© Fadel Gheit
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I disagree, since oil prices are not driven solely by industry fundamentals of supply and demand. I believe geopolitical factors also contributed to the collapse in oil prices. Saudi Arabia is using crude oil as a weapon as lower prices hurt the economies of Iran and Russia and reduce their influence in the Middle East. Saudi Arabia has successfully used oil as a weapon to end the Iran-Iraq war and contributed to the collapse of the Soviet Union. At current oil prices both Iran and Russia are likely to default on their foreign debt service obligations probably as soon as the end of this year. That is the real reason, why oil prices are dropping, not because the world does not need oil anymore. The changes in supply and demand are too small to be credited for the total collapse in oil prices from $100 to under $50 in six months. Neither the $100 nor $50 prices are sustainable.
Oil prices are the big story for 2015. They are a once-in-a-generation shock and will have huge reverberations. In your opinion, what influence it will have on the global economy?
Low oil prices benefit the consumer and the economies of oil importers, such as Japan, Europe and the United States, but it has a negative impact on oil producing countries: OPEC, Russia, Mexico and Norway. Thus, 2015 is going to be a bad year for oil exporters and a good year for oil importers.
What other factors might determine oil prices performance in the nearest future?
I suppose geopolitics will remain a key factor in oil prices. Actions by Russia and Iran could charge or defuse global tension and result in a response by Saudi Arabia, which could impact oil prices.
What is your forecast for oil prices for the beginning of the year?
I believe oil prices will probably go down further before a recovery, but I would not be surprised to see oil prices increase $10, $15, or even $20 by the end of this year.