- What is the story about?
- Rapid fall
- Shale coup
- OPEC Manipulations
- Oil dumping on the market by America
- Erroneous predictions
- The conflict between America and Russia
- Secondary factors of oil fall
- What will happen next?
In the fall of 2014, more and more people began to wonder why oil was getting cheaper. Starting from September 5, prices for all brands of fuel began to plummet. The trend continues today. The history shows that throughout the entire period of existence of the international oil market there were significant prerequisites for the growth and reduction of prices, including those that were created artificially. Autumn 2014 does not fall under one of the historical phenomena.
What is the story about?
From time to time the oil price chart has rapidly moved in one of the directions throughout the history of the market. One of the episodes took place a year before the outbreak of the Persian Gulf War. At that time, the spot price of oil was only $ 18.05. During the war, the price of Brent crude reached the level of $ 29, there were historical peaks at the time of $ 41.5. An interesting fact is that the day before the outbreak of hostilities, and the next day after their official completion, the cost of fuel was identical - $ 19.93 per barrel. Similar situations occurred during the period of the Islamic Revolution in Iran and during the Iran-Iraq war, during the Asian financial crisis and during the second war in Iraq. In September 2014, nothing foreshadowed a colossal fall. Like every year, against the backdrop of August, in September the price fell. The fall was not significant, only 4.5%.
The fall by 4.5% continued in October, and the question of why oil is getting cheaper today, and at the moment remains relevant. When, in mid-autumn, oil prices were at $ 86.4 per barrel, analysts began to worry. This is due to the fact that the world has no economic prerequisites for this phenomenon. Although the economy of world countries was in decline, it was very problematic to call it catastrophic or critical. So low and relatively high for today, the price level was last recorded in 2010 after the 2008 crisis. The world media began to actively make statements that the reason for the situation on the market was the manipulation of the United States. What happened after the fact is impossible to say for sure, but economists identify several significant factors and phenomena at the same time.
Quite a large number of world experts say that oil falls in price due to the carefully concealed real cost of developing shale oil in America. The cost of mining is much lower than that announced to the public. At the Geneva conference, representatives of large oil companies, such as Morgan Stanley, Eagle Ford and Barclays Plc., Stated that the cost of extracting shale fuel can vary from 30 to 60 dollars per barrel. This indicates that the price of "black gold" in the world market is not critical. It was also predicted that the fall in prices in October should end soon. Unfortunately, this forecast of oil prices has not come true.
The second factor that led to concern about the question of why oil is getting cheaper is the oversupply in the market. In large quantities on the world market comes "black gold" from Iran. Supplies from Latin America and from Africa began to occupy a significant part of the market. The policy of keeping the cost of oil by reducing its production was categorically rejected by OPEC countries. A major role in the appearance of a large offer was played by the sanctions that were lifted by the EU from the largest Iranian tanker company NITC. The EU actively supports Tehran, which is also among the major suppliers. Fuel has come to the market and from American manufacturers. To say more, recently the United States has invested large sums of money in the extractive industries of such states as South Sudan and Chad, Equatorial Guinea and Mozambique.
Oil dumping on the market by America
Many experts, wondering why oil is getting cheaper, mention America’s global discharge of large amounts of fuel to the market. Part of the national reserve was sent for sale due to the low cost of shale development. Following America, Canada resorted to a similar sale, which began the battle for its assets in the Arctic and began developing territories. It is worth mentioning the preparation of President Obama for the 2017 elections, which determines his policy with regard to the international oil market.
Today, oil is falling in price, and for the reason that even in the middle of autumn 2014, many brokers were counting on the resumption of oil prices after a fall. In their predictions, world analysts were repelled by the theories of the development of civil conflicts in Arab countries and lost. False information about the destruction of transport routes and fuel extraction sites in Arab countries did not play into the hands of speculators. Instead of the expected increase in the destruction of terminals in Iraq and Libya did not happen. On the contrary, now not one, but two export centers work at once. The war is in such a way that it does not harm the oil industry.
Kurdistan also actively defends its rights, oil exports of which are estimated at $ 4 billion. Restrictions and attempts to cut off Iran’s supply chains ended in failure. In the summer of 2013, the sovereignty of the quasi-state Arabic Caliphate was declared, through which the “left” oil was transported to the market. The formation of the state only stimulated the transportation to Europe of cheap semi-legal and illegal oil.
The oil price chart continues to move rapidly down due to a radical change in its supply routes. The attacks of US troops on Syria have strengthened the Turkish direction of exports from Iraq. Hiding behind the struggle with the Caliphate, about 27 refineries and the largest Syrian refinery were destroyed. As a result, Syria left the list of major fuel suppliers from Iraq. Its place was taken by more productive countries such as Kurdistan and Turkey. More profitable logistics stimulated the fall in world prices. The oil reserves of each of the countries of Iraq are one and a half times more than the reserves of Russia. The fall in oil prices will continue due to active competition between countries. Lowering the pricing policy, major suppliers, in particular the OPEC countries, intend to oust all competitors.
The conflict between America and Russia
Many experts, trying to explain why oil is getting cheaper in Russia, recall the good old “cold war” between America and Russia. The sanctions imposed due to the military conflict with Ukraine proved to be insufficiently influential, and the Russian economy practically did not suffer. Assumptions speak of attempts to influence the actions of the Russian government by controlling world oil prices. Lowering the cost of fuel leads to a reduction in government revenue in dollar terms. Consequently, the ruble to the dollar weakens. The country's economy is not able to maintain the mining industry in the proper amount. The contradiction in this assumption is only in the fact that not only Russia itself suffers from a fall in oil prices, but also the USA and many other states.
Secondary factors of oil fall
The graph of the dynamics of oil prices shows a downward trend not only as a result of unobtrusive at first glance economic factors. The direction is reinforced by numerous minor phenomena:
- Climate change in the world.
- Simplified navigation access to new Arctic fields.
- Unjustified Fukushima syndrome in the energy sector. Gas and fuel oil markets have increased significantly in volume.
- Active development of technologies for oil production, the search for alternative options for the development of fields.
What will happen next?
Expert opinion on the question of why oil is getting cheaper is slightly different due to the economic situation in the world and the active division of the world oil market. At the same time, most of the players are focused on the positive outcome of the situation. On this issue, expressed their opinion, many major suppliers of goods. At today's fuel price of approximately $ 55, experts announced:
- Well-known world analysts, oil and consulting enterprises, experts are inclined to the price of 60 dollars.
- The United States Energy Information Administration already in January called the optimal cost of fuel per barrel in the amount of $ 58.
- The agency "Prime", having surveyed about 150 analysts, gives its forecast for the price of oil. They predict a change in the cost of a barrel in the range from $ 50 to $ 80.
- Analysts of the famous company "Goldman Sachs" settled on the forecast of $ 50.
- Bank of America Merrill Lynch bets on the price of $ 40 per barrel.
- The president of the LUKOIL Corporation is leaning toward an oil price of $ 60 per barrel.
- Experts at Morgan Stanley suggest that in the first - second quarter of 2015, the price of oil will be kept at around $ 57. At the same time, the third and fourth quarter of the year, according to representatives of the company, promises a sharp increase in the cost of petroleum products to the figure of $ 70.
- Swiss banks are optimistic about the situation. They believe in setting prices for petroleum products at the level of $ 70- $ 85.
Despite the refusal of many large oil companies of the world from their plans and projects, their expectations remain very optimistic. Despite the tough policy of OPEC, the overwhelming majority of specialists are inclined to think that the situation in the global oil market will soon even out, and all the losses sustained by both countries and individual companies will be restored. In the meantime, the trend is falling, and why oil is getting cheaper today, no one will undertake to explain.