Oil Project

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 insignificant that they might stop production altogether, further slowing nation and global economic development.

    The price of oil is affected by three factors: supply and demand, obviously, but also slightly by expectation.  Currently, the demand for oil is low due to weak economic activity, globally speaking; higher efficiency; and the growing use of substitutes, such as natural gas, that reduce the need for oil.  The oil prices began to fall at a steeper rate on November 27, 2014 when OPEC met in Vienna and failed to agree on the proper amount of output to match the declining demand.  Several OPEC members were willing to cut back production, but Saudi Arabia wanted to continue their output.  They can survive the price drop because the price of a barrel to them is only five to six dollars; other countries, however, cannot survive.  If Saudi Arabia continues on the same beat and path, they will push out smaller competitors and force them to essentially go out of business. This price drop in barrels of oil is detrimental to countries whose economy is propelled by the oil industry, more specifically the smaller countries in the Middle East and Eastern Europe.  With the recent slump in prices, oil exporters are hurting and importers are benefiting.  The effects of this phenomenon...