The high price of cheap oil

Cheap oil may be a boon for consumers, but it will create more uncertainty in an already uncertain world

An oil refinery in California.
(Image credit: Justin Sullivan/Getty Images)

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"The oil industry, with its history of booms and busts, is in a new downturn," said Clifford Krauss at The New York Times. The price of oil closed under $40 a barrel this week for the first time since 2009, a 60 percent plunge from its peak last year. The explanation "boils down to the simple economics of supply and demand." The world is awash in crude, with U.S. oil production doubling over the past six years. Meanwhile, the economic slowdown in China, the world's largest oil importer, and sluggish growth in other developing countries are crippling demand. There's no end in sight for the global oil glut, said Russell Gold at The Wall Street Journal. Lower prices mean even more pressure on oil-producing countries to pump to make up for lost revenues. Saudi Arabia, Russia, and Iraq are pumping as many barrels as they can in order to defend their market share, in a battle that's looking increasingly like "the energy-industry version of trench warfare."

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