World Price of Oil -Where is OPEC Now?

S. Fred Singer / American Thinker

The world price of crude oil, which has been around 100 dollars a barrel for the past 6 years, has suddenly collapsed and is now tending below 50 dollars.  Many are trying to understand this rapid decrease and have proposed various explanations.

Of course, the ready explanation is simply in terms of supply and demand; but this just begs the question.  The supply of oil has increased sharply in recent months – mainly because of the prolific production of shale oil in the United States, thanks to the technologies of fracking and horizontal drilling.  In fact, the US is now the world’s largest producer of crude oil and US imports of oil have dropped to the lowest level in 10 years. 

At the same time, the demand for oil has not increased greatly — because of depressed economic conditions and more efficient use in cars and trucks throughout the world.  US imports peaked 10 years ago at 10 mbd [million barrels per day], about 50% of then-consumption, and have been dropping rapidly; Chinese imports have been rising steadily and now exceed 5 mbd.

Saudi objectives

One of the questions raised is why did Saudi Arabia, considered to be the linchpin of the OPEC cartel (or former OPEC cartel), permit the price to collapse.  As I will explain, it is not in their best economic interests, from a strictly profit-maximizing point of view.   Obviously, there are political considerations involved, which override simple economics.

Read more at AT: 

http://www.americanthinker.com/articles/2015/01/world_price_of_oil__where_is_opec_now.html#ixzz3Q2RWg83d