NEW YORK (MarketWatch) — Oil’s stunning price collapse was undoubtedly one of 2014’s top stories and will remain a major theme for investors in 2015.

Nymex WTI oil futures CLF25, fell 46% in 2014 to the lowest level since May 2009. Brent UK:LCOF5, the global benchmark, lost 48%, also ending at the lowest level since May 2009.

Here’s a look at the factors behind oil’s plunge.

Shale oil

U.S. Energy Information Administration, Annual Energy Outlook 2014

It's impossible to talk about oil’s plunge without talking about the supply glut. And it’s impossible to talk about the supply glut without talking about U.S. shale. Persistently high oil prices helped to spur the fracking revolution, which in turn triggered a boom for North Dakota and other shale-oil-rich regions.

Falling prices will weigh on production of oil from shale and other resources as energy firms cut back on projects, but investors are debating exactly how sensitive shale production will prove to be.

“In fact, we can even imagine initially higher output, as many shale players will scramble for survival and cash flow becomes crucial,” wrote analysts at JBC Energy. “This will push them to reduce the backlog of already drilled and fracked wells, while focusing new wells on their most promising assets.”

Price war

It’s not just the U.S., other major producers are also pumping away. OPEC, meanwhile, is keeping the spigots open in what many strategists see as nothing less than a price war aimed at routing shale and other higher-cost producers. The cartel opted at a closely watched November meeting to make no changes to its production levels, prompting another jarring decline for oil futures.

“This makes any rapid recovery of oil prices unlikely, especially as additional supply looks set to reach the market from northern Iraq and Libya,” wrote Carsten Fritsch, commodity strategist at Commerzbank in Frankfurt.

On Dec. 22, Saudi Arabia’s oil minister, Ali al-Naimi, said OPEC wouldn’t cut production even if oil falls to $20 a barrel.

Weak demand

Then there’s the other side of the supply-demand equation. Slowing Chinese economic growth and a sputtering European economy have helped to keep demand growth under wraps.

The International Energy Agency in December cut its 2015 forecast for global-oil demand growth by 230,000 barrels per day, to 900,000 barrels. That said, demand should receive a boost from the declines in oil prices that have already taken place, said Julian Jessop, economist at Capital Economics.

OPEC, in its monthly report for December, forecast that demand for its oil would drop to 28.9 million barrels a day in 2015 versus 29.4 million barrels a day this year.

Dissipating geopolitical fears

Iraqi pro-government forces take part in a major operation against Islamic State fighters north of Baghdad on Nov. 26. Getty Images

Oil had rallied into midyear, buoyed in part by geopolitical tensions surrounding Russia’s annexation of the Crimea, civil war in Syria, and broad advances by Sunni insurgents across northern Iraq. But the risk premium soon dissipated as investors came around to the view that none of the scenarios posed an imminent danger to supply. In Iraq, for example, southern oil fields remained well insulated from the turmoil.

Still, the prospect for disruptions can’t be ignored and it’s possible that a geopolitical shock could spur a rebound at some point.

Strong dollar

dxy_12092014

Commodity prices are inversely correlated to the dollar. The oft-cited rationale is that a stronger currency makes dollar-priced commodities more expensive to buyers using other currencies.

The ICE dollar index DXY, +0.03% , a measure of the currency against a basket of six major rivals, climbed 12.5% in 2014.

Binky Chadha, chief global strategist at Deutsche Bank, argues that the strong dollar is the primary factor in oil’s decline. After all, oil supplies have been building for a long time. It’s hard to believe that investors just “suddenly woke up” to the oil glut at midyear, he said.

Oil’s plunge started not long after the dollar rally began to accelerate, Chada notes, observing that it usually takes a rallying dollar a year and a half to cover the ground it’s gained in the last five months, Chadha told reporters recently, which might make finding a bottom in oil “a function of where the dollar stalls.”