Crucial factors and consequences of the oil crisis 2014-2016

 The most recent oil glut has been initiated by the Saudis, who have reacted on the successful development of new drill technologies in the USA. The shale energy boom in June 2014 has promised forthcoming termination of the Gulf dictate on the commodity markets. Riyadh has persuaded OPEC to intensify oil production holding down the share of the market. Rigs all over the globe drilled “easy” oil to transform the American shale crude into a very expensive product. However, nobody predicted oil prices to fall more than 60% in sixteen months.

Crucial factors

Besides Riyadh, the overvaluation of the asset during the period of low interest rates of the major central banks has affected the decline of the market price for a crude barrel after July 2014. In the 2014 summer, investors have been greedy for oil futures, so the interest in crude oil provided the strengthening of the “sell” trend. Thus, in 2015 three main factors have triggered the oil crises: (a) shale energy boom, (b) the Saudis’ intention to suppress high tech oil production, (c) overestimating of the oil futures liquidity on the global markets.

During 2015 economic slowdown in Asia has defined lower demand for energy and commodities, so million of barrels have been waiting for a buyer. Thus a new factor replaced (c), owing to the Chinese yuan devaluation and economic problems in the region. The contradiction between the Gulf and non-Gulf oil exporters was accumulated within OPEC and thus the (d) factor came on the scene.

The most powerful non-OPEC exporter Russia increased production and struggled with Saudis for East and Central European markets (e).

Iran had managed to close the nuclear deal; Tehran had survived sanctions and joined the battle for the oil markets in Europe and Asia (f).

The last, but not the least among the crucial factors is ISIS (g) ruining oil production in Syria and Iraq. In 2018 Russians are fighting OPEC and Americans to take control on the Syrian oil industry.


The Saudis had agreed to cut the production and worked out a new Investment Fund to pull through the hard times of low oil prices. Since January 2017, when OPEC with allies had made the deal for the cutoff, the oil markets are restructuring the shares and demands:

(a) The deepwater drilling and shale oil production put the onshore oil under the pressure. Thus, hi-tech oil companies from Europe and U.S. take advantage to overcome OPEC.
(b) The spot prices go higher, so producers are interested to sell oil instead of waiting for its later delivery. Logistics need to adjust the trend.
(c) The discussions of mass usage of new energy sources are becoming louder these days; moreover, the hybrid, electric and BEV vehicles gain recognition in the middle class all over the globe.