Who Is to Blame for the Oil Price Collapse?

Across the globe, nations are bearing the brunt of the oil price collapse. The crash has shaken up the face of the modem economy and left the world wondering just how low oil prices can go. But who is to blame for the colossal collapse? And how far could the price of oil fall before 2015 draws to a close? We delve into the dilemma in an attempt to get to the bottom of who should foot the fault.

All eyes on Saudi Arabia

Since the price of oil started to plummet the world has been pointing the finger at Saudi Arabia. After all, the country is no stranger to manipulating the price of oil in a bid to give itself a geopolitical advantage.  Now, the Saudis and OPEC stand to benefit greatly from eliminating high cost competitors such as American shale oil producers. Rather than stabilise the market by introducing a production cutback, they’ve chosen to take no action which indicates that they like the way the market is moving.

Andrew Topf, seasoned business journalist writes, “In 1973, Egyptian President Anwar Sadat convinced Saudi King Faisal to cut production and raise prices, then to go as far as embargoing oil exports, all with the goal of punishing the United States for supporting Israel against the Arab states. It worked. The “oil price shock” quadrupled prices.”

A US-Saudi collaboration?

Other theorists maintain that the US and Saudi Arabia are collaborating to take down Russia, most likely to punish it for its Ukraine antics. Venezuelan President Nicolas Maduro openly supports this theory, stating “Did you know there’s an oil war? And the war has an objective: to destroy Russia… It’s a strategically planned war … also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse.”

The three way war

Others assert that the price plummet is actually the result of a three way war between OPEC, Russia and the United States. None of these entities appear to have plans to cut back production which will continue to push prices lower.

How low can oil prices go?

As for the price of oil… Analysts predict that we could see per barrel prices fall into the US$30 mark in early 2016. Darin Newsom, senior analyst at Telvent DTN explains, “If this doesn’t hold, we could go back to price levels in late 2008 and early 2009 — down in the $30s. There’s no reason why it couldn’t happen,” said Darin Newsom, senior analyst at Telvent DTN. Some even warn that a US$20 dip is on the horizon.

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