Oil prices dropped to $81.84 a barrel on the New York Mercantile Exchange on Tuesday, the biggest one-day slide in roughly two years,
according to The Wall Street Journal. Some analysts predict it could fall up to $10 more this fall.
According to The Washington Post, the U.S. shale oil producers have lost 25 percent of their share prices in the past three months. On other continents, the downshift in prices has "pushed the budgets of Saudi Arabia, Russia, Libya and Iraq into the red, and deepened budget deficits in oil-exporting nations of Nigeria, Venezuela and Iran."
Altogether, seven of the 12 members of the OPEC cartel fail to balance their budgets when prices fall anywhere below $100 a barrel.
The largest exporter, Saudi Arabia, is unlikely to slow production in order to raise prices, as it's undergoing a drastic improvement of its living standards. In fact, the kingdom has cut prices instead of production. Because of this, about $200 billion that would have filled OPEC's coffers has remained in the hands of oil consumers like the U.S., China, and the European Union.
"Oil price war 3.0," is the name Philip Verleger, an economist and oil world analyst, has given the new landscape.
"The Saudis have to fight this now because they were seeing significant encroachment on their market share," he explained. By keeping prices low, other countries will suspend or cancel their most expensive projects.
"In the short term, oversupply and lower oil prices clearly have some positive impacts," said the Center for Strategic and International Studies. "They are good for economies and consumers, helpful for sanctions efforts against rogue states, and serve as buffers against continued political unrest and supply disruptions."
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