Souring Oil Prices: Who is the winner?
2014 second half had everyone's attention - literally every industry in the world. Corporate and non-corporate earth was shocked and worried simultaneously regarding the declining oil prices that had started its downward fall from ~$115/bbl. Speculations were everywhere, every financial institution, banks, brokerage firms, oil & gas industry companies, professionals, associates were wondering what will happen next. Everyone related this slump to the fall of 2009, or the few before that but this is something unlike we have seen before. Now in 2017, the oil price still hovers around ~$50/bbl. Despite all the efforts by OPEC in cutting production et cetera, nothing was able to lift this aging industry - atleast until now.
But is low oil price bad for everyone? for every industry? .. lets evaluate.
Picture reference: EE New Begining
The sharp decline in oil prices from $115 Per Barrel in June 2014 to record level of $28.94 Per Barrel in January 2016 catered a significant wealth transfer from the producers of oil to the final consumers. The result is expected to be a hybrid with an ultimate net benefit to the economy as inflation fall and stimulate global economic activity. Despite bringing hefty losses to most Oil & Gas corporations, oil exporting countries & oil manufacturingg companies, it did become a great opportunity for the following to make or save significant money:
Oil Importing Countries
Countries that import crude oil were clear winners to the decreasing oil prices. China, Japan, India, Turkey and Euro zone all displayed savings in their current account oil trade strengthening the country’s economic outlook.
Countries with Oil Production a low Percentage to other sectors
United States though an oil producing country benefited due to the newly discovered oil exploration shale technology and due to savings from other business sectors. United Kingdom was in the balance as Aberdeen the hub of oil production in the UK suffered, the country overall gained from higher profit generation from other sectors.
Airline and Auto-Mobile Industry
Definitely a no-brainer, lower crude oil prices have resulted in high cost savings in the Airline industry resulting in partial savings being transferred to the consumers. Likewise, the demand for private transport and vehicle emerged and increased significantly as millions of individuals saved cash on filling up a car tank.
Oil Consuming Industries
Petroleum is also the raw material for many chemical products, including plastics, pharmaceuticals, fertilizers, solvents, synthetic fragrances, and pesticides. Lower input prices benefited these industries globally.
The list is non-exhaustive but there were some clear winners from ~3 year depression reign of low oil prices. Despite some enjoying this great season of extra profit, overall the world is having difficulty to re-stabilize around $50/bbl oil price, because some of the major powers in the world are having serious economic troubles due to the lost income from crude oil & its exports.
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