Saudi Arabia, one of the world’s biggest producers in oil, is hinting that oil prices will be falling soon as production will increase in the kingdom. This decision is becoming an issue to the Organization of Petroleum Exporting Countries, an association that will have their finances threatened due to the decrease in prices of oil. Angered by the decision, countries like Venezuela, who are looking to raise prices to $100 a barrel, are afraid of how a third of the oil that OPEC exports will be cheaper than how much the other countries are looking to sell it for; this raises revenue for the Saudi Arabian kingdom but not for the other countries. Saudi Arabian officials, when interviewed, did not discuss their plan of lowering prices; however, when trusted members who spoke with the officials were interviewed, it seemed that the plans were to lower prices to under $90 falling to as low as $77 a barrel. Under the plan that Saudi Arabia has begun, the OPEC is becoming manipulated to drop prices and compete in a more competitive oil market, creating more tensions between the petroleum exporting countries and Saudi Arabia
The Competition Between Shale and Drilling
In the recent months, the United States has surprisingly turned around its oil production output and has begun competing in the oil market. To increase revenue, Saudis say, the kingdom will be dropping oil prices and delving into different methods of production to increase oil outputs and selling for a cheaper price. Under more analysis of the conversations, the OPEC is adamant on keeping prices at $100 a barrel instead of falling prices unlike the Saudis and the Saudis are looking to lower prices to help convince and manipulate the OPEC that the oil prices should be lower to compete with emerging oil markets like the US and China.
The Effect on the Market and the Future of Oil
The result of this news altered the markets significantly on Monday which ended with oil being sold for $88.89 a barrel, the lowest price since December 2010. As more markets emerge for the oil industry like the US and China, the supply will only go up as access to shale and ultra deep-sea drilling resources will be open for use and trade. The Saudis recently had claimed that “no one should be surprised” when prices fall under $90. Does this mean cheaper oil prices for consumers and a higher dependency on oil due to its cheap price?