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New Yorker
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As in any price war, the oil cartel’s ultimate goal is to stabilize prices at a higher level. But, if it is serious about driving marginal North American shale producers out of business, OPEC will have to keep prices low for a long time. To a large extent, the investments that have already been made in these fields are sunk costs. But, rather than writing them off and shutting up shop, producers will surely try to ride out the price war, extracting what they can and servicing their debts as best they can.

A few months of low prices probably wouldn’t have much impact on the fracking industry. It could well take several years for production to decline sharply. But can OPEC live with oil prices under seventy-five dollars a barrel until 2017 or 2018, which is the scenario that the futures markets have been pricing in over the past few days? Some of the cartel’s members, such as Saudi Arabia and Kuwait, may well be able to take the hit. But other oil-producing countries, including Venezuela and Brazil, desperately need higher prices. (And then there’s Russia, which is already impacted by sanctions stemming from its intervention in eastern Ukraine, and which has a generally cordial relationship with OPEC.)
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