
As widely reported, the two main reasons why global crude prices are trading below $50 is OPEC’s refusal to tighten supply. It is widely understood that Saudi Arabia-dominated OPEC is keeping the cartel’s oil pumps working at full capacity to pummel North American shale oil and Canadian tar sands producers. On a certain level, this strategy has been working-new field permit applications and oil rig deployments are crashing while shale industry layoffs are spiking. However, the sub-$50 price of oil hasn’t had much effect on shale oil production since the number of barrels of shale oil actually increased on a daily basis. The other cause for the oil price crash is the soft global demand for petroleum thanks to a weakening global economy.