Saudi Arabia and the Shifting Geoeconomics of Oil

Oil prices plunged more than 50 percent between mid-2014 and mid-2015. The Organization of the Petroleum Exporting Countries (OPEC) was widely expected to cut production in an effort to arrest the price decline. And yet OPEC did no such thing. As it left production levels unchanged and prices fell further, observers were quick to declare that the cartel was over a barrel. In fact, however, OPEC as an institution—and Saudi Arabia, its leader—is likely to emerge from this paradigm shift stronger than before in many ways. With its new strategy the kingdom is emphasizing market share, rather than price, while also moving to delegate the burden of balancing the world oil market to the U.S. shale industry. The move, therefore, marks a significant change in the geoeconomics of oil.