel.

The technologies have allowed these companies to more efficiently utilize wells in connection with reduced drilling time.

Most importantly, the relentless rise of the US shale sector has allowed the US to reduce its energy dependency on Saudi Arabia and further expand its geopolitical oversight, becoming the world’s largest oil producer.

In 2014-2016, OPEC member states lost 450 billion USD in oil revenues because of lower oil prices, according to the International Energy Agency (IEA). They are still trying to fill the holes in their foreign exchange reserves and budgets accumulated over the two years as oil prices plummeted from over 100 USD per barrel to under 30 USD per barrel.