Residents of the Middle East are used to attracting the derision of the rest of the globe's inhabitants with their outlandish conspiracy theories. Local governments' tendency to offer limited justifications for their policy decisions inadvertently contributes to cloak-and-dagger speculation about unremarkable phenomena.

Since July 2014, in the domain of oil analysis, the conspiracy theory shoe has switched to the other foot. In an attempt to explain the 70 percent decline in oil prices, leading media outlets have taken to publishing analyses awash with bizarre theories about the root cause.

A common theme is to blame Saudi Arabia for both the collapse in price and for flooding the market with cheap oil. Some of the popular conspiracy theories of late include the Gulf Kingdom secretly coordinating with the United States to weaken Russia; alternatively, it is consumed by sectarian hatred for Iran and is trying to torpedo its economy. Or, perhaps it is enraged by the emergence of shale oil and is employing a scorched-earth strategy. In all these cases, we are told that this is merely the latest episode in Saudi Arabia's 45-year stint as an irresponsible and destructive oil leviathan.

Many economists, however, are left scratching their heads, since the basic intellectual tools covered in Econ 101 courses are sufficient to explain the current situation. Adding to the confusion of nonconspiracy theorists, Saudi Arabia's oil minister, Ali Al-Naimi, has been highly transparent in describing the Kingdom's views and policy aims, revealing its consistency with the mundane explanations that a dispassionate economist would provide.

Here are some simple facts that will force conspiracy theorists to deploy some intellectual contortions:

First, global oil production has increased, but not by that much. Figure 1 shows world oil production (in millions of barrels/day) and the price of European Brent ($/barrel). In the period from January 2014 through October 2015, oil prices fell from $108 to $48 while global oil production increased from 77.3 million barrels/day to 80.0 million barrels/day, which is 3.5 percent. Global oil production has been growing at about 2.8 percent every two years for the last five years, so by historical standards, you would be hard pressed to characterize the market as being flooded by anyone – Saudi Arabia or otherwise.

US EIA

Second, Saudi Arabia has made a small contribution to the global increase. Figure 2 shows how some of the major producers have been modifying their output over the last five years: The flatness of the lines is quite striking. If we focus on the period from January 2014 through October 2015, Saudi Arabian production increased by 0.2 million barrels/day. In contrast, U.S. production increased by 1.4 million barrels/day and Iraqi production by 1.2 million barrels/day.

US EIA

Third, oil prices are not even particularly low; 2004 was the first year in history that monthly oil prices actually exceeded $40/barrel. If we adjust for inflation, then prices today are above anything since 1900, with the exception of the 1970s, and the period since 2004. The conventional usage of the term "flooding the market" means that prices are driven to a level where virtually nobody can register any profits, whereas oil companies – including Saudi Aramco – are still registering healthy margins. Oil may be less lucrative than before, but it is still highly lucrative!

In light of this data, if anyone deserves the "blame" for falling oil prices, it's the United States and Iraq – but in reality nobody deserves any blame at all. U.S. and Iraqi producers are entirely within their rights to produce and sell oil at a profit.

The real – and mostly mundane – explanation for falling oil prices lies in a combination of demand and supply factors. On the demand side, the Chinese and Indian economies have been growing below par, while the European Union and Japan are persistently struggling. On the supply side, in addition to the increased U.S. and Iraqi production, there is an expectation of increased Iranian production following the removal of sanctions. Also there is a realization that if oil prices were to stay above $60, then U.S. production could easily expand beyond its current level – shale oil is highly flexible and responsive to market conditions. Moreover, if they can attract sufficient investment, Iran, Iraq and Libya can all upgrade their capacity. These factors limit the possibility of price increases.

In this highly competitive environment, trying to effect a price increase by a unilateral cut in output would be commercial suicide, because your market share would be gobbled up by a competitor instantly. What about a coordinated output cut by OPEC? Glancing back at Figure 2, operating a cartel that does not include two of the top three oil producers (the United States and Russia), and that includes geo-strategic rivals (Saudi Arabia and Iran), is almost as improbable as some of the conspiracy theories currently circulating.

If any of the above sounds familiar, it should – Al-Naimi has been repeating it for about 18 months, which makes analysts' affinity for conspiracy theories even more baffling. The best explanation that one can conjure up for this wholesale rejection of transparent Econ 101 principles is that those suffering from low oil prices may be trying to force Saudi Arabia into some sort of commercial error by creating public pressure. In particular, a lot of U.S. shale oil producers are going bankrupt, while Iraq will have great difficulty in attracting oil investors if prices are low.