Crude oil prices drop as OPEC competes with U.S. fracking industry

The end of 2014 saw a major shift in global oil production as the United States passed Saudi Arabia as the world’s largest oil producer. As OPEC (Organization of the Petroleum Exporting Countries) has seen the American Oil industry expand they have seen their own control over oil prices slipping. In reaction, OPEC determined last fall not to curtail oil supply even as it appeared supply would soon exceed demand. Now, four months into 2015, we are seeing the lowest crude oil prices since 2008.

With crude oil, and in turn the price at the pump, continuing to drop many are wondering how long this can last and how low will crude oil prices go? Already the U.S. is seeing some contraction within the fracking industry as prices drop. While a “price war” may seem to benefit the economy, there are a still number of questions to consider. Chief among these being how long will OPEC continue at this production rate and how low will oil prices drop?

By 2013, the United States was already producing 3.5 million barrels of shale oil. Given the new American supply, high prices could simply not hold. “It was not feasible for the Saudis to defend $100 a barrel,” Professor Hamilton said. “It was a losing strategy. Fracking would have taken more of the market.”  http://www.nytimes.com/2015/01/21/business/economy/washingtons-role-in-oil-prices-recent-fall.html

With OPEC countries having stockpiled cash, several hundred billion dollars worth, over the last several years many experts predict crude oil prices could go as low as $20 barrel.

 

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>