Venture Explains: Cheap Oil

For as long as they last, cheap oil prices have far-reaching implications. 

Why are oil prices so low?

Fracking, which involves shooting a mixture of water, sand, and chemicals into the ground to crack open deposits of oil and natural gas, is upending global energy markets. Thanks to a domestic fracking bonanza, the United States recently surpassed OPEC kingpin Saudi Arabia as the world’s biggest oil exporter. This, coupled with a sluggish global economy, has sent oil prices plunging from over $100 a barrel to as low as $65 a barrel since last summer.

Who wins and who loses?

Consumers in Jordan have been more than happy to have seen the cost of their fuel fall. The Kingdom is also believed to have huge deposits of oil shale which could be extracted using fracking, potentially turning Jordan into a net exporter of energy. But fears remain that important aid and investment from Gulf countries could be cut back over the coming year as their oil revenues shrink.

How long will cheap oil last?

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In mid-December, Bank of America cautioned that crude prices could slump to as low as $50 a barrel in 2015. Accurately predicting which way oil prices will head over the coming months is nigh on impossible. But a great deal depends on what steps the United States and Saudi Arabia decide to take to try to maintain their market positions.