Oil Prices tumbling down….Is it GOOD or BAD for the World?


12/12/2014 saw the prices breach down to a 5 year low

oil-industryThe constant dripping of oil rates have been moaning news for last few months. However, the initial reactions for the decrease were positive as most of the most of world economies were welcoming the cheaper trends. But with time things have taken the ugly turn as expected. The oil producing and exporting economies are baring the burns of the declining trends. Moreover, the sluggish economic growth around the globe has cut down the demands and this has only accelerated the downfall of the oil industry.

The Organization for Petroleum Exporting Countries (OPEC) last month had suggested some precautionary measures of lowering the production levels in order to keep up the prices to their normal levels but this effort was opposed by Saudi Arabia and its Gulf allies. As a result this idea of decreasing the oil produce was rejected. However, the current situations are falling apart for the oil rich countries as they are witnessing heavy losses on their exports.

Why did Saudi Arabia oppose a production cut?

Saudi Arab being the oil rich region that it is had a couple of options at the OPEC meet. They would have accepted to bring down Saudi Arabian oil production market and lose their revenues and market share. The second option is to let the price fall assuming the higher cost of production will drip the supply automatically. By opposing this move of a production cut, Saudi Arab and its allies are signaling for a similar reduction in produce for the non-member oil producing nations as well.

How is the condition for other oil producing nations other than Saudi Arabia?

The next year is going to be a litmus test for the major oil producing nations other than Saudi Arabia. Oil producing economies like Venezuela and Nigeria are predicted to be the most sufferers as they already are in an extreme painful status. Venezuela has already supporting a subsidized price policy for its regional allies in order to keep the supplies going, however this protective move is likely to kickback as it may be soon they might face the risk of default.

Future for Oil Industry looks most uncertain than ever:

Though uncertainty has been the rule of the game in oil industry, it has never been this unpredictable ever. Industry veterans predict a further fall in the price on a global platform, most of them feel that the lowest price is yet to be reached and the world will witness it by early next year. However, assumptions also direct a recovery in prices by the mid of 2015 as the slashed demands will be slowing picking up. But all this will take time and the speed, percentage of increase can just be a wild guess without any substance at this point in time.