Oil price has historically gone up and down and that has never been a major problem for the world. Usually in about 2-3 years time it rebounds.
However, what is different this time, is that there are several forces that are going to keep it down.
They are
1) The shale boom - The discovery of shale and its economical extraction at $50-60 price range per barrel has created a new so called "regulator"/"moderator" that is never going to allow oil to go above this price range.
2) Iran - A new supplier into the world market has been added who has a potential for 500,000 to 1,000,000 barrels of crude a day
3) Market forces prevent production cut - history has taught Saudi and other OPEC countries that ceding the market position is a very dangerous play. Hence they will not cut production for fear of losing market share. This market is based on long term contracts and if you lose market share, you will have a very tough time getting it back. The other problem is cutting production will only result in the US taking advantage of the shale boom. All these countries realize that it is only a matter of time before oil is no longer used in the world and people switch to alternate forms of energy. Hence these countries are making an attempt at "making hay while the sun shines". In the long term who knows if there will be takers for the oil.
4) World demand is slowing - Rise in alternate energy sources, most countries going through economic slowdown, world population slowly reaching a plateau and hence the demand is bound to follow that curve to some extent (it is expected that population growth in the world will stop by 2050 by some studies based on current trends)
5) Supply glut - US storage in Cushing and several other places are almost full, most countries have filled up their reservoirs, UAE is in fact agreeing to supply oil free of cost to India if it allows them to store oil and later recover 1/3 of it (2/3 will be free). It will take several months of demand exceeding the supply for these reservoirs to start getting empty
6) Technology - Rapid improvements in technology are making shale and other remotely available oil sources economically viable at the $50-60 mark
8) Geo politics - A low price is advantageous to US and Saudi from a political standpoint as it keeps Russia in check. Russia will not cut production for fear of losing market. Venezuela is under 60% inflation and cutting oil will only worsen this situation. A low price is also going to keep the ISIS coffers lower which is good for several countries. Low price is always an advantage for oil consuming nations and hence they would "let things be" and not interfere. A low price is good for OPEC as it prevents US and other countries from extracting oil via shale. From a political standpoint it has reached a stalemate where everyone has something to gain from this situation and the only loser being oil itself.
As a result of the above I predict that oil price will remain sub $50 for the next foreseeable future. It is likely never to cross that mark.
What this means for the Middle-East
I predict that unless there is rapid cultural, economic, skill development and political change in these countries, one or more of the following is likely to happen (and I will give my reasons why)
1) A massive political turmoil/internal strife will likely take place in most of these countries
Similar to the Arab springs, it may not be unusual to see a massive internal strife in several of these countries demanding other forms of political management (kicking theocracy/autocracy out and bringing in democracy)
2) War between countries
Some countries may even go to war with each other (Iran vs. Saudi, ISIS vs. a few others, Israel may get sucked into this, Pakistan may get sucked into this)
3) Countries breaking apart
Where there is a significant population of Shia and Sunni followers, the region may witness split of a country in two or more parts
Why do I make these predictions
1) US - US is a monkey in the story of the monkey and the cats. It will always look out only for its best interest and it will let other countries go through a lot of suffering as long as it gains from it. This has always been the way it has operated. It will meddle in the world affairs only from a self interest perspective although the official narrative is that of being a world watchdog.
In this situation, a middle-east turmoil benefits the US (it did not do so in the past). Why?
1) US now is self sufficient and no longer needs the middle eastern oil. Earlier it was dependent on middle-east oil but now it is a competitor to them
2) US can sell arms and weapons to these countries and benefit from its sales if they go to war or if there is a strife
3) It does not matter which country wins the war/struggle in the region as that will ALWAYS benefit US because
a) It will push oil price up and hence US shale will benefit
b) It will allow US to sell weapons/arms
c) Whoever emerges the victor would still have to depend on US to supply technology for the extraction. It is a win-win situation
4) It is in direct US interest that these countries go to war with each other because otherwise the shale deposits may go unused forever (like the saying goes "the stone age did not end because the world ran out of stone", the oil age may end without shale being used)
US has been clearly hypocritical in advocating democracy, liberalism and all that crap to the world but has been supporting the theocracy and the repulsive human rights record of Saudi regime. They support Saddam as long as he stands with them. They never supported Iran and did their best to prevent Iran from being a democratic power. They foisted a false WMD story on Iraq and completely screwed it up (as Iraq was about to set up an oil exchange that would trade in non US currency)
US did all this purely from a self-interest perspective. Oil.
Now, what has changed with the Shale boom is that the middle east now seek to become the competition to US. Hence US will slowly pull sanctions out of Iran, it will slowly withdraw from the region and will give some lame excuses for changing its stance etc. (again it will talk about liberalism, freedom, democracy and all that crap) and will drive these countries to war.
2) Cultural/Religious - There is too much bad blood between the countries of these regions over religious and cultural differences and they have historically been warring nations all through. It is not hard for them to pick up their swords and sharpen them once more.
There are so many warring/jihadi/wahabi/ and all sorts of sects that give all sorts of religious and other reasons to go to war and keep fighting over a piece of desert sand.
3) Lack of skill development - People in these countries have historically enjoyed the benefits of oil boom and several generations of their population has led a very comfortable and cushy life. They never bothered to improve their skills. If the population does not work hard for a living and does not know how to work hard, it is only a matter of time before the country falls
These countries need oil to be at a very high value for their budgets to break even (ref. link ). Saudi needs oil at $104, Kuwait at $78, UAE at $81 etc.
Oil is never coming back to those levels. Hence, there will be budget cuts, there will be job losses, there will be closure of oil companies and government jobs. Where will people then staff themselves if they lack skills?
Unemployment will surely rise if the countries do not have anything else to offer to themselves and to the world.
4) They have nothing else - Without oil, the best these countries can offer to the world is a desert tourism. Tourism will hardly sustain their current lifestyle.
Countries that lack natural resources (Japan, Singapore etc.) have invested heavily in other areas such as being a technology front runner, a manufacturing hub, a financial capital etc. Small countries like Denmark own the patent for Insulin medicine and that would give them revenue. Korea and Taiwan are manufacturing hubs. Switzerland is the worlds financial capital.
Unless the Middle-East brings something to the table for the world to benefit from, they stand isolated. They are not self-sufficient unlike countries like India or US or China that have vast agricultural and arable lands. Hence they need the world to need them or they will go dry very soon. Literally.
I hope that I can give a better prediction, but I am sad that a lot of trouble and sorrow are imminent in these regions unless something changes quickly.
If I were the leader of one of these countries, here is what I would do to prevent chaos in the future
1) I would encourage rapid skill development initiatives
2) Force austerity and cut down unnecessary spending
3) Invest heavily in alternate technologies/initiatives
4) Put a lot of money in Wealth management funds that will invest in other countries/resources to give me sustained funding for the near future
5) Connect with people regularly and keep them informed/engaged so that they do not engage in any unlawful activities
6) Encourage emigration
7) Encourage voluntary population controls
8) Invest heavily in R&D and identify other things that my country can offer to the world
The views expressed are not intended to hurt anyone or any sentiments but more of a "Nostradamusy" urge to predict the future. I hope I am wrong.