Your independent energy adviser
0800 051 5770

The Oil Price War Opens a New Frontier

Oil PumpsThe talk had been that the war on ISIS would be the progenitor of volatility in the oil market, whilst that still may prove the case a different war has erupted. This time however it is an economic one.

Oil prices have been tumbling for weeks as OPEC producers fail to reduce production and in some cases slash forward prices (Saudi Arabia), whilst non-OPEC producers enter the market in ebullient state with new found reserves and commercial intent.

Cue market saturation and tumbling prices.

The reasons for Saudi Arabia’s specific actions are the most interesting.

The US shale revolution has altered the global energy landscape, ‘de-coupling’ the US from the ‘global complex’ energy market and enabling it to become a volume exporter of its excess energy sources.

Saudi Arabia, and others, are worried.

Their position as market makers and takers is suddenly under serious threat. For energy dependent economies this means major trouble far beyond the norm. Regime change is the big fear as a change in the levels of economic prosperity prompt social tensions.

Saudi has slashed the contracted price for its sale of crude to the US in a clear head on battle with US reserves. The impact has been to force US crude to trade at levels that render shale oil production uneconomic.

Exactly what OPEC want and need to maintain their position at the head of world energy markets.

This one could run on and on. Geo-political control is at stake and no one is in a mood to back down.