How We Got Here
There are a number of reasons why the price of oil crashed in 2014, and has stayed low since then. The basic problem is that supply outstripped demand back then, and continues to do so today.
On the supply side, the amount of usable oil increased due to the success of U.S. fracking wells in North Dakota, along with Canada extracting more from its oil sands in Alberta. As a result of this
78 Sep/Oct 2019
local production, the two North American countries were able to cut their oil imports sharply, which put downward pressure on world prices according to the investment website Investopedia.
In the past, Saudi Arabia would have responded to this downward pressure by reducing its oil output to push prices back up. But not this time. Aware that North American oil costs more to produce, the Saudis opted to keep oil prices low over the long term to cripple their competition. They could afford to. “The cost of pumping a barrel of oil in Saudi was less than $10 in 2015,” reported CNN Business. In another report, the news service observed, “Saudi Arabia is suffering from low prices, but its competitors are hurting worse. U.S. oil production, after years of blistering growth,
has not only ground to a halt, but has started to decline.”
Of course, the Saudis had other reasons to keep the oil flowing. For instance, Forbes magazine reported that the Saudis wanted low oil prices to stay competitive with emerging energy alternatives.
“The Saudis saw this coming,” wrote Forbes. “For years, as their country remained dependent on oil exports for 85% or more of its revenue, they have feared not that they will someday run out of oil but that they will run out of customers for it. They anticipate that electric vehicles, industrial efficiencies, biofuels and climate-change concerns will turn consumers away from oil. A return to $100 oil would accelerate that evolution, even if in the short term it
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90
