WASHINGTON — A HISTORIC change of roles is at the heart of the clamor and turmoil over the collapse of oil prices, which have plummeted by 50 percent since September. For decades, Saudi Arabia, backed by the Persian Gulf emirates, was described as the “swing producer.” With its immense production capacity, it could raise or lower its output to help the global market adjust to shortages or surpluses. But on Nov. 27, at the OPEC meeting in Vienna, Saudi Arabia effectively resigned from that role and OPEC handed over all responsibility for oil prices to the market, which the Saudi oil minister, Ali Al-Naimi, predicted would “stabilize itself eventually.” OPEC’s decision was hardly unanimous. Venezuela and Iran, their economies in deep trouble, lobbied hard for production cutbacks, to no avail. Afterward, Iran accused Saudi Arabia of waging an “oil war” and being part of a “plot” against it.
By leaving oil prices to the market, Saudi Arabia and the emirates also passed the responsibility as de facto swing producer to a country that hardly expected it — the United States. This approach is expected to continue with the accession of the new Saudi king, Salman, following the death on Friday of King Abdullah. And it means that changes in American production will now, along with that of Persian Gulf producers, also have a major influence on global oil prices. America was once, by far, the world’s largest oil producer and exporter, and its swing producer. The Texas Railroad Commission determined “allowable” levels of production for Texas, the Saudi Arabia of the day. But by 1970, United States oil production had reached its high point of 9.6 million barrels per day and began to decline.
The United States began to import more and more oil. By 2008, its own oil production was down almost 50 percent from the high point. Oil prices reached $147 a barrel, and fears that the world’s oil production had peaked and that we were beginning to run out of oil had become pervasive. Quietly, though, an unconventional oil and gas revolution was beginning to pick up speed in the United States. It yoked together two technologies: hydraulic fracturing and horizontal drilling.
By leaving oil prices to the market, Saudi Arabia and the emirates also passed the responsibility as de facto swing producer to a country that hardly expected it — the United States. This approach is expected to continue with the accession of the new Saudi king, Salman, following the death on Friday of King Abdullah. And it means that changes in American production will now, along with that of Persian Gulf producers, also have a major influence on global oil prices. America was once, by far, the world’s largest oil producer and exporter, and its swing producer. The Texas Railroad Commission determined “allowable” levels of production for Texas, the Saudi Arabia of the day. But by 1970, United States oil production had reached its high point of 9.6 million barrels per day and began to decline.
The United States began to import more and more oil. By 2008, its own oil production was down almost 50 percent from the high point. Oil prices reached $147 a barrel, and fears that the world’s oil production had peaked and that we were beginning to run out of oil had become pervasive. Quietly, though, an unconventional oil and gas revolution was beginning to pick up speed in the United States. It yoked together two technologies: hydraulic fracturing and horizontal drilling.
Read the full article here: http://www.nytimes.com/2015/01/25/opinion/sunday/what-happened-to-the-price-of-oil.html?smid=tw-share&_r=0
No comments:
Post a Comment