The price of oil tumbled today after OPEC decided against production cuts. Saudi Arabia rejected calls from poorer members of the group to cut production by up to 2 million barrels per day. Brent crude fell more than $6 a barrel to $71.25.
The oil cartel has previously defended higher oil prices vigorously. The gulf states have become far more lenient on price due to fear of America’s growing production. The US has become one of the world’s top oil producers thanks to hydraulic fracturing. The shale oil boom has changed the world’s petroleum dynamic completely.
Saudi Arabia and its allies are prepared to suffer through lower prices presently in hopes of pricing the US out of the market. At lower prices, US shale oil production becomes less attractive as it is an expensive procedure.
Ironically, OPEC’s decision is aiding the US in a different foreign policy matter. The US and the European Union are currently at odds with Russia over its actions in eastern Ukraine. OPEC’s decision to keep oil prices low is a big blow to Russia, as the country needs oil at around $100 a barrel in order to keep its budget afloat.