Since 2007, U.S. crude oil production in the United States has nearly doubled, thanks mainly to new technologies used in the extraction of shale oil.
The recent rapid fall in the price of oil is a result of simple supply and demand, said market analyst Dominic Haywood of Energy Aspects, a research consultancy in London.
“Production grew by about 1 million barrels per day year on year” because of rising U.S. output, especially in 2014, from shale producers, he said.
A plunging price would normally prompt the Organization of the Petroleum Exporting Countries to slash production in order to boost the price. Instead, the cartel chose in November to keep its daily production quota at 30 million barrels per day. The aim is to "flush out" high-cost oil producers who rely on a soaring oil price to fund their operations, Haywood said.
“OPEC are a low-cost producer," he said. "And as a low-cost producer in a falling price environment, you should not be the one that cuts production — it should be the high-cost producers. And there are various high-cost producers out there. The U.S. shale producers are one contingent of that group.”
Speaking Tuesday, the United Arab Emirates’ energy minister, Suhail Al-Mazrouei, said rising North American shale oil output was unsustainable and needed to be curbed.
"We are telling the market and other producers to be rational, to be like OPEC and look at growth in the international market," he said.
With more oil producers entering the industry in recent years, OPEC is battling to retain control of the market, said analyst Abhishek Deshpande of investment bank Natixis.
“They really are trying to test the mettle of the other non-OPEC producers such as the U.S. and Russia, which are producing almost the same amount of oil as Saudi Arabia,” he said.
Oil giant BP announced 300 job cuts in its North Sea operations Thursday.
In the United States, the number of new shale-drilling projects has declined. Analysts say extraction projects in Canada’s tar sands are particularly vulnerable to the falling oil price.
“Lots of these projects were modeled and sanctioned on an oil price of between $90 and $110 per barrel," Haywood said. "So the economics are no longer what they were.”
Major oil producer Iran based its government budget on oil prices of $100 a barrel. President Hassan Rouhani said Tuesday that Iran would withstand the economic pain of falling prices — and he appeared to accuse longtime rival Saudi Arabia of plotting against Tehran.
“Those who have planned the oil price reduction against some countries should know that they will regret it,” Rouhani said.
Analysts predict oil prices are unlikely to rise over the coming year, creating a financial headache for some producers but relief for many consumers.
