THE UPS AND DOWNS OF OIL PRICES

At the time of writing, oil prices were dipping dramatically towards the $20 USD per barrel mark, prices that the oil industry hasn’t seen since the ‘90s. For an industry that was gleefully dancing in the streets over $120 USD per barrel oil a mere seven years ago, these depressed prices are causing a major upset in all oil producing economies.

In years past, the oil industry has counted on OPEC, an international oil cartel led by Saudi Arabia to artificially inflate prices and keep oil producers swimming in cash. That and steadily increasing demand in the growing economies of South America, India and Asia drove oil prices to new heights. Oil exporting countries cheered and blew wads of cash on extravagant construction and services. Oil importing countries did their best to keep up but high oil prices depressed economies there.

In 2015, the downturn began due to increased oil production and Saudi Arabia’s refusal to shut down any wells. By mid 2015, facing $30-$50 per barrel oil prices, companies in Canada began making deep, deep cuts and unemployment soared. Now at $20 per barrel, the pain drags on with no resolution in sight.

Production, despite the sinking value of each barrel, continues apace. The US, Middle East, Canada, Russia and some South American countries are all producing oil steadily and fighting for a steady pool of oil importing clients by lowering prices to the basement. New technology means that previously untapped resources are brought into play, flooding the market.

Weak European economies, a shocking slowdown in China’s runaway growth, and increasing technological efficiency means that global oil demand is not strong enough to gobble up the growing supply.

Oversupply, meet under-demand. How are we feeling the pinch?

Check back soon.