Oil Keeps Crashing; Price is Now at Lowest Level in Seven Years

By Robert G. Yetman, Jr. Editor At Large

The price of crude oil continues plummet, falling below $37 a barrel on Tuesday. That has not happened since February 2009, when the so-called Great Recession was in full swing. Reacting to the further decline in the price of oil, the Dow Jones Industrial Average fell by over 200 points during the trading day on Tuesday, before settling at 162.51 points down by the market���s close.

Although oil recovered in the years that followed the worst of the global economic collapse, ultimately ascending to a peak price of around $108 a barrel in June 2014, the world has since been subject to a massive glut of the black gold such that it has caused prices to sink by roughly two-thirds off of that peak value.

There are basically three reasons for the now-enormous inventory of crude: weak demand in countries with stagnant economies; significant growth in U.S. output; and unwillingness on the part of OPEC to cut production, in spite of the beating taken by member nations like Nigeria and Venezuela. It is believed that Saudi Arabia, the 800-pound gorilla in the OPEC room (it is the world���s largest oil exporter), is seeking to keep the pressure on America���s energetic shale oil and gas industry. The aforementioned Nigeria and Venezuela are examples of OPEC countries that do not have the deep pockets capable of withstanding the strategic approach taken by Saudi Arabia to maintain high production levels, and their own economies are suffering, as a result.

While the price decline has resulted in great news at the pumps, that���s about the extent of it. The overarching negative effects to the global economy from the collapse in oil prices far outweighs the more ���nuts and bolts��� benefits realized by consumers. However, given Saudi Arabia���s stance at the present time, don���t look for the situation to improve anytime soon.