Meeting in Vienna yesterday, OPEC failed to enforce production cuts to halt the fall in world oil prices.  The AP reports:

Reflecting its lessening oil clout, OPEC decided Thursday to keep its output target on hold and sit out falling crude prices that will likely spiral even lower as a result.

Oil prices fell sharply on the news. Even though the decision was largely expected, it showed the once-powerful cartel is losing the power to push up markets to its own advantage.

OPEC has traditionally relied on output cuts to regulate supply and prices. But it appeared to realize Thursday that with cheap crude in oversupply, a reduction would only cut into OPEC's share of the market without a lasting boost in prices and with others outside the cartel making up the difference.

Normally, falling oil prices are very good news for the American economy, amounting to a virtual tax cut for families, because so much energy consumption is inelastic.  People must drive to their jobs, and homes must be heated in winter.  Businesses that consume energy (in other words, all of them) find their costs falling as well, boosting profits.

But all of a sudden, within the space of a few years, fracking technology has made the U.S. a major and fast-growing producer of oil and gas, soon to become a net exporter if production continues to grow.  But hydraulic fracturing is more expensive than, for example, drilling in the Saudi desert.  Some, including a Russian oil tycoon, are warning that fracking could be crippled.  Via Breitbart:

OPEC policy on crude production will ensure a crash in the U.S. shale industry, a Russian oil tycoon said. (snip)

American producers risk becoming victims of their own success. At today’s prices of just over $70 a barrel, drilling is close to becoming unprofitable for some explorers, Leonid Fedun, vice president and board member at OAO Lukoil (LKOD), said in an interview in London.

“In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” said Fedun, who’s made a fortune of more than $4 billion in the oil business, according to data compiled by Bloomberg. “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”

There may be some high-cost producers who can’t survive at $70 a barrel (Canada’s tar sands are particularly expensive to extract, for example), but the technology is rapidly developing, so if OPEC thinks it can drive America out of fracking, it is mistaken.  Moreover, many OPEC members are spending at a level that can’t be sustained for too many years.  Among the principal OPEC producers who need high oil prics are bad guys Iran and Venezuela.  So the strategy of inflicting pain to drive out the Americans could end up costing Venezuela’s and Iran’s rulers their jobs, and maybe their lives.  And some of those Saudi princes may have to cut back on their private jets and high-priced hookers.  Ouch!

I don’t expect the tumbleweed to be blowing through Williston, North Dakota anytime soon.  And I expect the American economy to get an overall shot in the arm from lower energy prices.

Bring it on.