What seemed impossible last year,happened at the end of August, when a barrel of crude oil “sunk” below $40, for the first time since the end of the global economic crisis. With a high of $107.26 in 2014, the oil price fell for eight consecutive weeks, the longest streak since 1986.
It’s not something to be happy about
While people are happy because gas prices are low, we must also look at the downside of things: many oil companies are cutting down jobs. Ben van Beurden, CEO of Royal Dutch Shell :“Today’s oil price downturn could last for several years.
“Of course we don’t have a crystal ball but Shell planning assumptions reflect today’s market realities so we are planning on a prolonged downturn”, said van Beurden, according to euronews.com. 6500 employees were left without a job by Shell.
The oil price fluctuation is partly determined by actual supply and demand, and partly by expectation. So, what is actually causing this oil price fluctuation? “The Economist” say that there are four factors involved. First, there is the weak economic activity, increased efficiency, and a growing switch away from oil to other fuels.
Second, confusion and agitation in Iraq and Libya, two big oil producers, has not affected their output. America’s placement as world’s largest oil producer is reason number three, because it now imports much less oil, creating
a lot of spare supply.
Finally, Saudi Arabia an their Golf allies have decided not the make life easier for their enemies, Iran and Russia, so they’ve decided not to sacrifice their own market share to restore the price.
Oil prices shouldn’t fall again
But there are some “optimists” voices concerning the oil price fluctuation. ADS Securities’ Noureldeen Al Hammoury, an expert in this situations, explained for Euronews in an interview last week that the price should not fall again.
“We have to look at the current situation where fundamentals are unchanged. We know very well we are not replacing oil any time soon, for a decade at least, world demand is high, and we don’t expect a big fall like last year. The successive price drops are unlikely to repeat themselves, and oil will rise again. This week’s rises are a prelude to a coming stability.”
What are your thoughts on the oil price fluctuation? Share them with us, using the comments section below.
