Prices are down because of a combination of
reduced demand and dramatically
increased supply, created to an extent by the hydraulic fracturing revolution known as fracking.
At last month's meeting of the Organization of Petrolum Exporting Countries ministers in Vienna,
some members argued for decreasing production to slow or reverse the oil price drop. But Saudi Arabia, still OPEC's
largest oil producer,
convinced the other members of the cartel that their best move would be to keep the spigots open. It is a move that remains under debate this week at an
Arab energy conference in Abu Dhabi, United Arab Emirates.
It seems strange that OPEC would be trying to drive oil prices lower. After all, the whole point of the cartel is to use its leverage to maximize profits. But Saudi Arabia's oil minister,
Ali al-Naimi, sees low prices as a new kind of strategic weapon. He believes that oil producing countries need to accept
some temporary pain in order to drive down prices to the point where fracking becomes unprofitable, and the newly emerged North American producers start going out of business.