The Complex World Of Falling Oil Prices

The Complex World Of Falling Oil Prices

by Sangeeta Haindl
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Tuesday, January 6, 2015 - 4:00pm



Oil’s spectacular price collapse is undoubtedly one of 2014’s top stories and will remain a major theme in 2015, as no one saw last year’s dramatic fall coming. Prices have plunged sharply over the past six months, leading to significant revenue shortfalls in many energy-exporting nations while many consumers are probably going to pay less to heat their homes or drive their cars. From 2010 until mid-2014, world oil prices had been fairly stable, at around $110 (£68) a barrel; since June 2014, prices have almost halved. The main reasons for this change are weak demand in many countries due to weak economic growth, coupled with surging US production. Added to this is a determination by the oil cartel OPEC (Organisation of the Petroleum Exporting Countries by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela) that it is not going to prop up prices by cutting production.

Global oil markets are complex with numerous geopolitical and economic implications, from the slowing Chinese economic growth to a sputtering European economy. 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. Plus, there’s last year’s tensions surrounding Russia’s annexation of the Crimea, the civil war in Syria and broad advances by Sunni insurgents across northern Iraq to further disrupt oil-as-usual business. However, until now, none of these scenarios have actually posed an imminent danger to supply. Yet, the prospect for severe disruptions cannot be ignored, and it is possible that a geopolitical shock could threaten oil supplies at some point in the future.

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Sangeeta Haindl writes on social innovation, social enterprise, and social entrepreneurs. She is the owner of Serendipity PR, in London, U.K., where she works with high-profile brands and organizations in the public, non-profit, and corporate sectors, winning awards for her work from the communications industry. She describes herself as a Spiritual Entrepreneur, Conscious Explorer, and Futurist. She enjoys helping others, paying it forward, and being a mum.