Why does Saudi Arabia keep pumping oil when prices are at a historic low?
The price of oil has crashed over the last year and a half. In the middle of 2014, a barrel of crude cost over $100. Now it's worth just over $30.
Normally, such a collapse would lead OPEC to pump less oil. The idea is that less oil on the market helps keep prices up. But despite a historic fall in oil prices, the Saudi Arabian-led international oil cartel hasn't budged: The biggest step it has taken so far is offer to freeze production at its current record levels. Production cuts are not on the table.
The big question is, why? One theory is that OPEC simply has less control over the oil market than it used to, thanks to the shale gas revolution. Another possibility is that OPEC wants oil prices to be low precisely in order to drive shale oil producers, which have higher costs, out of business.
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WNU Editor: Alternative energy, energy efficiency, and better, cheaper, and more efficient ways to extract oil have changed the energy industry. My take is that this trend will continue .... which means that today's oil reserves may become even cheaper in the future. It is a pleasant thought .... unless you live in a country that is dependent on oil exports.
1 comment:
It's a cycle, it will go back up again. Always does and always will.
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