[jsmcgd]

I don't think the US increased oil production to decrease oil prices. It has had a very successful increase in shale gas production due to new technologies. This has affected the oil prices, and Saudi Arabia in turn isn't liking the competition, so it has massively increased its oil production as a matter of policy. This will eliminate a lot of new, marginally profitable energy producers, across the globe, including Russia. Once they've collapsed, expect the taps to close again. I think the current situation is more of a happy accident for US Foreign Policy. A lot of American producers will be burnt by the current price of oil as well.

[kamme]

Your theory sounds logical, and that action by OPEC would also seem logical.

... but the numbers suggest otherwise. The last few years there is no increase in production by OPEC countries: http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=5&pi...

[saryant]

Saudi Arabia hasn't increased production, but they also haven't decreased production. Within OPEC, the Saudis are supposed to be the swing producer, adjusting their output up and down to maintain price targets. That arrangement has largely broken down as it relied on the other members to respect their quotas. OPEC has found (many times) that when prices drop too far, their members ignore the quotas and feud for marketshare instead.

The Saudis used to keep to their role as swing producer but this time they're letting the rest of OPEC sweat. They've got currency reserves to weather this storm but most of the other OPEC members do not (save for the rich Gulf emirates). The Saudis are trying to teach the rest of OPEC a lesson and bring them back in line.

Couple that with the phenomenal increase in American oil and gas output due to fracking and horizontal drilling and you've got a situation in which two major producers, the US and Saudi Arabia, are flooding the market. Since there's no central authority over American producers, they'll drill whenever the market price will sustain their project. America is unique in that mineral resources are privately held rather than owned by the state, giving private enterprise the incentive to drill as much as possible until the price renders a given well uneconomical.

The end result is that the Saudis have abdicated their role (not for the first time, but this may be the last) and the Americans have picked up.

America is now the world's swing producer. No one saw that coming.

[jsmcgd]

That chart is missing 2014. The latest I've heard is that Saudi keeps increasing supplies:

http://arabianindustry.com/petrochemicals/news/2014/dec/14/s...

[gadders]

Saudi has also increased oil production to put pressure on Iran, with which it competes for regional hegemony.