Peoples DailyOver the Thanksgiving holiday, the Organization of Petroleum Exporting Countries (OPEC) decided not to cut back on oil production, thus letting crude prices continue to fall. As a result of the U.S. the shale oil boom and weaker global economic growth, oil prices have dropped by nearly 40 percent this year. Earlier today, the West Texas Intermediate fell briefly below $65 per barrel.

U.S. oil production has risen from about 5 million barrels per day in 2005 to nearly 8 million today. More supply combined with faltering demand has predictably resulted in lower prices. Saudi Arabia produces oil much more cheaply than do American oil companies that use the higher cost fracking to coax crude out of the ground. The Saudis are attempting to push the price oil below the cost of fracking, and thus drive U.S. domestic oil producers out of the market. (Lower oil prices are intended to bankrupt Canadian oil sands producers too.)

However, another side effect of low petroleum prices is the possible destabilization of petro-states like Russia, Venezuela, and Iran. In an article that suggests that the price of oil could fall as low as $40 per barrel, Bloomberg News rounds up the the effects of low prices on various unsavory regimes:

Oil and gas provide 68 percent of Russia’s exports and 50 percent of its federal budget. Russia has already lost almost $90 billion of its currency reserves this year, equal to 4.5 percent of its economy, as it tried to prevent the ruble from tumbling after Western countries imposed sanctions to punish Russian meddling in Ukraine. The ruble is down 35 percent against the dollar since June...

Even before the price tumble, Iran’s oil exports were already crumbling because of sanctions imposed over its nuclear program. Production is at a 20-year low, exports have fallen by half since early 2012 to 1 million barrels a day, and the rial has plummeted 80 percent on the black market, says the IMF.

Lower oil may increase the pain on Iran’s population, though it may be insufficient to push its leaders to accept an end to the nuclear program, which they insist is peaceful. ...

Venezuelan Rioting: The country was paralyzed by deadly riots earlier this year after police repressed protests about spiraling inflation, shortages of consumer goods and worsening crime.

“The dire state of the economy is likely to trigger renewed social unrest, while it seems that the government is running out of hard currency,” Capital Economics, a London research firm, wrote in a Nov. 28 report.

Declining oil may force the government to take steps to avoid a default including devaluing the currency, cutting imports, raising domestic energy prices and cutting subsidies shipments to poorer countries in the region, according to Francisco Rodriguez, an economist at Bank of America Merrill Lynch.

“Though all these entail difficult choices, default is not an appealing alternative,” he said. “Were Venezuela to default, bondholders would almost surely move to attach the country’s refineries and oil shipments abroad.”

The current situation in the oil markets looks like yet another boom-bust-boom-bust cycle in which low prices lead to low exploration, production, and technology investments that, in turn, leads to high prices and higher levels of technology investments, again resulting in more production and lower prices, and so forth.

In the meantime, enjoy the cheaper fuel and relish the fiscal pain of global bad actors.