an analysis of the price of oil, cause of high production, and repercussions

o understand this story, we have to go back to the mid-2000s. Oil prices were rising sharply because global demand was surging — especially in China — and there wasn't enough oil production to keep up. That led to large price spikes, and oil hovered around $100 per barrel between 2011 and 2014.

But as oil prices increased, many energy companies suddenly found it profitable to start extracting oil from difficult-to-drill places. In the United States, companies began using techniques like fracking and horizontal drilling to extract oil from shale formations in North Dakota and Texas.

That led to a boom in "tight oil" production, as the US has added about 4 million new barrels of crude oil per day to the global market since 2008.

Up until very recently, however, that US oil boom — along with increases in Canada and Russia — had a fairly minimal effect on global prices. That's because, at the exact same time, geopolitical conflicts were flaring up in key oil regions. There was a civil war in Libya. Iraq was a mess. The US and Europe slapped oil sanctions on Iran and pinched that country's exports. Those conflicts took more than 3 million barrels per day off the market.

Things changed again around September 2014. Many of those disruptions started easing. Libya's oil industry began pumping out lots of crude again. And even more significantly, oil demand in Asia and Europe has been weakening — particularly in places like China, Japan, and Germany.

The combination of weaker demand and rising supply caused oil prices to drop from their June peak of $115 per barrel down to around $60 per barrel by mid-December.

Since OPEC produces about 40% of the worlds oil, it can affect the entire world market by deciding how much to sell... and by changing the price, they can put countries into bankruptcy (Russian ruble is worthless and falling right now) because some countries balance their budget (country owns the oil, unlike in the USA) by predicting their profits from oil sales, and when they lose money, they go bankrupt due to far too much government spending. Russia, Iran and Venezuela. 
Oil revenues account for roughly 45 percent of Russia's budget, and the government's spending plans for 2015 had assumed that prices would stay in the $100-per-barrel range. At 50 a barrel, Russia is severely in a deficit, and has to stop warring with Ukraine and increasing militaristic overtures towards the USA (Russian bombers over Alaska)

Suadi Arabia, whom has saved incredible amounts of money because they have been selling massive amounts of oil, and have nothing to waste the money on (haven't been to war in 70 years) and don't throw away money on foreign aid, and seem to be impervious to aggressive conquest from militaristic empire building countries and native militias, possibly due to the 2 most religious sites in the islamic faith being in Saudia Arabia. There are only 20 million natives, and 8 million others.

For all intents and purposes, OPEC is now engaged in a "price war" with the United States. What that means is since it's cheaper to pump oil out of Saudi Arabia and Kuwait, and more expensive to extract oil from shale formations in places like Texas and North Dakota... as the price of oil keeps falling, some US producers may become unprofitable and go out of business.

The result? Oil prices will stabilize and OPEC maintains its market share and manipulative control.
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an analysis of the price of oil, cause of high production, and repercussions
an analysis of the price of oil, cause of high production, and repercussions
Reviewed by pada mama
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