What low oil prices mean for American oil companies

We're in trouble, folks.

If gas is $2.50 a gallon in America, but only $1.05 after importing from Saudi Arabia, which would you want to purchase?

LOS ANGELES, CA (Catholic Online) - As previously reported, the more oil Saudi Arabia has, the cheaper the country can afford to charge. The lower cost of oil means American companies have been forced to downsize to keep up. Even after cutting over half its staff, many are at risk of financial ruin. 

American banks are preparing for oil companies to file for bankruptcy, the sanctions on Iran are in the process of being lifted and the looming question of whether the government plans on instituting bank and company bailouts looms above the already highly taxed middle and lower-classes.

CNN Money reported Saudi Arabia plans to keep the price of oil nice and low.

In keeping oil prices low, American oil companies - and the oil industry in general - will be spending more than the cost of required barrels. The cost-to-revenue ratio will continue to grow in opposing directions, leading to more layoffs, closing companies and possibly a future in which all oil used in the United States is imported.

Though such a dramatic change would take several years before it came to pass, some believe everything will work itself out.

The Wall Street Journal stated crude oil markets will ultimately balance -but is that true?

Khalid al-Falih spoke after a conference in Riyadh to say, "Demand will grow, as it has already started in 2015, and there will be a period not far into the future [when] demand will catch up with supply. We don't want that day to come. We believe excessively high oil prices precipitated the world we are in."

He added that high oil prices have led to over-capitalization and investments in oil markets, which created a world where "everybody wanted to contribute to supply more than the demand that was coming in."

To support his claim, al-Falih spoke at a business conference panel on Monday to say, "Our investments in capacity of oil and gas have not slowed down. We have been able to do a lot of cuts in spending simply by driving down costs. You will not find a single barrel being sold on the spot market or traded by traders...Our supplies are tightly linked to end users' demand."

Saudi Arabia plans to keep the price of oil down and will only sell in bulk under long-term contracts. 

What does the constant decline in oil cost from Saudi Arabia mean for American oil companies? It means it will be cheaper to import oil than it will be to drill for our own, which could possibly create a mountain range of debt, hundreds of thousands of unemployed American citizens and a bankrupt oil industry.

Hopefully, the United States oil companies will find a way to drill at a significantly lower cost, banks will continue to fortify themselves in the event of companies filing for bankruptcy and a significant revival hits the American oil economy.

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