The Saudis are betting against American innovation - which generally isn't a good bet to make. From the WSJ:
Today, the discovery and development of oil from shale rocks means that oil output is faster paced and near at hand—in Texas and North Dakota, Colorado, Oklahoma, Wyoming, even Ohio. Drilling and hydraulically fracturing a well takes weeks, not years. An expensive well costs $10 million, compared with the billions needed to drill offshore wells and build associated infrastructure. Moreover, expenditure of both time and money are falling fast.
The oil field investment cycle has shortened. Wildcatters in Texas discovered the Eagle Ford Shale in 2008. Within five years, it was pumping a million barrels a day—thanks to an influx of capital that paid for drilling thousands of new wells. Each well roars into life and then drops off fast. Without constantly drilling new wells, these oil fields will peter out. [...]
Companies like EOG Resources Inc. are drilling better wells faster. EOG said recently it takes 4.3 days to drill its average well in the Eagle Ford Shale in South Texas, down from 14.2 days in 2012. What’s more, as it drills more of them, it has figured out how to locate wells to get the highest oil output.
Combining lowering costs and increasing output means that EOG says it can drill wells at $40 per barrel in North Dakota, South Texas and West Texas, while still earning a 10% return. We “pride ourselves on being a very efficient operator,” Billy Helms, EOG’s head of exploration, said at a recent industry conference.
Since oil prices began to fall, many companies have cut their capital spending plan for 2015 and the number of drilling rigs in the U.S. has fallen. But output has continued to increase.