Oil prices have been one of the most watched trends in economics during the 21st century. From 1999 to 2008, the price of crude oil saw an unprecedented spike, going from under $25 per barrel to more than $160 per barrel. Rapidly increasing demand in emerging economies such as China and India and production cuts by the Organization of Petroleum Exporting Countries (OPEC) in the Middle East drove the price of oil to its record heights.

What Happened In 2014 In India

Shortly thereafter, a deep global recession throttled demand for energy and sent oil and gas prices into a precipitous free fall. By the end of 2008, the price of oil had bottomed out at $53. The economic recovery that began the following year sent the price of oil back over $100; it hovered between $100 and $125 until 2014, when it experienced another steep drop.

Numerous factors contributed to the 2014 drop in oil prices. Economies such as China, whose rapid growth and expansion created an unquenchable thirst for oil in the first decade of the new millennium, began to slow after 2010. China is the world's largest country by population, so its lower oil demand had significant price ramifications. Other large emerging economies such as Russia, India and Brazil experienced similar economic trajectories in the early 21st century – rapid growth during the first decade, followed by much slower growth after 2010. The same countries that pushed up the price of oil in 2008 with their ravenous demand helped bring oil prices down in 2014 by demanding much less of it.

Spurred by the negative effect of high oil prices on their economies, countries such as the U.S. and Canada increased their efforts to produce oil. In the U.S., private companies began extracting oil from shale formations in North Dakota using a process known as fracking. Meanwhile, Canada went to work extracting from Alberta's oil sands, the world's third-largest crude oil reserve. As a result of this local production, the two North American countries were able to cut their oil imports sharply, which put further downward pressure on world prices.

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Saudi Arabia's actions also contributed to falling 2014 oil prices. Faced with a decision between letting prices continue to drop or ceding market share by cutting production in an effort to send prices upward again, the Middle Eastern country kept its production stable, deciding that low oil prices offered more of a long-term benefit than giving up market share. Because Saudi Arabia produces oil so cheaply and holds the largest oil reserves in the world, it can withstand low oil prices for a long time without any threat to its economy. In contrast, extraction methods such as fracking are more expensive and therefore not profitable if oil prices fall too low. By supporting low oil prices, Saudi Arabia hopes that countries such as the U.S. and Canada will be forced to abandon their more costly production methods due to lack of profitability.