Last summer oil prices climbed to $110 per barrel amid an escalating insurgency in Iraq by a group called ISIS (Islamic State of Iraq and Syria). “Everybody knew” oil prices would remain elevated during the crisis even if there were no disruptions of supplies. Sometimes conventional wisdom can be wrong.
Now, the price of oil has plummeted and the conventional explanation is that the decline is because of increasing U.S. oil production, slowing global growth, and the resulting imbalance between supply and demand.
Sometimes one needs to look through conventional wisdom, connect the dots, and consider alternative explanations. Saudi Arabia, which controls roughly 73 percent of the world’s proven oil reserves