OPEC chooses not to cut production
The Organization of Petroleum Exporting Countries has announced that it will not cut production, a move that both threatens and strengthens national economies around the world.
Bloomberg reports that the international price of oil dropped to $75 for the first time since 2010 after it was confirmed that OPEC member nations would not cut their production levels. The decision was reached in a meeting of OPEC members in Vienna, Austria.
OPEC is responsible for producing 30 million barrels of oil daily, which is equivalent to 40 percent of the world's daily output. Business Insider notes that the price of oil has dropped more than 30 percent since June. The move threatens a number of national economies, among them Venezuela and Russia. Both those nations need the price of oil to be above at least $100 to balance their budgets. Saudi Arabia, another major oil exporter, is said to need oil prices to hover around $90 a barrel to support its spending habits. Reuters reports that Venezuela's representative to OPEC left the meeting clearly agitated and refused to interact with the media. Some interpret the decision to maintain current levels of production as a move to undercut oil producers in the United STates, which has recently become the world's largest exporter of oil. This is because oil extracted in the United States relies on fracking, a newer technology than oil extracted in foreign countries. This makes the cost of extracting a barrel of oil in the United States ranged from $50-$100, while traditional oil extraction costs around $10-$25, according to a different Bloomberg article. Keeping production at its current level, and thus maintaining current market prices, means that it may soon become too costly to extract oil in the United States, threatening its newly acquired market dominance.
