FRACKING WONDERFUL: Shale Ready to Tango with the Saudis.

When oil prices first started falling two summers back, market observers turned their attention to OPEC to see if the cartel would constrain production to stop the slide. But Saudi Arabia strong-armed its fellow petrostates into staying put, reasoning that market share was more important than robust prices, and so oil fell down below $30 per barrel earlier this year before rebounding into the $40s where it remains today. Riyadh’s reasoning was based on the assumption that bargain prices would hurt upstart non-OPEC producers (read: American shale firms) more than it would hurt the big petrostates, and its strategy of inaction has been somewhat successful: U.S. oil production is down roughly one million barrels per day from a year ago.

But this dip is hardly the precipitous fall the Saudis were hoping for. Shale production is relatively expensive, but U.S. frackers have innovated their way out of a tight spot and managed to keep the oil flowing in quantities most analysts expected wouldn’t be possible in today’s price environment. But a slower-than-expected decline isn’t the only trick shale has up its sleeve, because as Reuters reports, one fracking company believes it can compete on cost with Saudi Arabia’s mega-fields. . . .

Back when prices first started to tumble, analysts believed the breakeven price for most shale projects—that is, the oil price companies would need to still turn a profit with their operations—was somewhere near $75 per barrel. Pioneer is now claiming it is operating wells that could still turn a profit with prices under $3 per barrel, putting those projects on par with the bigger conventional fields of Saudi Arabia.

This doesn’t mean that every shale well could stay online if prices suddenly plunged below $10 (Pioneer is citing its lowest cost wells in its most productive fields here), but it does evince one of the underlying strengths of the American shale boom: its ability to constantly improve, iterate, and innovate new techniques and technologies to bring costs down while boosting output. Are you ready for a shale rebound?

Yes. Starve our enemies.