Monday, 2 February 2015

Oil for everybody, but who will win the war?


In recent months the price of oil has fallen to a six year low.
What has triggered this down ward trend? When will it end? Who is going to gain from it?
In the graphic we can see the development of the price since the late 80s.
Since the late 90s the demand for oil by China has been growing until its peak in the late noughties.
Price kept going up as demand was much greater than available oil.
Then the financial crisis happened which changed the dynamics of the markets.
North America, affected by high prices, started fraking in the shale fields of North Dakota and Texas  and oil sands of Alberta. This caused stockpiling of plentiful oil mainly because of weak European economies and governmental efficiency policies around the world.
The price of oil was therefore on a downward slope.

To add to this slide, although OPEC countries need high prices for their economy, they have done nothing to make prices rise. Instead and in order to maintain market share they keep extracting.
At the same time shale extraction is becoming uneconomic and fears are voiced by producers who are in trouble of closing down shop.
So all that we have to do is to sit behind the wheel drive as much as we can and wit to see who will win.

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