P-ISSN: 2808-0467
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THE USA’S SHALE OIL REVOLUTION: OPEC STRATEGIES AND
OIL PRICES WAR IN GLOBAL ECONOMY
Cahya Handy Saputra
1
, Andria Luhur Prakoso
2
Muhammadiyah University of Surakarta, Surakarta, Central Java, Indonesia
1
cahyahandi7@gmail.com
2
alp120@ums.ac.id
PAPER INFO ABSTRACT
Received: March
2022
Revised: April
2022
Approved: April
2022
Background: At the beginning of 2020, the Covid-19 pandemic attacked the
world and affected the continuity of the world economy. This condition also
causes oil prices to decline further. OPEC plans a strategy to realize its role
as a regulator of the world oil trade. Not only the global economy but the
stock market is also affected by the decline in oil prices. Production of shale
oil in the United States lowered OPEC oil prices, coupled with economic
conditions during the Covid-19 pandemic which worsened the international
economy.
Aim: The authors examined changes in oil prices due to United States’ shale
oil.
Method: The qualitative method and literature review were employed in this
study. The information was compiled from a variety of documents and other
sources.
Findings: The United States reduced its reliance on OPEC imports, which
resulted in lower OPEC oil prices due to an oversupply and decreasing
demand. Along with the Covid-19 epidemic, not only is the global economic
collapse growing worse, but the decrease in oil prices in early 2020 is getting
worse as well. Finally, the world economy suffered a downturn, which
impacted the international capital market.
KEYWORDS
shale oil; OPEC; oil prices; global economy
INTRODUCTION
Energy is one of the basic human needs and is the basic capital for development in other
sectors. This makes energy something that is very important for a country to have. Countries
in the world make energy an important component that is used to measure the country's
development. This ultimately has an impact on the state budget to allocate funds for developing
energy. Countries that have abundant energy sources are often classified as rich countries. It is
not uncommon for countries to compete to obtain energy based on limited resources, one of
which is petroleum. Oil is a source of energy that has been the favorite for countries to drive
development.
Oil and natural gas are some of the most important energy commodities for countries.
Regardless of the non-renewable nature of oil, oil and natural gas can support a country's
economy. Due to the limited nature of oil and natural gas, an international organization was
created that regulates and shelters countries that export petroleum. This organization is called
the Organization of the Petroleum Exporting Countries (OPEC) (Behar & Ritz, 2016). OPEC
also regulates oil trading due to the limited nature of petroleum, so it needs to be regulated to
prevent scarcity. In this case, OPEC consists of countries that have natural oil resources.
However, not all countries that export and produce oil are included in this OPEC membership.
Countries that produce the largest oil, such as Russia, the United States, and China are not
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members of OPEC, this makes these countries free to carry out economic activities using
petroleum.
OPEC has also experienced member entry and exit, this is due to the dynamic international
situation. There have been several times escalations between OPEC and non-OPEC member
countries. This is often based on the desire of OPEC countries to get a balanced price and the
existence of regulations regarding oil quotas and tariffs. The United States is one country that
often comes into conflict with OPEC members. This is because America has considerable oil
reserves and is dependent on foreign oil sources. Canada, Mexico, Venezuela, Iraq, and Algeria
are countries that have become sources of American oil imports. America's dependence on oil
imports makes America try to find alternative resources to meet its energy needs. This is
manifested in America in the form of "Shale Oil" which comes from fine-grained sedimentary
rocks that contain kerogen and can be processed into energy (Baumeister & Peersman, 2013).
Shale oil is a synthesized source of energy and commodities are being developed by America.
The existence of shale oil should be a gateway for America to reduce its dependence on
oil imports. However, who would have thought that shale oil would be a nightmare for oil-
producing and exporting countries, for example, OPEC member countries? The development
of shale oil production is predicted to be "the new oil ordered" because the production price is
not too expensive and the raw material can be found in all layers of the earth. Meanwhile,
OPEC member countries that control oil production feel that shale oil is a threat to commodity
prices. When countries try to control shale oil, the oil will be left behind and the price of oil
will become a mere memory. OPEC member countries are trying to design a strategy for the
shale oil revolution pioneered by America. This was done to maintain the price of the oil
commodity, which has been rumored to have continued to decline since 2014 and is still
fluctuating. The decline in oil prices in the development of world energy will affect world
orders. This can lead to changes in economic activity in the energy segment around the world.
However, America will not stop producing shale oil because it is its main commodity. At
the beginning of 2020, the Covid-19 pandemic attacked the world and affected the continuity
of the world economy. This condition also causes oil prices to decline further. OPEC plans a
strategy to realize its role as a regulator of the world oil trade. Not only the global economy but
the stock market is also affected by the decline in oil prices. Production of shale oil in the
United States lowered OPEC oil prices, coupled with economic conditions during the Covid-
19 pandemic which worsened the international economy. Based on this, the author will
examine changes in oil prices due to United States shale oil.
In this study, the author formulated a problem regarding how the OPEC policy strategy is
to protect the price of oil commodities for its member countries and the implications of the
United States energy revolution through shale oil which threatens the world economy in the
energy sector. Finally, the author will analyze the impact of the oil price war during the Covid-
19 pandemic on stock markets and the world economy.
METHOD
The qualitative method and literature review were employed in this study. The information
was compiled from a variety of documents and other sources. The sources discuss the OPEC
strategies and the oil prices war in the global economy.
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RESULTS AND DISCUSSION
International Regimes
The international regime is something that underlies all institutions and organizations in
international entities. Stephen D. Krasner's book entitled, "International Regimes" explains that
international regimes are a group of principles, rules, and norms in implicit or explicit decision-
making to regulate the behavior of actors and norms of international relations (Marc A. Levy,
Young, & Zürn, 1995). In this case, the international regime also facilitates the formation of an
agreement. This agreement can be made with international organizations, individual actors, to
state actors. while J. Samuel Barkin in his book entitled "International Organization: Theories
and Institutions" is more directed at actor expectations by analyzing the influence that
international organizations have on other actors. One of these expectations can come from an
agreement facilitated by the international regime itself.
Various elements of the consensus explain several things about the regime as a social
institution. The international regime characterizes the institutional structure of the wider
international community. Regime analysis is one of the tools to understand international
cooperation. In this case, cooperation is analyzed in terms of norms and the routine behavior
of patterned actors. In this case, if a collaboration is not under a regime or institution, the
activity cannot be considered as cooperation (N. C. Levy, 2005). The international regime
regulates the interaction of actors in certain areas with the number and types of different actors
participating. The principles from one regime to another are also different. State actors also
have a fairly broad role in shaping international agendas that can focus attention on specific
issues. The regime is also concerned with compliance aspects, this creates substantial success
for the regime. In fact, in some cases, the state mobilized the military and politics to make it
obedient to the international regime.
Regimes often distribute resources on special issues related to members of an institution.
This also has implications for the distribution of the capacity of each member country in an
international institution. Regimes can influence by redefining objectives in policy as this leads
directly to the development of a country. This requires a direct role from the state involved in
an institution because the international regime is impossible if the actors under it do not
implement the regime. The magnitude of the consequences received by the state regarding the
regime depends on the ability of the institution to solve problems. Each institution and the
structure within it plays a role in being able to show the effectiveness and superiority of each
of the rules in the institution. Concerning the international regime, OPEC has a set of rules to
regulate international oil prices even though the journey is often experiencing challenges.
OPEC also opened a regulation to cut subsidies due to a transfer of the petroleum market share
to the shale oil industry. OPEC creates regulations and protection policies for the oil ministers
of OPEC member countries. This effort was made to protect the management of each country's
oil market in adjusting to changes in the energy market share due to the presence of shale oil.
OPEC cannot create an international regime for non-OPEC member countries. If possible, non-
OPEC member countries would not comply. The international regime is weak outside of
international institutions. Meanwhile, countries that develop shale oil are non-OPEC member
countries. So in this case OPEC can only provide protection policies to member countries to
balance the market between crude oil and natural gas along with shale oil.
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OPEC and Petroleum World Order
OPEC is an international organization whose members are oil-exporting countries. OPEC
was founded in 1960 in Baghdad with five forming countries, namely Venezuela, Kuwait, Iran,
Iraq, and Saudi Arabia. OPEC was established to regulate oil trade around the world as well as
a strategy to increase oil prices. Since its inception, OPEC has expanded its membership to
countries that have great potential in their natural oil resources. Oil is a limited energy resource,
so OPEC aims to create stability in trade and oil production. Even though the price of oil is
never at a stable point because oil always fluctuates. This is caused by various factors in the
economic and political fields. This volatile oil price has implications for the economies of the
oil-exporting countries in the world.
In 2014 world oil experienced a sharp decline and had an impact on oil prices worldwide.
Oil has a very big influence on the world economy because if one of the oil-exporting countries
experiences a decline it can result in a domino effect on all other exporting countries. This is
inseparable from the position of oil, which is a very popular source of energy used by countries.
The existence of this oil has been around for a long time and has always been the prima donna
of countries. In 2014 the price of oil has decreased by 40%, up to the last five years it is still
experiencing instability (Andre & Nasrudin, 2019). Before 2014, the price of oil per barrel was
around $ 115. Since June 2014 the price of oil has continued to decline. In this case, OPEC is
responsible for price fluctuations that have led to a significant drop in commodity prices.
Changes in oil prices are not only influenced by supply and demand factors, geopolitical
factors also play a major role in changes in oil prices. This is because the oil sector is mostly
controlled by Middle Eastern countries. Countries in the Middle East always experience
geopolitical turmoil because it is a strategic place for large countries to seek national interests.
Regarding the supply-demand, it is often the result of very low demand for importing countries
while export countries offer commodities in high quantities. The oil problem does not only
occur in the Middle East region, Venezuela is even experiencing serious economic problems.
Venezuela is an oil-exporting country that experienced a decline in oil prices in 2014. This was
due to the decline in world oil prices, but Venezuela is heavily dependent on oil commodities
to drive the economy. This caused Venezuela to experience inflation of up to 60% (Lubiantara,
2015). In this case, it can be proven that countries that depend only on oil commodities are a
vulnerable group nowadays. This is due to the continuous fluctuation of oil prices and stability
is not certain.
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Figure 1. Venezuela Oil Crisis
Source: Mata Mata Politik (2019)
Oil is an important source of energy in the world order, while OPEC is an international oil
organization. OPEC and oil are inseparable units in the international world. OPEC is trying to
defend its falling oil prices and impose implementation quotas. The decline in oil prices in the
world order is not only negatively inspired by the countries. Some countries are stimulated to
develop other energy sources and some countries feel that the decline in oil can help stimulate
the economy of an oil-importing country. This relates to the monetary side of a country, if the
country is an importer of oil, that country can get a low oil price to reduce the deficit in the oil
trade balance. Oil is a commodity that is quite complicated because of the various interests of
the state and non-state actors.
United States Shale Oil Revolution
Awareness of the availability of energy has increased after the consumption of energy raw
materials began to experience a significant increase. This is also felt by the United States, the
United States has begun to become aware of the limitations of oil, which has been the raw
material for energy. The United States is a country that has the second-highest level of energy
consumption in the world. The United States depends on energy to power the country's
economy. The consciousness of the United States has prompted the United States to seek
alternative resources to replace petroleum. The United States then uses shale rock to be used
as shale oil.
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Figure 2. The American Shale Oil Revolution
The potential of shale oil has been researched since the 10th century, but its existence has
not been of interest to the state or private sector. This was due to the lack of adequate
technology at that time due to the different properties of the particles from conventional
petroleum. In 1981, drilling began in Texas for two decades. The drilling method is different
from conventional oil because it uses a hydraulic method. Drilling for shale oil was not only
carried out by the United States but previously Scotland and France had also been
experimenting with shale oil production since the 1937s (Martineau, 2007). Initially, this
revolutionary drilling practice yielded high economic value. The researchers looked for oil
content in the sedimentary rock layers, which are trapped in small porous spaces in the lowest
layer. The difference with conventional petroleum is the deeper location of the shale oil
material (Martineau, 2007). The existence of shale oil did not experience any development
after the 1970s because the geopolitical conditions of the Middle East, which began to stabilize,
finally restored the price of oil. Shale oil is considered too expensive and the state and private
sectors prefer petroleum. At that time shale oil mining was considered economically
unprofitable.
Oil is an energy source whose stability cannot be predicted, always experiencing turmoil.
The Middle East plays a significant role in the stability of petroleum because OPEC's
dominance comes from countries that are members of this region. After shale oil was
abandoned in the 1970s, shale oil came back to attention in early 2000. This occurred due to
unstable geopolitical conditions in the oil-exporting countries. The price of petroleum at that
time could be reduced from USD 80 per barrel of oil to USD 60 per barrel. However, in 2005
the price of oil experienced a high jump, reaching USD 100 per barrel. Finally, because of
political support, research on shale oil was conducted again, especially by the United States.
The United States conducted research secretly and succeeded in mining about one million
barrels of shale oil in 2005. In the end, the United States was able to control several points of
shale oil drilling without publication. The production of shale oil by the United States has
continued to grow to nearly 7.4 million barrels per day since 2013.
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Figure 3. Estimates of United States Shale Oil to World Oil
According to the US Energy Information Administration (EIA), the amount of shale oil
reserves has increased continuously to 10.3% of the total conventional oil reserves. However,
the United States did not immediately exploit shale oil on a large scale. Shale oil is one of the
drivers of the United States’ domestic economy. In 2011 the United States experienced a shale
oil boom which made a sharp increase per year. Finally, it affects the number of imports of the
United States from OPEC member countries. This happens because the United States already
has sufficient oil reserves in the range of 26% of production each year (Lubiantara, 2015). The
EIA even predicts that the United States’ shale oil production can overtake Saudi Arabia's
position as the owner of the largest oil reserves.
Figure 4. United States Comparison of Production and Imports
Source: U.S. Energy Information Administration 2015
The United States produces large shale oil and until 2015 the increase in production cannot
be matched by any other country. This is because the drilling process for shale oil cannot be
carried out in all geographic conditions. Some places that have relatively cold temperatures are
quite difficult to mine for shale oil. This is like what happened to Russia when it wanted to drill
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in Siberia, which has been researched to contain large reserves of shale oil. The region of
Siberia is a region with cold, low temperatures, and an unstable climate (Wang & Krupnick,
2015). Therefore, the United States exploited the difficulties experienced by other countries in
producing shale oil to continue to encourage shale oil production. Although technology and
costs are available, geographic conditions are not supportive, it will cause significant obstacles
and challenges in the process of drilling for shale oil. This proves that shale oil is a new
commodity that countries want to develop to reduce dependence on petroleum.
Figure 5. United States Shale Plays
The United States holds the title of the largest shale oil producer through energy
diversification. Based on the picture above, the majority of United States states can be used as
shale oil drilling fields. This condition is also supported by the geological structure of the
United States which contains hydrocarbon resources. Besides, the US bureaucracy also fully
supports the processing of underground mineral resources. The modern United States
infrastructure network also provides convenience in the production and distribution process of
shale oil. The shale oil sector is a stable energy industry project in the United States. This has
implications for a drastic increase in shale oil production in the United States. Besides, this has
implications for OPEC dependence of up to 27% of the total US oil consumption
(Congressional Budget Office, 2014). The United States encourages every state to develop
energy independence to meet energy consumption activities.
Changer in World Oil Prices
The progress of shale oil has not brought fresh air to OPEC member countries. This
happened because the world oil price experienced a big shock. The United States is one of the
countries that import quite a lot from OPEC member countries. After the United States carried
out the shale oil revolution, the level of US imports of conventional petroleum fell drastically.
This is reported to have touched the lowest figure in history. As long as the United States is
involved in international trade, the activities of the United States' shale oil production will have
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major implications for the OPEC oil trade. The decline in the price of oil per barrel made OPEC
pressured by several member countries to issue a policy. However, in the end, a big dynamic
occurred because not all OPEC member countries asked for a price reduction. Countries like
Saudi Arabia want to allow world oil prices to maintain their market share so that they are not
captured by other producers, especially the United States.
Figure 6. Oil Price War
The most significant decline in oil prices in the world occurred in 2014, this was not much
influenced by the development of shale oil in the United States. Oil exporting countries are
experiencing an oversupply with minimal demand. This resulted in a drastic drop in commodity
prices. However, the United States entered the supply and demand chain of the oil trade and its
position was also very large. This condition worsens the share of the world oil market. It is
feared that the oil price crisis in 2014 will cause oil commodity prices to fall further if there is
no change in the world oil trade chain (Congressional Budget Office, 2014). Oil diversification
not only opens up opportunities and alternatives for countries to increase energy production.
In other conditions, oil diversification has led to an oil price war between comparative
advantages for the energy sector.
The world oil price war has been subject to debate by several academics and world
observers. This is due to the view that shale oil is detrimental and has no high economic value.
However, the majority of statistics suggest that the United States is reaping high profits and
can reduce its dependence on OPEC oil. Besides, there is evidence that other countries want to
follow in the footsteps of the United States making this shale oil quite beneficial to the
economy. Besides, it is proven in the tragedy of the 2014-2016 world oil price decline that it
can strengthen the reason that shale oil is indeed profitable. Behind the production process,
which requires technology with relatively high financing, shale oil has proven to be a profitable
commodity.
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Figure 7. Global Oil Market-2020
Changes in oil prices in the international market have an impact on the waves of
international financial markets. After the big oil shock from 2014 to 2016, the international
economy also experienced a decline. This was due to a decrease of about 70% of the price per
barrel of OPEC oil. This condition is the worst in the last decade. The decline in oil prices,
which was initially influenced by geopolitics, changed, and the creation of shale oil caused a
prolonged crisis.
Figure 8. Global Crude Oil Prices According to the World Bank
Oil is the main commodity for several OPEC countries such as Saudi Arabia, where 90%
of the country's revenue comes from oil. Because OPEC controls about 40% of global oil, the
decline in oil prices will greatly affect the process of oil production and export. The oil price
crisis that occurred as a result of the development of shale oil made Saudi Arabia firmly control
OPEC. However, Saudi Arabia did not immediately pursue a policy of cutting oil quotas to
restore oil prices. West Texas Intermediate (WTI) is the benchmark for world oil prices. Until
early 2020, it was reported that oil prices continued to fluctuate. However, since the Corona
pandemic has hit oil prices have gotten lower. This decline according to WTI reached USD
37.63 per barrel and is considered the worst record in the history of the world oil market.
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Figure 9. World Oil Prices Early 2020
The continuing collapse in world oil prices is not only weighing on OPEC member states.
This is also felt by other countries such as Indonesia, and several other countries that produce
oil. The state budget deficit with the amount of revenue is not balanced and adds to the
economic burden on oil-producing countries. The fall of WTI in early 2020 dragged the
exchange rates of several countries on the spot market to several levels per USD. The world
oil price greatly affects the exchange rate of countries. In February 2020 it was reported that
the price of oil was in the range of USD 55 per barrel. However, on March 9, 2020, it was
reported that the price of crude oil was reported to have decreased to USD 31.13 per barrel and
increased by 4.2% on March 12, 2020 (Hidayat, 2020). Even energy observers say that until
2020 the oil price improvement will not experience a significant increase.
OPEC Strategic and Responses
The weakening economic incentives due to the decline in OPEC conventional oil prices
prompted OPEC to issue a strategy. This strategy is considered for several things, including
market segmentation to the continuation of the shale oil trend. OPEC conducts market share
analysis by projecting the oil market in the future. This is considered more important because
OPEC understands the increase in market share in certain circumstances. It cannot be denied
that the existence of OPEC is used as a member country to support the economy. Countries
will be very concerned about the continued decline in oil prices. OPEC has several alternatives,
including developing the oil business as usual without any changes, cutting supply so there is
no oversupply to keep up with existing demand, or also producing as much petroleum as
possible to increase competitiveness against shale oil so that shale oil loses its legality in the
international community. Some of these strategies are possible alternatives for OPEC to
maintain the existence of its member countries due to falling oil prices.
The anxiety of OPEC member countries is getting worse, especially countries whose main
commodity is oil. So in 2015 Saudi Arabia took control of OPEC to refuse production cuts.
From this statement, it means that OPEC chose a strategy that allowed OPEC production to
continue as usual. Saudi Arabia chose this strategy to restore stability to the oil market. Holding
on to a low price gradually at least can reduce the level of US shale oil production (Shamon,
2014). If OPEC reduces the average oil production, then shale oil production will skyrocket
and will get a large space in the world oil market share. The strategy adopted by Saudi Arabia
bore fruit so that the production of shale oil in the United States had decreased due to higher
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production costs. However, on the other hand, all oil prices have continued to decline, reaching
the level of USD 30 per barrel.
Countries that rely on oil as their main commodity has experienced anxiety and deficit
since 2020. Oil prices fluctuate even on one day the price of oil can be very high and the next
day it falls drastically. The condition of the market share is so anarchic that OPEC countries
are increasingly aware of their domestic economic strategies. Saudi Arabia even issued debt
securities for a year to get USD 10 billion in funding (Shamon, 2015). Angola even adopted an
incentive policy to encourage export activities and improve monetary policy and the real sector.
Algeria has cut its state budget by 9% since 2016 and froze several projects to save the budget.
Iraq and Iran issued public sector wage policies to save spending. Iran, which is struggling to
lift sanctions from the United States, has seen a slowdown in economic growth since 2014
(Mahmoodi, 2017). Other countries such as Kuwait, Libya, Nigeria, and Qatar are also
struggling to save budget and stimulate economic development due to the collapse of world oil
prices.
Oil Price War, Covid-19 Pandemic, and Global Stock Market
Although Saudi Arabia initially rejected the policy of reducing production, in March 2020
oil production was reduced. This reduction is around 1.5 million per barrel per day to prevent
an oversupply during the Covid-19 pandemic. This policy cannot be separated from Russian
influence. Russia in this regard is also competing with the United States to produce shale oil
and cultivate a lot of energy reserves. The OPEC reduction in oil production may be suitable
to be implemented in Russia because Russia is not a member of OPEC and Russia only depends
on oil 37%, this is actually in Russia's favor. However, countries like Saudi Arabia, Kuwait,
Iraq, Iran, and countries that depend on more than 50% of their income from petroleum are
getting worse (Garzón & Hierro, 2018). This condition eventually resulted in a global oil price
war. Some researchers argue that the oil price war between Saudi Arabia and Russia is
considered an attempt to undermine US shale oil. At least the decline in oil prices has slowed
down world economic growth. OPEC member countries are currently designing policy
formations to export petroleum. Also, fiscal and monetary policies determine the economic
development of each country. Countries are even willing to cut the number of energy subsidies
to reduce fiscal costs. It is used to prevent excessive dependence on energy resources. Not only
oil-exporting countries but also importing countries also experience the impact of this
condition. The decline in oil prices has made oil-importing countries reduce energy subsidies.
Figure 10. Oil Price and EMDE Potential Growth
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The oil price cuts led to a global oil price war that resulted from the ambitions of Russia
and Saudi Arabia. In early April 2020, Russia held a meeting with Saudi Arabia via online
video conference due to the Covid-19 Pandemic. The result of this agreement is to cut oil
between 10-15 million barrels per day to end the oil price war. The Covid-19 pandemic has
caused the share of the global oil market to escalate considerably. The country began to worry
about a worse oil crisis and fear a surge in US shale oil production. Until finally the Asian
market tried to reject the United States shale oil commodity. It cannot be denied that the Covid-
19 pandemic has shaken the world economy, including oil. A report from Reuters stated that
world oil has decreased in demand by about 30% after the Covid-19 pandemic hit countries
(Albulescu, 2020). On the other hand, America is happy because of the decline in conventional
oil prices. President Donald Trump stated that the low oil price was the beginning of the victory
of shale oil in the global oil market share.
The impact of the oil price war, the development of shale oil production, and the Covid-
19 pandemic brought bad news to the world economy. An economy that has been structured in
such a way becomes hampered at its pace. Countries began to formulate new strategies to
restore stability to the domestic economy. Even though some countries are reported to be
experiencing a recession, this will have a bad impact on the world economy (Garzón & Hierro,
2018). If one country experiences a crisis, this effect will have an impact on other countries.
The domino effect in the economic crisis is something that is very much feared and worried
about happening. Even other economic impacts due to oil have occurred on the international
stock market. Who would have thought that oil could also affect the stability of the global stock
market? Even in one day, if the price of oil drops, it can have a wide impact on the financial
market. Apart from the anxiety caused by shale oil, the world economy is being haunted by the
Covid-19 pandemic. Likewise, oil prices still have an impact on economic policy uncertainty
(EPU).
Changes in world oil prices until the recession created an interesting fact. Coupled with
the Covid-19 pandemic, oil prices have plummeted further until 2020. If at the beginning the
author has touched on the capital market a little, then in this section the author will explain the
impact of falling oil prices on the stock market. Since 2008 the stock market has reportedly
fallen by 20%. The dramatic fall in oil prices was bad for the stock market as well. Even
research from Coleman (2012) explains that there is a link between oil and the stock market.
This is evidenced by the drop in oil prices during the 1998 Asian crisis.
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Figure 11. Evolution of WTI and Stock Market
Source: World Bank and EIA
It is reported that in early 2020 the stock market experienced a collapse due to declining
oil prices. Saudi Arabia as the activator of OPEC held a meeting with Russia. However, several
major capital market indexes are still experiencing a decline, such as the Japanese Nikkei, the
British FTSE, and the Singapore STI. With the rise of shale oil in the United States, the United
States holds the lowest production budget. Russia's position in intervening in the OPEC oil
turmoil is in the interest of disrupting the progress of US shale oil in the oil market share
(Hidayat, 2020). Besides that, all oil prices that are getting lower will also have the potential to
disrupt the US shale oil investment. Besides, the price of crude palm oil has even declined.
Based on the above analysis, it can be concluded that the fluctuation of oil prices causes
enormous tension for all parties connected to the global economy. Neither party will benefit,
even though the United States relies on shale oil.
CONCLUSION
Energy is an important issue for all countries in the world. Energy has a big influence on
a country's economic activity. One of the energy resources is petroleum. Crude oil is a large
source of energy and has become the prima donna for countries to control the oil sector. The
international institution that proves the oil trade and accommodates the oil-exporting countries
in OPEC. OPEC is dominated by oil-rich Middle Eastern countries and is the world's largest
oil exporter. Meanwhile, in this world, not all countries have oil resources. Some countries
have oil production but do not wish to export. So in this paper, understand how OPEC does
among countries that need oil.
The United States sector develops an alternative, namely shale oil which is used as a
commodity that can reduce its dependence on OPEC oil exports. However, this rapid and
massive development did not provide fresh air for the OPEC countries. The increase in US oil
shale has an impact on lowering oil and gas prices. OPEC finally made a strategy to stem the
decline in oil prices so as not to experience a significant collapse. However, the 2014 oil crisis
still has an impact on oil prices today. Not only oil, but the global economy has also fallen
victim to this decline in oil prices. The United States lowered its dependence on imports from
OPEC, in the end, OPEC oil prices decreased due to an oversupply while the demand
decreased. Not only is the global economic downturn, but the decline in oil prices in early 2020
The USA’s Shale Oil Revolution: OPEC Strategies and Oil Prices War in Global Economy
842 Interdisciplinary Social Studies, 1(7), Apr 2022
is getting worse along with the Covid-19 pandemic. In the end, the global economy experienced
a decline that affected the international capital market.
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