With the price of oil down 28 percent in recent months, financial analysts and political pundits are all asking the same questions: What are the reasons behind this drop and why isn’t OPEC taking steps to stop the bleeding?
It’s Economics 101. When the price falls, you cut supply. OPEC nations are amongst the world’s top oil exporters. It’s certainly within their capability. If there was even a hint they would slow production, prices would certainly jump from current lows of about $82 a barrel.
According to recent estimates, Saudi Arabia needs the price at $99.20 to break even. Even at that point, many OPEC nations would still be in the red. So why is OPEC sitting on its hands?