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The 2010s oil glut is a considerable surplus of crude oil that started in 2014–2015 and accelerated in 2016, with multiple causes. They include general oversupply as US and Canadian tight oil (shale oil) production reached critical volumes, geopolitical rivalries amongst oil-producing nations, falling demand across commodities markets due to the deceleration of the Chinese economy, and possible restraint of long-term demand as environmental policy promotes fuel efficiency and steers an increasing share of energy consumption away from fossil fuels.

The world price of oil was above US$125 per barrel in 2012, and remained relatively strong above $100 until September 2014, after which it entered a sharp downward spiral, falling below $30 by January 2016. OPEC production was poised to rise further with the lifting of international sanctions against Iran, at a time when markets already appeared to be oversupplied by at least 2 million barrels per day.[1]

In December 2015, The Telegraph quoted a major oil broker stating: "The world is floating in oil. The numbers we are facing now are dreadful"[2] – and Forbes magazine stated: "The ongoing oil price slump has more or less morphed into a complete rout, with profound long-term implications for the industry as a whole."[3]

As 2016 continued, the price gradually rose back into the $40s, with the world waiting to see if and when and how the market would return to balance.[4]

In October 2018, Brent prices had recovered to their pre-2015 levels, peaking [5] at $86.29 a barrel on 3 October.

The following month, Brent prices fell approximately 22%, constituting the largest monthly loss in a decade, ending the month at $59.46 per barrel on 30 November.[6]


Unsustainable pricesEdit

On 6 April 2014, writing in a Saudi Arabian journal, World Pensions Forum economist Nicolas J. Firzli warned that the escalating oversupply situation could have durably negative economic consequences for all Gulf Cooperation Council member states:

the price of oil has stabilized at a relatively high level (around $100 a barrel) unlike all previous recessionary cycles since 1980 (start of First Persian Gulf War). But nothing guarantees such price levels in perpetuity.[7]


North American shale outputEdit

Combined U.S. and Canadian oil production nearly doubled from 2008 levels, due to substantial improvements in shale "fracking" technology in response to record oil prices. The steady rise in additional output, mostly from North Dakota, West Texas, Oklahoma and Alberta, eventually led to a plunge in U.S. oil import requirements and a record high volume of worldwide oil inventories in storage.[8] By October 2018, U.S. shale oil production rose to 7.6 million barrels per day.[9] amid reports of significantly lower production costs.[10]

China's slowed growthEdit

The 2015–16 Chinese stock market turbulence slowed the growth of the economy in China, restraining its demand for oil and other industrial commodities.[citation needed]

Geopolitical rivalriesEdit

In spite of longstanding geopolitical rivalries – notably the GCC bloc versus Iran and Venezuelaemerging markets oil producers within and outside OPEC maintained at least some output discipline until the fall of 2014, when Saudi Arabia advocated higher OPEC production and lower price levels to erode the profitability of high-cost shale oil production.[citation needed]

It has been suggested[by whom?] that the Saudi Arabian-Iranian Proxy War was a powerful influence in the Saudi decision to launch the price war.

Some geoeconomics experts have argued that the SaudiQatari rivalry has shattered the semblance of unity that may have existed amongst fossil fuel producers:

What we’re witnessing here is a fight to the death between the world’s leading oil and natural gas producers at a time when fossil fuel prices are collapsing across the board.[11]

Combating climate changeEdit

In the quarters leading up to the 21st UN Climate Change Conference in Paris, US and European policy makers, pension trustees and academic thought-leaders became active devising new ways of fostering private capital stewardship and "greener" investment: persuading and incentivizing institutional asset owners to embrace renewable energy and a low-carbon investment ethos, more propitious for long-term growth.[citation needed]

Speaking at the 5th annual World Pensions Forum held in Paris on the sidelines of the UN Conference, Earth Institute Director Jeffrey Sachs argued that institutional investors would eventually have to divest from carbon-reliant oil industry firms if they could not react to political and regulatory efforts to halt climate change: "Every energy company in a pension fund's portfolio needs to be scrutinized from purely a financial view about its future, 'Why is this [a company] we would want to hold over a five- to 20-year period?'... If we continue to hold major energy companies that don’t have an answer to a basic financial test, we are just gambling. We have to take a fiduciary responsibility – these are not good bets."[12]

President Obama insisted on America's essential role in that regard: "We've led by example [...] from Alaska to the Gulf Coast to the Great Plains [...] we've seen the longest streak of private job creation in our history. We've driven our economic output to all-time highs while driving our carbon pollution down to its lowest level in nearly two decades. And then, with our historic joint announcement with China last year, we showed it was possible to bridge the old divide between developed and developing nations that had stymied global progress for so long [...] That was the foundation for success in Paris."[13]



Under Hugo Chávez and his Bolivarian government, PDVSA resources were used to fund social programmes, with Chávez treating it like a "piggybank".[14] His social policies resulted in overspending[15][16][17] that caused shortages in Venezuela and allowed the inflation rate to grow to one of the highest rates in the world.[18][19][20]

According to Cannon, the state income from oil revenue grew "from 51% of total income in 2000 to 56% 2006";[21] oil exports increased "from 77% in 1997 ... to 89% in 2006";[21] and his administration's dependence on petroleum sales was "one of the chief problems facing the Chávez government".[21] By 2008, exports of everything but oil "collapsed".[17] and in 2012, the World Bank explained that Venezuela's economy is "extremely vulnerable" to changes in oil prices since in 2012 "96% of the country's exports and nearly half of its fiscal revenue" relied on oil production.[22] When oil prices dropped in 2015, this worsened the crisis Venezuela was experiencing from the government's mismanagement.[23]

Venezuela has not yet, as of 2018, recovered from the oil production loss. Combined with OPEC/NOPEC production cuts, higher than average demand growth, US shale pipeline bottlenecks, and Iranian sanctions, the oil glut came to an end.[citation needed]


Immediately after the death of Hugo Chavez, Castro sought a new benefactor as the oil that was shipped from Venezuela to Cuba began to slow.[24] With Cuba needing new support, relations between the United States and Cuba began to be reestablished in 2014 during United States–Cuban Thaw.[24]

However in 2016, Cuba still relied on Venezuela's oil and economic assistance. With Cuba's economy slowing as a result of Venezuela's own crisis, many Cubans feared that their nation would soon return to having similar experiences to that of the Special Period, which occurred following the dissolution of the Soviet Union, which Cuba heavily relied on.[25]

See alsoEdit


  1. ^ Kalantari, Hashem; Sergie, Mohammed (2 January 2016). "Iran Says Post-Sanctions Crude Output Boost Won't Hurt Prices". Bloomberg News. Retrieved 16 January 2016.
  2. ^ Evans-Pritchard, Ambrose (29 December 2015). "Goldman eyes $20 oil as glut overwhelms storage sites". The Telegraph. Retrieved 29 December 2015.
  3. ^ Sharma, Gaurav (11 December 2015). "Oil Market Rout: Winners, Losers And Cost Implications For 2016". Forbes. Retrieved 29 December 2015.
  4. ^ "OPEC Basket Daily Archives". OPEC. Retrieved 21 May 2016.
  5. ^ "Market Insider Daily Archives". Business Insider. Retrieved 3 October 2018.
  6. ^ Myra P. Saefong. "Oil prices drop 22% in November for biggest monthly loss in a decade". MarketWatch. Retrieved 2018-12-06.
  7. ^ Firzli, M. Nicolas J. (6 April 2014). "A GCC House Divided: Country Risk Implications of the Saudi-Qatari Rift". Al-Hayat. London. Retrieved 29 December 2014.
  8. ^ Krassnov, Clifford (3 November 2014). "U.S. Oil Prices Fall Below $80 a Barrel". The New York Times. Retrieved 13 December 2014.
  9. ^ Jessica Resnick-Ault (17 September 2018). "U.S. shale oil production to rise to 7.6 million barrels per day in October". Reuters. Retrieved 2018-12-07.
  10. ^ Kevin Crowley (7 December 2018). "U.S. Shale Likes But Doesn't Need OPEC Cuts to Keep on Growing". Bloomberg. Retrieved 2018-12-07.
  11. ^ Firzli, M. Nicolas (17 June 2017). "The Qatar Crisis and the Eastern Flank of the Arab World". Retrieved 18 July 2017 – via Al Sharq Al Awsat
  12. ^ Pearce, Andrew (6 December 2015). "Jeffrey Sachs: Fund Managers Have a Duty to Dump Fossil Fuels". Financial News. Retrieved 30 December 2015.
  13. ^ Obama, Barack (12 December 2015). "President Obama's Statement on Climate Change". White House Briefing Room. Archived from the original on 28 December 2015. Retrieved 30 December 2015.
  14. ^ ""Pdvsa is the government's piggy-bank," a U.S. official says". El Universal. 29 June 2004. Archived from the original on 4 March 2016. Retrieved 28 June 2014.
  15. ^ Siegel, Robert (25 December 2014). "For Venezuela, Drop In Global Oil Prices Could Be Catastrophic". NPR. Retrieved 4 January 2015.
  16. ^ Scharfenberg, Ewald (1 February 2015). "Volver a ser pobre en Venezuela". El Pais. Retrieved 3 February 2015.
  17. ^ a b Corrales, Javier (7 March 2013). "The House That Chavez Built". Foreign Policy. Retrieved 6 February 2015.
  18. ^ Lansberg-Rodríguez, Daniel (15 March 2015). "Coup Fatigue in Caracas". Foreign Policy. Retrieved 10 July 2015.
  19. ^ "Inflation rate (consumer prices)". CIA World Factbook. Retrieved 26 February 2014.
  20. ^ "Venezuela's economy: Medieval policies". The Economist. 20 August 2011. Retrieved 23 February 2014.
  21. ^ a b c Cannon, p. 87.
  22. ^ "Venezuela Overview". World Bank. Retrieved 13 April 2014.
  23. ^ Egan, Matt (12 July 2016). "Why Venezuela's oil production plunged to a 13-year low". CNNMoney. Retrieved 14 July 2016.
  24. ^ a b "Why the United States and Cuba are cosying up". The Economist. 29 May 2015. Retrieved 14 November 2015.
  25. ^ Burnett, Victoria (12 July 2016). "Amid Grim Economic Forecasts, Cubans Fear a Return to Darker Times". The New York Times. Retrieved 14 July 2016.