For decades the oil market has been almost solely under the control of oil cartel OPEC. Supply and production were determined by this small group of mostly Middle Eastern countries, thereby influencing oil prices as it benefited them. However, new developments in Canada and the U.S. shale oil revolution have threatened to take away OPEC’s monopolistic hold on the industry.

As OPEC’s control of the market fades, the organization is pulling out all the stops to stay in power. In order to maintain market share, they’ve kept production high, despite the fall in demand, in an effort to keep oil prices so low that U.S. shale oil producers default.

However, the strategy has only served to streamline the U.S. industry making it leaner and more efficient, while other producers around the world have slowly taken away enough market share that even the world’s foremost oil powerhouse, Saudi Arabia, has only a limited ability to affect prices anymore.

Tensions between Iran and Saudi Arabia flared up to kick off 2016, while oil dropped low enough to touch an 11-year low. However, a stronger U.S. dollar seemed more to blame than the political conflict as investors have finally realized that OPEC can’t affect oil values as much as they have in the past.

Global economic slowdown concerns are still on investors’ minds, with the U.S. dollar gaining strength as a safe haven asset. Oil inventories are still very high, meaning that any real political clash between Iran and Saudi Arabia shouldn’t disrupt worldwide oil supplies or lead to any hiccups in production. If there were a disruption, U.S. shale companies could realistically pick up the slack in production in a very short amount of time.

However, long-term low oil prices have also served to benefit a slowing economy. Businesses have been able to reap greater profits than usual during tough economic times thanks to considerably lower energy overhead expenses. Cheaper gasoline for consumers has been another side benefit of low oil prices, helping to inject a boost of consumer confidence and spending into the economy.

Oil will likely stay in the $30 range for the first quarter of the year and could remain there until the summer. Eventually though, the reduction in energy costs and the boost to the global economy will cross over a critical threshold and revive energy stocks and oil prices later in the year. Drillers are still stacking rigs, so getting back up to optimum production will take time once the market reverses course.

Oil could jump up fairly quickly to the $50 range but won’t rise too fast past that point.

Without OPEC’s influence on the global oil market, the industry is now governed more by actual supply and demand – a relationship that may be common everywhere else but is still a new concept for energy. Oversupply issues will continue to plague oil prices in the short term, but things should start to pick up later in the year.

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