World oil prices have been falling recently — and that's good news for oil consumers such as the U.S., Europe and China, and a potential challenge for the big exporters like Saudi Arabia and Russia.
The oil market is notoriously volatile, and the factors driving prices down are temporary. But some energy industry analysts are posing a much larger question: Is the world, and the U.S. in particular, entering a new phase of expanding energy supplies and more moderate prices?
In the short term, oil will still be subject to big swings. Prices were rising earlier this year as nations and traders stockpiled oil on worries that an outbreak of hostilities with Iran could disrupt supplies and cause an energy crisis.
But weak economies in Europe and slow growth in the United States have been keeping demand low. The benchmark West Texas Intermediate grade crude was flirting with $110 a barrel in February and has been under $98 a barrel this week.
Finding The Right Price
OPEC, the Organization of Petroleum Exporting Countries, says it wants to keep world oil prices at or below $100 a barrel to help the recession-hit economies of Europe and the United States recover.
OPEC leaders say they need to balance a world oil price that won't hamper the global economy but will still provide them with enough profit to keep developing their oil fields and infrastructure to meet future demand.
In other words, they don't want to kill the goose that lays the golden egg. But other factors in world energy production could limit OPEC's power, according to some analysts.
"This could be the last great hurrah for the OPEC cartel," says energy analyst Phil Flynn, of PFGBest Research.
Flynn says new oil-producing technologies such as fracking and shale-oil extraction are changing the energy equation for the United States.
"This is historic, it really is," he says, adding that the U.S. is exporting more oil products "than it has since the Truman administration."
Oil expert Philip Verleger notes that U.S. demand for oil has been dropping "dramatically," in part because of the weak economy, but also because Americans are conserving and shifting to other fuel sources, such as natural gas.
"The auto industry had a deathbed conversion to fuel economy," says Verleger, a fellow at the Peterson Institute for International Economics.
Abundant supplies of cheap natural gas could help revive American manufacturing, he says, giving the U.S. a cost advantage over countries such as China, which imports oil from the Middle East and is negotiating with Russia for natural gas supplies.
Oil Prices And World Markets
However, the U.S. still imports 60 percent of the oil it uses every day, and some analysts are less optimistic about how dramatic the changes will be in the coming years.
Robert Johnston of the Eurasia Group agrees that the reduction in U.S. energy dependency could be a big story. But he says the idea of decoupling the United States from foreign oil suppliers is "overstated."
Even if the U.S. becomes physically less dependent on foreign oil, he says, "we're still going to be dependent on world oil prices. U.S. oil production will just help offset the increase in demand from Asia, and especially from China."
What happens to the big oil-producing countries such as Russia and Saudi Arabia if oil prices go down and stay down?
Verleger believes that the Saudis can survive, because they have the oil reserves and the market clout to keep prices in a range where they make enough profit to meet their hefty national budget needs.
Saudi needs have grown sharply in the past year. The House of Saud has ridden out the Arab Spring that toppled several Arab autocrats. In a pre-emptive attempt to pacify potential dissidents, the government ramped up social spending.
Russia did much the same thing, but it has a much larger population and much less of a cushion than Saudi Arabia.
In the run-up to Russia's presidential election in March, Vladimir Putin raised retiree pensions, spent lavishly on preparations for the 2014 Winter Olympic Games, and promised to boost spending on infrastructure and social programs.
Analysts' projections vary widely as to what oil price Russia will need this year to avoid going into deficit spending — estimates range from a low of around $100 a barrel to a high of about $117.
Putin, who was inaugurated as president on Monday for a third term, could face greater instability and opposition if he is unable to keep up his promised pace of development.