I have read that one of the reasons the Sauds are allowing the price to drop is because they want to financially drain ISIS and others of their ilk in order to squeeze their enemies dry. I truly hope that is one of their reasons because we need to do SOMETHING to stop ISIS. Cutting off their access to income from selling oil on the black market should at least make some kind of dent eventually, I would think.
I'll agree with you on this one. We simply have no idea what will be going on in the next 10 or 20 years. However Saudis do have the advantage of having possibly the lowest per barrel production cost in the world. Even if oil gets replaced as the main stream fuel it will still be required for a lot of manufacturing processes, price would inevitably drop a lot but the Saudis could still make a profit where most others couldn't. Enough profit to keep their country running? Probably not. I do not think the price of oil will stay this low for more than a few months. That is enough to send a message, it's enough to push some smaller operators into financial trouble (significantly affecting the amount of risk other small operators will take in the future) and maybe most importantly, enough to cause pretty much every large western public oil company to lower CAPEX for 2015 and beyond.
I really do not think the Saudis have as much power now as most people think they do. They dominate a few smaller countries around them, but there is too much supply elsewhere now for them have much of a ´plan´. I don´t think they can artificially inflate prices anymore by cutting production because they know that other countries will just overproduce. Venezuela and Russia are just in too bad of a situation to be able to afford cutting producing with the ´hope´ that it raises prices. You are definitely right, there will always be demand for oil and Saudi will probably be the last driller standing.
