Some may disagree with me but a large oil oversupply and low oil prices are directly influenced by Saudis. They use their vast oil reserves as a heavy financial weapon. In 1980s low oil prices generated by Saudis oil market oversupply helped to bring down USSR. Today they are doing same thing in order to push out Russia from the ME and destroy their main competitors including US oil industry. Saudis oil extraction cost is the lowest in the world. The question is if Putin's Russia is going to accept similar economic fate as USSR and if not then what they could do?
I used to have a similar view until I looked back at the record. OPEC, led by Saudi Arabia, cut production through the early 1980s in an effort to prop up the price of oil. Russia, meanwhile, had geared up its oil exports, feeding a surplus into the struggling world economy(that also got new production from Alaska and the North Sea). Not until the middle of the decade did the Saudis (and cooperating OPEC members) give up on trying to limit supply and return to normal production levels. That's when the price of oil really cratered.
Here are some excerpts from Wikipedia:
"From 1980 to 1986, OPEC decreased oil production several times and nearly in half to maintain oil's high prices. However, it failed to hold on to its preeminent position, and by 1981, its production was surpassed by Non-OPEC countries[clarification needed]. OPEC had seen its share of the world market drop to less than a third in 1985, from nearly half during the 1970s.[14] In February 1982, the Boston Globe reported that OPEC's production, which had previously peaked in 1977, was at its lowest level since 1969. Non-OPEC nations were at that time supplying most of the West's imports.[15]
"OPEC's membership began to have divided opinions over what actions to take. In September 1985, Saudi Arabia became fed up with de facto propping up prices by lowering its own production in the face of high output from elsewhere in OPEC.[16] In 1985, daily output was around 3.5 million bpd down from around 10 million in 1981.[16] During this period, OPEC members were supposed to meet production quotas in order to maintain price stability, however, many countries inflated their reserves to achieve higher quotas, cheated, or outright refused to accord with the quotas.[16] In 1985, the Saudis were fed up with this behavior and decided to punish the undisciplined OPEC countries.[16] They abandoned their role as swing producer and began producing at full capacity, which created a "huge surplus that angered many of their colleagues in OPEC".[17] High-cost oil production facilities became less or even not profitable. Oil prices as a result fell to as low as $7 per barrel.[16]
"During the 1980s, non-OPEC production increased worldwide.[10] By 1980 the Soviet Union was the world's largest producer of oil.[11]"
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