There was an article in the Evening Standard yesterday about
how oil prices are rapidly falling and the unexpected/political reasons for
this. Oil now costs around a third of what it did only one year ago at $40 a
barrel rather than $100 and it is believed that this is due to the boom in the
US fracking industry. Saudi Arabia aims to kill off as much of this industry as
possible with lower oil prices so as to avoid the US becoming completely
self-sufficient with no dependence on supply from the Middle East. This tactic
could be considered good news to consumer nations such as much of Europe but it
is not clear how long it could last. There is a flaw in this plan however, Saudi
Arabia cannot maintain these low prices without losing too much money and once
they go back up the US gas reserves will still be there ready to be fracked
with higher profits than ever.
From your research, do you think this will be a short-term solution from Saudi Arabia? My concern is that prolonged periods of low oil prices may reduce the urgency for many nations to move towards renewables
ReplyDeleteIt is definitely short-term, to make any profit Saudi Arabia need their oil prices at about $100 per barrel while at the moment it is $40 so this cannot be sustained but really how long it lasts depends on how the US respond.
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