http://www.resilience.org/stories/2014-12-19/the-oil-price-crash-of-2014

Usually when there is a mismatch between supply and demand in the global crude market, it is up to Saudi Arabia—the world’s top exporter—to ramp production up or down in order to stabilize prices. But this time the Saudis have refused to cut back on production and have instead unilaterally cut prices to customers in Asia, evidently because the Arabian royals want prices low. There is speculation that the Saudis wish to punish Russia and Iran for their involvement in Syria and Iraq. Low prices have the added benefit (to Riyadh) of shaking at least some high-cost tight oil, deepwater, and tar sands producers in North America out of the market, thus enhancing Saudi market share.

The media frame this situation as an oil “glut,” but it’s important to recall the bigger picture: world production of conventional oil (excluding natural gas liquids, tar sands, deepwater, and tight oil) stopped growing in 2005, and has actually declined a bit since then. Nearly all supply growth has come from more costly (and more environmentally ruinous) resources such as tight oil and tar sands. Consequently, oil prices have been very high during this period (with the exception of the deepest, darkest months of the Great Recession). Even at their current depressed level of $55 to $60, petroleum prices are still above the International Energy Agency’s high-price scenario for this period contained in forecasts issued a decade ago.

Yes, Virginia, there is always an alternative view. In fact, there are often multiple alternative views, and they are not necessarily contradictory, just different parts of a very murky elephant.

This may not be a totally correct interpretation of events, and no doubt it represents a partisan agenda, but like all the others, it is compelling, shows evidence of deep understanding, careful study and astute insight, and we dismiss it at our peril.

No one is saying “supply and demand” doesn’t matter. It does play a vital role, but it is only part of the story, the tip of the iceberg. Its not just that someone is “gaming the system”; everyone is gaming the system, and no one really knows what he’s doing or how its going to play out.

This is just the raw data.

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