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Oil War of 2014
The Oil War of 2014 was a global competition for oil market share between traditional oil producing countries led by the OPEC and the surging US shale producers. Starting in June 2014, oil prices on world markets began a sustained slide which led many conspiracy theorists to initially believe the U.S. and Saudi Arabia were working together to pull oil prices down in order to punish Russia because of its involvement in the Ukraine crisis. Very few analysts realized at the time the price meltdown was a covert action by the OPEC countries to supply the market with a glut of oil to defend their market share.
The shale gas revolution between 2011 and 2013 in the U.S. set out alarms in the Middle East as the U.S. import of oil dropped significantly for the first time in history. The outlook of the U.S. becoming a net oil exporting country from a leading importer, as it had been during the last five decades, sent shockwaves through major oil producing countries such as Saudi Aria, and United Arab Emirates. The U.S. shale revolution suddenly made the U.S. into a major oil producing country and was poised to take over market shares that was the life blood of the Middle East. However, there was only one catch to the shale oil boom and that is, compared to oil productions in the Middle East, shale oil extraction requires fracking, a complex process using advanced equipments and technology to pry open underground rocks in order to extract the oil. As a result, shale oil extraction is much more expensive than traditional oil production. In order for shale production to make economic sense, the oil price must stay above $80 a barrel.
By flooding the market with cheap oil, OPEC countries hoped to drive down world oil prices to a level significantly below the breakeven price of $80 per barrel for shale oil production, which in turn would drive many of the U.S. shale producers out of business.
On November 27, OPEC countries made the contentious decision in Vienna to keep its oil production target, leaving the market with a supply glut.
- Part of Speech: proper noun
- Synonym(s):
- Blossary:
- Industry/Domain: Energy
- Category: Shale gas
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