OPEC Has Us Right Where It Wants Us

In October of 1973, a coalition of Arab nations flipped the chessboard on the West, and the interesting part is that they didn’t do it with tanks or bullets, but rather with a spigot. 

They cut oil exports in response to U.S. support for Israel during the Yom Kippur War, and what followed was the first true oil shock: crude prices quadrupled, gas lines snaked for miles, and the illusion of energy security in the West evaporated faster than spilled gasoline on asphalt. 

Fifty years later, the tactics are more surgical, with drones instead of embargoes, targeted strikes instead of sweeping bans. 

And yet, the mantra remains the same: Energy is power. 

Today, that power is shifting again. 

Over the past week, the Middle East has entered an even darker chapter than where it’s been for nearly three years — Israeli drones struck targets in Doha, Qatar (a U.S. ally, mind you) killing top Hamas leadership and igniting a storm of condemnation across the Gulf. 

Qatar’s government, furious and humiliated, has already called for a full retaliation.

And believe me, markets didn’t wait for diplomacy to kick in. 

Crude prices jolted higher, with Brent pushing toward $67 and WTI scraping $63 per barrel. The price spike was modest by historical standards, but that’s precisely the point: the powder keg is still dry, and traders know that it will only take one more match to send oil soaring.

You see, this strike wasn’t in Gaza. It wasn’t in Lebanon or southern Syria. It was in Qatar, home of U.S. military bases, gas riches, and deep, uneasy ties to Western powers. 

So when a partner state becomes collateral in a proxy war, it signals something deeper than the headlines can explain. It signals that no nation, no refinery, no shipping lane is off-limits. 

And in oil markets, that means risk premiums are quietly building like pressure behind a valve.

I wish I could tell you that this was the only geopolitical chaos taking place at the moment. 

While the Middle East is boiling, Eastern Europe has escalated into a full-blown energy war, with both sides shifting strategy into a tit-for-tat campaign targeting the most valuable infrastructure both side has left: energy. 

In the last few days and weeks alone, Ukrainian drones have hit multiple Russian refineries, including the Rosneft-owned largest facility in Ryazan. For the record, that knocked over over 17% of Russia’s refining capacity offline, cutting millions of barrels of processed crude from their system and triggering domestic fuel shortages.

Russia, for its part, has turned its sights on Ukraine’s energy grid. Within days of the Ryazan strike, Russia launched a barrage against a thermal power station near Kyiv, cutting electricity to entire districts and driving up demand for backup generators, fuel, and cross-border support. 

This is no longer a conventional war, it’s an energy war. And every refinery that burns, every pipeline that cracks, reverberates all the way to the global spot market.

In peacetime, the market might have brushed this off as a regional flare-up… but not now. 

And this, dear reader, is why OPEC+ has us right where it wants us. The group has officially regained control of the global oil markets, and the last place we want to be is at their mercy. 

You see, all it takes is one output adjustment to send prices higher. Remember how the media was touting the oversupply coming up, with every headline harping over the expected OPEC output hike by over 500,000 barrels per day this October? Now they're only offering a measly 137,000 barrels per day. 

That wasn’t an oversight, it was a flex. This was a reminder that when the world panics, the Kingdom collects, and Saudi Arabia, the de facto captain of the cartel, knows exactly what it's doing. 

The Saudis have no interest in stabilizing prices at $60. They want higher crude prices, which hauled in roughly $888 billion in net oil export revenue back in 2022. That year, oil prices were far higher than they are today, and now they have leverage that hasn’t existed in years: a divided West, a wounded Russia, and a slow-bleeding American shale industry that can’t grow like it used to.

The irony is that this should be the moment for U.S. drillers to shine. If geopolitics has taught us anything over the last fifty years, it’s that domestic energy production IS national security. 

However, today’s reality is more complex and a lot more troubling. Remember, producers in the Permian Basin aren’t in the best position. Not only are they running out of Tier 1 acreage, but the low commodity price environment is damaging future output, no matter how much the EIA wants to hope otherwise. 

The easy wells — those juicy, oil-rich zones that made the U.S. shale revolution possible — are drying up, and what’s left is more technically demanding, more expensive to extract, and getting gassier by the foot.

With WTI crude barely treading water in the low $60s, we have a reluctant industry pulling back on drilling, slowing rig counts, and shelving expansion plans. 

If we learned anything from the price crash in 2015, it's that investors are demanding discipline, not growth. Banks are cautious, and while the EIA continues to publish rosy forecasts for U.S. output, the hard truth is that the production curve is bending downward. Even the IEA, which rarely misses a chance to praise future supply resilience, was forced to walk back its projections this year.

This isn’t a crash, mind you, it’s a slow fade. And if oil stays in the $60s for much longer, U.S. output won’t just plateau — it’ll shrink. 

That’s when the real squeeze begins… why? Well, because global demand isn’t falling. It’s still climbing, driven by post-COVID recovery, rising petrochemical use, and a relentless wave of energy-intensive AI infrastructure that’s eating megawatts like Halloween candy.

So where does that leave us?

We’re left with an overly optimistic set of projections that’s pricing like oil is plentiful and risk is minimal — when the opposite is true. 

But my veteran readers know that as always, volatility breeds opportunity. 

Not for the majors — they’ll survive no matter what — but for the smaller, more efficient domestic drillers that know how to drill smarter, not just faster. These are the operators that can still turn a profit even when oil is cheap. And these companies aren’t betting on geopolitical chaos, they’re building value underneath it. 

What we want to take advantage of are the Permian operators that are optimizing laterals, shaving costs on completions, and capable of pumping more barrels out of the ground. 

In many ways, they’re the last real growth stories in U.S. oil. And when the majors inevitably go shopping, whether it’s when Exxon needs to pad their reserves or Chevron needs to replace aging assets, it’s those small investment gems in the Permian that will be first on the menu.

You just have to know where to look.