TOKYO -- West Texas Intermediate is teetering on the edge of $30 a barrel as a combination of weak emerging-market demand and a supply glut born from OPEC dysfunction drives the U.S. benchmark crude oil price to a 12-year low.
As they watch WTI slide, Saudi Arabian officials are surely reflecting on the admonition of Sheikh Zaki Yamani, the kingdom's oil minister during pivotal years for OPEC in the 1970s: "The Stone Age did not end for lack of stone, and the oil age will end long before the world runs out of oil."
Sitting on some of the world's largest petroleum reserves, Saudi Arabia still boasts greater leeway for increasing output than any other producer. Yet even the Saudi state is feeling the bite of this bear market.
Should the government continue to deplete financial assets at the current rate, they could run out within five years, the International Monetary Fund predicts. Riyadh has decided to hike electricity and gasoline prices -- moves out of character for the oil-lubricated welfare state.
Ravenous demand from China, India and other fast-growing emerging economies sustained the oil price boom of the 2000s. Today's less-frenetic pace of economic expansion, which China calls its "new normal," has eased its need for petroleum. The same goes for iron ore, coal and other commodities.
But what really sent the price of crude plunging by three-quarters in the space of 18 months was the revolution in U.S. shale oil production. No one would have imagined this scenario four or five years ago, according to Daniel Yergin, a global authority on the oil market.
The great unlocking of American shale has disrupted not only the dynamics of oil supply and demand but also the geopolitical order. Saudi Arabia regards America's resurgence as a major oil supplier with alarm. OPEC members, particularly the Saudis and Iran, are out of step, and the cartel has failed to bridge the gap with nonmember oil producer Russia.
As the Middle East seethes with unrest -- Syria's civil war and the rise of the Islamic State militant group provide just two examples -- the Saudis are increasingly frustrated with the policy of U.S. President Barack Obama toward the region. The West remains at loggerheads with Russia over Ukraine. The struggle for dominance in oil only fuels geopolitical rivalries.
Analysts now expect the downturn to last longer than they did when it began in the summer of 2014. No new oil market order has emerged to stabilize the price. Nor is it clear what sort of landscape cheap crude leads to.
The age of shale is not guaranteed to last forever. The International Energy Agency predicts shale oil output will peak sometime in the 2020s. There is a risk that skimping on Middle Eastern oil field investment now could cause the oil price to spike in the future, IEA Executive Director Fatih Birol warned recently. Oil-consuming nations must take heed that the days of cheap crude, thought pleasant while they last, may eventually come to a sudden, painful end.