[Printed in IP Journal, German Council on Foreign Affairs] Pin-pointing the reason for the dramatic – and continuing – fall in the price of oil is relatively easy: OPEC held its 166th conference in late-November 2014 to decide on a strategy to address oil prices, which had been falling at five to ten percent per month since July. Rather than pursue a production cut
to boost prices as usual, OPEC adopted a Saudi proposal to keep output steady at 30 million barrels per day. The explicit intent of the Saudi strategy is to drive prices down until the highest-cost non-OPEC producers are forced from the market, with their shares reverting to the “most efficient producers” – that is, to OPEC.
For Russia, Iran, and Venezuela, this Saudi strategy is ruinous, so much so that many in these countries declare the whole affair a geopolitical plot hatched by the Saudis in league with the US and EU. However, while the impacts on Russia and Iran are certainly not unwelcome in Riyadh (or, for that matter, Washington or Brussels), Saudi oil minister Ali Al-Naimi – who was kept in place last week by Saudi’s new ruler King Salman, while most other high ranking ministers were reshuffled – insists that today’s new market realities had presented OPEC with no choice but to defend its market share in this manner. The pain imposed on Moscow, Tehran, and Caracas is but collateral damage to states already facing crises rooted in their politics. [Continue at IP Journal OR: for more oil-sector details, HERE IS THE LONG VERSION with FIGURES]