When the price of crude oil tumbled dramatically between 2014 and 2016, it heralded the demise of an economic and geopolitical world order in place since the end of World War II.
In the last few decades, fracking technology has turned the US into the world's largest oil producer.
Against that backdrop, the move towards renewable energies and away from fossil resources is making dramatic steps forward. Oil still rules - but for how much longer?
A study published back in September 2012 made headlines by predicting an imminent drop in oil prices. The analysis bucked traditional mainstream scientific opinion, which forecast that the market would continue to climb until hitting ‘peak oil’ - the moment when global oil production peaked. After that, most experts believed, the price for crude would skyrocket. But by the end of 2013, market supply began to far outstrip demand, and prices collapsed. Within two years, they fell by 70%. Was it just another anomaly in the history of the industry? Not quite. Many factors contributed to the fall.
After the 9/11 terrorist attacks in 2001, the US was shocked by reports that Saudi Arabia might have been involved. North America relied on vast imports of oil from the Middle East, so to lower US dependence on the Gulf States, policymakers overhauled and realigned the country’s oil strategy. When oil prices rose dramatically in the first decade of the new millennium, companies in the US were able to begin implementing a technology that had previously been viewed as economically unviable - extracting oil and shale gas through fracking.
By exploiting its significant shale oil deposits, the US was able to slash imports, which in turn led to an oversupply on world markets and crashing prices. The world’s biggest oil-producing nations began fighting fiercely for their slice of the pie. In a move to break the American producers, Saudi Arabia moved into high-stakes poker mode, flooding the market in an intentional attempt to lower prices even further and force the North American fracking industry to its knees. But the move didn’t pay off, and the order that had prevailed on the international oil market since the end of the Second World War was stood on its head.
To turn prices back around, Saudi Arabia and the other members of OPEC were forced to curb production and join forces with Russia. It’s a game with high geopolitical stakes, and the market for oil remains volatile. Meanwhile, the transition to renewables is in full swing, and global demand for oil could fall even faster than predicted. Is it the beginning of the end of the Oil Age?
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