FROM John Rockefeller’s Standard Oil in the late 1800s, through the Railroad Commission of Texas in 1930, to OPEC since 1960, institutions have long tried to control and stabilise the oil market for their own benefit. Only rarely, says Jason Bordoff, director of Columbia University’s Centre on Global Energy Policy, has the oil market behaved like a normal market, more subject to the laws of supply and demand than to the whims of a cartel. Now is one of them. Take supply. A year ago Saudi Arabia refused to allow OPEC to try to raise prices by pumping less crude, in the hope that a low price would drive competitors, especially America’s shale-oil producers, out of business. Since then it has used its low cost of production to carve out a bigger slice of the pie. It has fought with Russia and fellow OPEC members to sell oil to China. Seth Kleinman of Citibank says that it has recently sought to displace Russian crude going into refineries in Sweden and Poland, and cut prices across Europe.

Producers with higher costs, including big listed oil firms and many rival national oil companies, have also behaved rationally, albeit reluctantly, cancelling at least $150 billion of investments this year, with more cuts to come next year. It takes time for this retrenchment to feed into lower production, because oil projects have long lead times, and in the meantime, producers naturally seek to compensate for lower prices by pumping more from existing facilities. But eventually diminished investment will reduce output.

The geopolitical tensions that sometimes play havoc with the oil market are relatively absent this year, in part because OPEC has more or less abandoned its quotas. That means disputes within the cartel that might once have led to the breaching of production caps, such as the proxy war in Yemen between Saudi Arabia and Iran, barely stir prices. Instead the factors that are setting traders’ pulses racing make crude oil sound about as thrilling as iron ore: an oil-workers’ strike in Brazil; cuts to Iraq’s investment budget; a Saudi bond issue that may enable it to withstand lower prices for longer.

Demand is also making its mark. As might be expected, the falling oil price is boosting consumption to a degree. Since last year, according to the International Energy Agency (IEA), a Paris-based forecaster representing oil-consuming nations, drivers have been opting more often for “larger, more fuel-guzzling vehicles” such as SUVs, especially in America and China. Overall the IEA expects demand to grow by 1.9% this year, well above the average for the past decade, of 0.9%.

Yet the nuances are as interesting as the overall direction. The IEA says that even in the developing world, the amount of oil consumed per unit of economic output is declining. China’s growth, in particular, is becoming less energy-intensive. Fuel-efficiency standards may not be tightly enforced but they nonetheless affect three-quarters of all vehicles sold worldwide. Industry analysts are beginning to invoke “peak demand”, as opposed to “peak supply”, as a factor that may determine the trajectory of prices in the long run.

In its annual “World Energy Outlook”, released on November 10th, the IEA predicted that a relatively sluggish recovery in demand and decline in supply would yield a price of $80 a barrel in 2020. But it also aired an alternative scenario in which oil stays in a range of $50-60 a barrel until well into the 2020s. One of the main reasons it hedged its bets is American shale oil, which has not been responding as promptly to changes in the price as analysts had assumed.

Even after oil prices fell last year, production continued to increase, a process that has only recently started to reverse (see chart). The IEA says this longer-than-expected adjustment was caused by a timelag of several months between drilling a well and fracking it (ie, pumping in water and sand to split the shale rock, allowing oil to seep out). Cost-cutting and hedging also enabled the industry to maintain margins even as prices fell.

One big question is how quickly frackers would ramp up production again if oil prices rise. The IEA is sceptical. It argues that banks may be reluctant to fund more of their wells; staff will take longer to mobilise after recent lay-offs; and other factors will make shale-oil production “stickier” than boosters assume. It believes that rapid depletion rates in shale-oil fields may raise costs faster than new technology can lower them, putting a cap on shale’s long-term potential. That would be music to Saudi Arabia’s ears. But the shale-men are a resourceful bunch, who understand markets at least as well as the Saudis. The battle is not yet won.