The oil industry has faced serious scrutiny due to fluctuating prices. In fact, the industry saw price drop down to the $20s in the last year. Fortunately, by the end of the year, these prices had increased up to the $50s before the start of 2017. These sudden changes have pushed some investors away from the table. This doesn’t equate to an end in the oil industry. In fact, several elements are showing the potential for increased prices and a return for investors in the upcoming year.
Reviewing Capitulation Associated with the Price War
Changes in policy initiated by the OPEC have initiated strategies to increase the production levels of oil. By meeting supply and demand, investors don’t have to fear sudden changes that produce a loss. The reduction of supply has proven to generate major issues. However, if the policies change, this enables oil-rich countries to increase production and lower issues associated with an inability to meet the demands of oil companies.
What is Saudi Arabia’s Role in All of This?
Currently, the country has taken action to lower its reliance on the natural resource by privatizing Saudi Aramco. The national oil company could prosper in these conditions. However, the issue they could face is that the company could still lose profits based on the current price of oil. It is due to these possible conditions that the country is pushing for an increase in oil prices and ultimately costs for consumers.
The Full Effect on Oil Producers
The sudden price reductions have affected the United States as well. The U.S. faces serious conditions in which oil could become depleted. The inability to drill offshore has affected their ability to retain status as a major oil producer. Each of the projects in which the country has attempted to tap into these rigs has lead to oil spills that affect the environment and prices more negatively.
The oil war has affected all countries involved in negative ways. Due to a slowing in supplies, the prices for trade oil have increased causing more issues for residents of these countries. To read through the full details of the oil price war and its effects on local economy read more here.