The United Arab Emerites (UAE) is putting blame from plunging oil prices squarely on the United States and Canada.
UAE Energy Minister Suhail Mazroui said last week that it was impossible for Middle East oil producing countries to protect oil prices in the face of what he called the “flood of oil extracted from sand and shale fields in the U.S. and Canada.”
A number of countries, including some Organization of Petroleum Exporting Countries (OPEC) members, have called for a reduction in oil exports from OPEC to stabilize prices. “This would make no difference due the amount of oil coming from the shale and sand fields,” Mazroui said. “What will slow the flow are prices so low that production form those fields is no longer profitable.”
Mazroui said he was beginning to see closure of some operations in the U.S. and said he welcomed it. “There has been overproduction of four million barrels per day in the U.S. and this is not sustainable. The market is taking care of this,” he said.
Oil prices have dropped from $115 a barrel in June 2014 to $42 a barrel on Friday. Most shale and sand fields are not profitable below prices of $80 a barrel.
The drop in oil prices is having major impacts on a number of oil producing countries, including Venezuela, Colombia, Ecuador, Iran, Algeria and Russia. Although Colombia and Ecuador appear to have taken steps to withstand an extended period of lower oil prices, Venezuela and Russia appear to be in trouble.
Annual inflation is running at more than 60% in Venezuela and many international analysts say the country could default on its loans by mid-2015. The financial rating agency Moody’s downgraded Venezuelan debt last week, calling it “very high risk.”
The Russian ruble has fallen almost 45% against the U.S. dollar as of January 16, much of it attributed to instability created by the drop in oil prices.