Sustained $100 barrel oil unleashed a flood of oil and gas investment into the Americas, with many dollars targeting unconventional or tight oil supplies that can not be profitably developed if oil prices are below $70. In an article written by Angel Gonzalez, The Wall Street Journal reported on June 27th that the Americas attracted $320 billion of oil and gas investment in 2011 or 48% of the globe's total investment and up from 39% in 2003.
That investment boosts oil production in the US, Brazil, and Canada, causing sleepless nights in Saudi Arabia, and partially explains why the Saudis continue to pump a high 10 million gallons per day, even though oil prices are falling. The Saudis want oil prices to fall to the $70-$80 range to stem competitive oil investments and teach Iran and Russia a lesson.
Unlike Iran and Russia, the Saudis believe oil prices have been so high that investment in oil production, as well as biofuels, electric vehicles, and CNG vehicles, threatens their interests. Their solution is to push prices down, if they can, in part to raise risks for further investment in unconventional oil and oil substitutes.
Look not much further than the facts that the Americas attracted 48% of global oil investment and that oil substitutes are emerging in the USA to understand why oil prices are falling but the Saudis keep their production high. For me, that translated yesterday into filling up with $3.15 gasoline.