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Oil Project Essay

1014 words - 5 pages

Oil Project Executive Summary Group 3

The collapse of oil prices starting in 2014 was seen to be one of the biggest stories in the world over the last several months.  Oil supplies are vastly outstripping demand causing the commodity price to plummet. Every major country around the globe has been affected in some way with further turmoil expected over the next couple of years. In just under under nine months, the price of oil has been cut by more than half averaging 115 dollars to 50 dollars a barrel. Consumers of gasoline and other oil related products have greatly benefited, while top oil producers have seen major losses in profit. At this point, the profit for many producers is so ...view middle of the document...

 The effects of this phenomenon are having a negative impact on countries, such as Russia and Nigeria.  Russia is suffering a lower GDP and income and Nigeria is being forced to raise its interest rates to offset its declining currency value.  However, this decline in oil prices has the potential to benefit the global economy: more people will buy and stimulate the market, global GDP will rise, inflation rate will begin to plateau, and US Federal Reserve will be able to delay a rise in interest rates.
In 2015, the United States was recognized as the number one producer of oil around the world, outpacing Saudi Arabia and Russia. It also holds the position of the number one consumer eclipsing China, Japan, and India. By consuming more than we produce, the United States is number one in global oil imports. Exports are very low due to government policy and stockpiling. To emphasize, overall oil imports are at a 17 year low while production is at a 24 year high. This is caused by new-found wells in North Dakota and Texas and increased fracking production around the country. These new successful explorations are currently boosting the oil supply globally with growth exceeding ten times compared to Saudi Arabia in the same period.
Global production of oil continues to be significantly higher than demand, leading to significantly lower prices and contributing to inventory build. However the United States is forecasted to start to produce less and consume more this year as demand for crude oil is forecasted to rise, reversing a previous OPEC forecast for a decline in demand. This troubling forecasted trend is going to lead to American oil producers having to further cut oil rigs in operation. American oil rigs in operation is predicted to be working at its lowest level since December 2011.
While U.S. drillers are idling and laying off workers left and right, Saudi Arabia’s plan of allowing oil prices to tumble is forecasted to provide significant...

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