NEW YORK (TheStreet) -- The precipitous decline in oil prices actually began five months ago, but it has only recent gotten steep enough to capture everyone's attention. With prices now down 40%, investors and consumers are wondering what happened and how long this trend is likely to last.
There's some speculation that OPEC may have helped worsen the price decline in order to undermine U.S. production -- and that it may have backfired. Here's a short timeline on how oil fell so fast and who the winners and losers are.
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WTI closed Friday's session below $70.
Three months ago
Oil was down 10% from its July high, and there was speculation that because oil is traded in U.S. dollars, strength in the dollar was putting downward pressure on prices. Brent crude was 10% off its July high of $115 per barrel at this point.
Two Months Ago
Oil was down 20%, and the most likely culprit seemed to be weakening global economic growth (deflation), and therefore weakening demand for the world's most used and watched commodity.
One Month Ago
Oil was 30% below its most recent peak, and it looked like there must be additional forces at work. It was suggested that perhaps the OPEC nations--and Saudi Arabia in particular -- were launching a sort of "oversupply attack" on their newfound American competition.
By flooding the market with more oil than necessary, the Saudis have been able to manipulate the worldwide price down to levels where it is not profitable for many producers to explore, drill, and refine -- particularly for smaller, newer producers. With the U.S. now generating 9 million barrels per day, the reasoning is obvious.
With a barrel of oil costing 40% less than it did just four months ago, and at this point it seems clear that the OPEC member countries are extremely concerned about the rapid growth of U.S. shale production.