Why Does the Price of Oil Keep Falling?

Friday, February 6, 2015

The plummeting price of oil is still the biggest energy story in the world. It's bringing back cheap gasoline to the United States while wreaking havoc on oil-producing countries like Russia and Venezuela.

But why does the price of oil keep falling? Back in June 2014, the price of Brent crude was up around $115 per barrel. As of January 23, 2015, it had fallen by more than half, down to $49 per barrel.

For all intents and purposes, OPEC is now engaged in a "price war" with the US. What that means is that it's relatively cheap to pump oil out of places like Saudi Arabia and Kuwait. But it's more expensive to extract oil from shale formations in places like Texas and North Dakota. So as the price of oil keeps falling, some US producers may become unprofitable and go out of business. And the price of oil will stabilize. At least that's what OPEC members hope.

The above is excerpted from an article on Vox.

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