What is the reasoning behind the sharp fall of oil prices starting in mid 2014? Things I have considered: 


Poor economic conditions around the world could have caused an unpredicted decrease in demand. The resulting surplus has begun driving prices down. 
This could be exacerbated by a decade of record-high prices that spurred massive investment that changed supply capacity. I know part of this could also be a result of technological innovation that, over the last few years, has changed supply capacity. Add to this the relatively recent discovery of new pockets of oil/natural gas here that producers have begun exploiting. 
Consumer's expect prices to continue falling and so they forgo purchasing fuel if possible. This slowdown in demand can actually help fuel that expected price drop. This could contribute to a steady downward pressure, I think. 
Geopolitical relations between America, Saudi Arabia, Russia and Iran. I know that Saudi Arabia and co. could slash production in an attempt to remove the excess supply and drive prices of oil up again. 
America is now a (the?) leading oil producer world wide and the USA do not import nearly as much oil as it once did. The fact that the USA are using oil extracted and refined domestically has obvious implications etc. An interesting question is how OPEC's recent announcement to not cut production and instead let prices stay low might affect domestic production where things like horizontal drilling and fracking drive up the cost of extraction. 


I would really appreciate a substantiated walkthrough of what has caused this very sharp turn around in oil prices. I know the last decade was a time of record highs...so why now the massive landslide in the value of oil?

I should say I am hoping to hear from economists who perhaps have some specialized knowledge here. I do have an undergrad degree in economics and I have read and am familiar with most of the general arguments.  I am looking for a well substantiated and thorough answer that will deepen my understanding of this issue.
My understanding of the recent drop in oil price is due to recent changes in US drilling. They are now the worlds largest oil producer. This article by the economist does a good job explaining.

My answer (borrowed very heavily from the economist.)


Demand is low because of weak economic activity, increased efficiency, and a growing switch away from oil to other fuels.
America has become the world’s largest oil producer, creating a lot of spare supply. 
The Saudis and their Gulf allies have decided not to sacrifice their own market share to restore the price. They could curb production sharply, but the main benefits would go to countries they detest such as Iran and Russia. Saudi Arabia can tolerate lower oil prices quite easily. It has \$900 billion in reserves. Its own oil costs very little (around $5-6 per barrel) to get out of the ground.


For further reading, the NY times has a decent article explaining it a little more.

edit:
I think it is safe to assume that OPEC has market power. They can get oil far cheaper than their competitors (as referenced above).

With that in mind,
The below reference provides a model which explains what we are experiencing here. Cournot competition seems a perfect model to use.


Naoum-Sawaya, J. and Elhedhli, S. (2010). Controlled predatory pricing in a multiperiod Stackelberg game: an MPEC approach. J Glob Optim, 50(2), pp.345-362.


A key quote from the above article: "After reducing or eliminating competition, the predatory firm
can raise its price and compensate the loss by earning monopoly profits in the long run".

This second provides a very brief overview of OPEC and their behaviour.


OPEC reflects on its history. Salisbury, Peter, Middle East Economic Digest.


I couldn't find an empirical study comparing a Stackleberg model to the OPEC cartel but I do not doubt that this has been done to death.