Illustrated by the above Economist cover, it seems as if the economy of oil is changing, thanks in large part to the boom of shale drilling in the United States. America is a now competitor in the international oil market .
Given the global dependence on oil - the world consumes 90 million barrels a day of oil - it should come as no surprise that this American "shale revolution" is having a huge impact on the global economy.
Here is the short version of why, from The Economist:
Their manic drilling—they have completed perhaps 20,000 new wells since 2010, more than ten times Saudi Arabia’s tally—has boosted America’s oil production by a third, to nearly 9m barrels a day (b/d). That is just 1m b/d short of Saudi Arabia’s output. The contest between the shalemen and the sheikhs has tipped the world from a shortage of oil to a surplus.
And what exactly does this oil surplus mean? For consumers, there are two main takeaways.
,- Cheaper oil has a global positive effect on consumers. This $40 less per barrel translates to $1.3 trillion shifting "from producers to consumers".
- Although import-heavy nations like Turkey will benefit more from lower oil prices, The Economist predicts this could raise global GDP .
How long will this continue? Only time will tell. Right now, OPEC wants to try and cut their oil output, to drive the prices back up. However, Saudi Arabia is hoping to let prices fall and bankrupt the American shale drillers. What affect this all will have on the Gulf nations remains to be seen.