Publications: The Petroleum Economics Monthly

A Conflict of Necessity: The 2014 Oil Price War (September 2014)


Middle Eastern nations have been forced into a price war. Specifically, the “Middle East Troika”—Kuwait, Saudi Arabia, and the United Arab Emirates—must fight to defend its position in the global market. The Troika countries share several unique characteristics. First they rely on sales of domestically produced oil for much of their revenue and GDP. Second, the production cost for their oil is lower than such costs anywhere else in the world. Third, each of these nations has very large foreign currency reserves, which means their economies can tolerate months or even years of low oil prices. Finally, if they do nothing, the Troika nations stand to lose market share as US and Canadian producers boost output aggressively. In this report, we chronicle the events that started the price war, highlighting the changing pattern of world oil flows and the weakening economic circumstances. We then discuss how the battle can be brought to an end.


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