Brent crude oil, one of several kinds of oil on the world market, dropped below $40 a barrel on Tuesday. However, the main group of oil producing countries has been unable to reduce production to limit supply.
The Organization of Petroleum Exporting Countries (OPEC) met in Vienna last week. OPEC said members should be part of climate change-related talks such as the COP-21 meeting in Paris.
The group also called on members to maintain, in its words, an “energy dialogue” with countries that produce oil but are not OPEC members. About two-thirds of oil production is carried out by non-OPEC countries.
But, the 13 member countries could not agree on any production cuts. OPEC oil production continues at record levels. An OPEC report says the group’s oil production increased to over 31 million barrels of oil per day.
Some experts say OPEC member Saudi Arabia continues its production levels to keep competitors from gaining market share.
Some producers in the United States use techniques like hydraulic fracturing, or fracking, to increase oil output. However, that method costs more than the traditional drilling techniques used in many other countries. These may include the indirect costs of pollution to ground water or very small earthquakes in some places.
OPEC says it continues its high production levels because it believes demand will increase in the coming year.
Experts say worldwide demand for crude, or unprocessed oil, is already about 2 million barrels a day below the current supply. That has led to some markets to have more oil than needed.
That oversupply may grow as international sanctions on Iranian exports are lessened. Iran is an OPEC member.
Indonesia also became a full member of the oil group at the December meeting.
Demand for oil has been decreasing as economic activity in many important areas around the world has slowed. Economic growth slowed in the group of 19 nations that use the euro as money from July to September. Growth in the Eurozone was 0.3 percent during that period.
Slowing demand in China has also been blamed for low oil prices. China is the world’s second-largest economy. Economic growth in China has slowed to a yearly rate of 6.9 percent, the country’s lowest growth since 2009.
Words in This Story
barrel –n. a standard measurement for oil
dialogue –n. a discussion or series of discussions that groups or countries have to lessen differences
hydraulic fracturing –n. a process of drilling for oil in which fluids are pumped into the ground in order to get more oil
crude –adj. unprocessed, raw