Here's a game of chicken we can win!
Playing a literal or metaphorical game of "chicken" is almost never a good idea. That's because you can never really win the game unless you know for sure that your opponent will blink or flinch not just before you do, but before it's too late to avoid a fatal head-on crash.
But that isn't stopping Saudi Arabia from continuing to play a game of chicken with the United States when it comes to crude oil. The Saudis simply refuse to cut production as they hope to keep oil prices low enough, long enough to crush the upstart American shale oil business.
Take heart America, this is a game of chicken we can actually win.
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America can win because the U.S. economy is not all about oil, and the Saudi Arabian economy is. America can win because demand for crude oil will not stay down for long. And finally, America can win because we haven't really begun to fight.
Let's talk first about our economic diversity and durability. Sure, we've enjoyed the primary role our growing energy sector has played in our job growth over the last six years. But we have too much of a varied economy and a skilled population to suffer a death blow even if our energy industry continues to contract. And we know this because it's been happening for six months. Rigs are being shut down and more than 20,000 energy workers in this country have been laid off since crude and natural gas prices started to collapse this past fall. Through this period, the U.S. GDP has continued to grow.
Next, let's talk history. Oil prices go through wild ups and downs, but nothing is forever in the crude market. Prices crashed from the middle of 2008 through the early months of 2009 because of the worldwide economic slowdown. But crude was back over $100/barrel soon enough. Remember not so long ago when everyone was telling us the world was running out of oil for good? Now they tell us we have too much oil. The only constant is the free market and you can be sure the free market will drive prices up again.
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Finally, America has not truly begun to play this game of chicken anyway. So far, we're still not allowed to export our crude oil in any significant way. Our President is still dead-set against measures like building new refineries and the Keystone Pipeline, both of which would improve market conditions for U.S. and Canadian oil and gasoline products. And we're still not drilling and fracking enough or at all on federal lands. We can win, but we'll need more courageous and frankly, we need more pro-American leadership in Washington, to get it done.
Bottom line, Saudi Arabia has no choice but to keep oil production humming because it simply doesn't have another thing to offer the world's markets. The U.S. can survive an era of lower prices for a lot longer. And it can enjoy the boost from the inevitable turn in the markets because that would still be an economic net gain for us, while it would just be a return to normalcy for the Saudis.
Commentary by Jake Novak, supervising producer of "Power Lunch." Follow him on Twitter @jakejakeny.