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A worker walks by an oil pump during a sandstorm on Jan. 8, 2015, in the desert oil fields of Sakhir, Bahrain. (Hasan Jamali/AP)
A worker walks by an oil pump during a sandstorm on Jan. 8, 2015, in the desert oil fields of Sakhir, Bahrain. (Hasan Jamali/AP)

Six conspiracy theories behind plunging oil prices Add to ...

The world loves good conspiracy theories. They appeal to the paranoid in all of us, making us suspect that dark and secret – always secret – forces are at work to deprive us of our wealth, our happiness, even our lives.

Part of their attraction is their simplicity, even elegance. To pin an arcane event, from a political assassination to an economic collapse, on a conspiracy is to make the complicated simple. Better yet, conspiracies are impossible to prove, which means they are impossible to prove false. That, in turn, awards them varying degrees of credibility, allowing them to live on.

So it is with the price collapse that sent oil from $110 (U.S.) a barrel in June to about $50 today. How and why did it happen so fast? How do you explain the fall when global oil demand is not, in fact, falling; it continues to rise. Surely, more than simple economics – supply outstripping demand – is at play.

Easy answer: It’s a conspiracy.

It’s not just the conspiracy nuts who say so. Iranian President Hassan Rouhani told a cabinet meeting that the oil price collapse was “politically motivated” and a “conspiracy against the interests of the region, the Muslim people and the Muslim world” (never mind that the OPEC giant behind the price drop, Saudi Arabia, is rather Muslim). Russian President Vladimir Putin in effect said the same. “We all see the lowering of the oil price. There's lots of talk about what's causing it,” he said recently. "Could it be the agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.”

Ditto Nicolas Maduro, president of Venezuela, the OPEC country driven to near collapse because of the price fall. Answering his own rhetorical question, he explained that the low price was engineered by the United States and its allies “to harm Russia.”

Herewith your handy guide to the most popular oil-plunge conspiracies, plus one that I made up – my oil-soaked grassy knoll.

1. SLAPPING RUSSIA

Saudi Arabia controls OPEC. The problem for the Saudis is that Russia, the kingdom’s greatest rival in the export market, is not part of OPEC, meaning Moscow doesn’t obey Riyadh’s orders. Russia is stealing market share from the Saudis, especially in China, the oil market’s biggest growth area. Saudi Arabia can pump oil more cheaply than the Russians, so what better way to punish Russia’s audacity than to push prices down? To believe this theory, you have to believe that Russia alone is stealing the Saudis’ market share. In truth, lots of non-OPEC countries, Canada among them, are guilty of the same act.

2. SLAPPING VLADIMIR

In this conspiracy theory, the Saudis and the Americans have joined forces to hurt Mr. Putin, not because he is throwing too much oil on the global market, but because of his support for the murderous regime of Syrian dictator Bashar al-Assad. The Saudis would claim that none of its oil policies is political. But OPEC in general and the Saudis in particular are sometimes driven by revenge politics. To wit: the 1973-74 Arab oil embargo, designed to punish the Americans for their airlift support of Israel in the 1973 Yom Kippur War.

3. SAUDI ARABIA VS. IRAN

Iran and Saudi Arabia are the great traditional rivals in the Middle East, both of them fuelled by oil and the latter the favourite of the Americans since the fall of the Shah in the 1979 Islamic Revolution. The Saudis, according to the conspiracy theory, fear that the Americans will upset the balance by inviting Iran into the tent, which would happen after the Iranians agree with the West to end or curtail their nuclear program. The Saudis know that Iran needs $140 a barrel to balance its budget, so why not mess them up by driving the price down to a third that level? The trouble with that theory is that low prices are more likely to encourage the desperate Iranians to sign a nuclear deal that the Americans support, all the better to end the U.S.-led sanctions against Iran.

4. SAUDI ARABIA VS. CANADA

Keystone XL pipeline or not, the Canadians are sending enormous amounts of oil to the United States – about 2.5 million barrels a day – and the number will rise at the expense of Saudi and Venezuelan exports as the oil sands expand. What makes this a conspiracy theory is that it sees the Saudis going specifically after the Canadians when everyone knows that the real culprit is the United States and its surging shale oil production. To say that the Saudis are using low prices to whack shale oil is not a conspiracy; it’s no doubt true.

5. SAUDI OWN-GOAL

Sir Bernard Ingham, who was Maggie Thatcher’s press secretary, had a good line about conspiracy theories. “Many journalists have fallen for the conspiracy theory of government,” he said. “I do assure you that they would produce more accurate work if they adhered to the cock-up theory.” So it might be with the Saudis. Years ago, they decided to diversify their oil-export-dependent economy by building massive refineries. Guess what? Refineries need oil to refine, which meant that exports had to be held back. When exports are held back, export market share falls. So does international political leverage. We don’t believe the conspiracy theory that says the Saudis will pay the Iranians to bomb Saudi refineries.

6. IT’S THE ENVIRONMENT, STUPID

U.S. President Barack Obama conspired with the Saudis to flood the global market with oil to bring down the U.S. shale oil industry. Why would he want to do that? Because the shale oil glut sent prices spiralling down, threatening the development of renewable energy and slowing progress in cutting U.S. greenhouse gas emissions. This conspiracy theory is mine and I am sticking to it.

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Follow on Twitter: @ereguly

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