Reasons stands behind falling in OIL price while tension in the
Historically, when political tensions increased in the Middle East, the price of oil rose too. Buyers of oil worried that conflicts could interrupt drilling or interfere with oil-tanker access to waterways. In theory, when risks rise, so do prices. But in recent days, even as tensions have been growing between two key oil producing nations — Iran and Saudi Arabia — oil prices have been falling. They slipped below $36 a barrel on Tuesday. Why? (Geewax, 2016)
The reasons is according to (Geewax, 2016)
1. Experts explain it this way: The two countries are both in OPEC but now are on such bad terms that they'd be unlikely to agree on anything — including a plan to reduce drilling. OPEC members are supposed to reach a consensus before changing production policies, and right now, the OPEC policy is to maintain existing high levels of pumping "If they can't agree on an output level and some way to control prices, then everybody will just keep all-out pumping and try to raise as much money as possible for their countries," said Daniel Katzenberg, senior energy analyst at Robert W. Baird & Co
2. And there's another big reason for the low global oil prices: America's abundant supplies. On Tuesday, American Petroleum Institute President Jack Gerard, after delivering his annual State of American Energy address, told reporters that low oil prices reflect the new U.S. role in energy markets. These days, even when Middle Eastern supplies face possible disruptions, oil buyers don't panic; they know U.S. producers can fill any supply gaps, he said. "The geopolitics of energy has changed significantly over the last decade," Gerard said. "The United States is now the world's No. 1 producer of oil and natural gas." Those U.S. oil supplies are "taking out a lot of the risk that we have seen historically" in OPEC-dominated energy markets, he said. "Our production in the United States today is around 9 million barrels a day; that's almost doubled over the last five or six years," Gerard said. "So the global market today is very different." All of that is good for U.S. consumers, he said, noting that the U.S. Energy Information Administration says the average U.S. household saved nearly $700 on cheaper gasoline last year, compared with 2014.And 2016 may be even better for household budgets. The nationwide average price for a gallon of regular is now $1.99, according to AAA, the auto club. That's 21 cents cheaper than a year ago.
The New York Times reveals:
3. United States domestic production has nearly doubled over the last six years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once was sold in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices. Canadian and Iraqi oil production and exports are rising year after year. Even the Russians, with all their economic problems, manage to keep pumping. (KRAUSS, 2016)
4. There are signs, however, that production is falling in the United States and some other oil-producing countries because of the drop in exploration investments.
On the demand side, the economies of Europe and developing countries are weak and vehicles are becoming more energy-efficient. So demand for fuel is lagging a bit. (Geewax, 2016)
References
Geewax, M. (2016, jan 05). Troubles Are Up In The Middle East, But Oil Prices Are Down. Huh? Retrieved jan 07, 2016, from npr.orf: www.npr.org/sections...-prices-are-down-huh
KRAUSS, C. (2016, Jan 06). Oil Prices: What’s Behind the Drop? Simple Economics. Retrieved Jan 07, 2016, from New York Times: www.nytimes.com/inte...ment/oil-prices.html
The reasons is according to (Geewax, 2016)
1. Experts explain it this way: The two countries are both in OPEC but now are on such bad terms that they'd be unlikely to agree on anything — including a plan to reduce drilling. OPEC members are supposed to reach a consensus before changing production policies, and right now, the OPEC policy is to maintain existing high levels of pumping "If they can't agree on an output level and some way to control prices, then everybody will just keep all-out pumping and try to raise as much money as possible for their countries," said Daniel Katzenberg, senior energy analyst at Robert W. Baird & Co
2. And there's another big reason for the low global oil prices: America's abundant supplies. On Tuesday, American Petroleum Institute President Jack Gerard, after delivering his annual State of American Energy address, told reporters that low oil prices reflect the new U.S. role in energy markets. These days, even when Middle Eastern supplies face possible disruptions, oil buyers don't panic; they know U.S. producers can fill any supply gaps, he said. "The geopolitics of energy has changed significantly over the last decade," Gerard said. "The United States is now the world's No. 1 producer of oil and natural gas." Those U.S. oil supplies are "taking out a lot of the risk that we have seen historically" in OPEC-dominated energy markets, he said. "Our production in the United States today is around 9 million barrels a day; that's almost doubled over the last five or six years," Gerard said. "So the global market today is very different." All of that is good for U.S. consumers, he said, noting that the U.S. Energy Information Administration says the average U.S. household saved nearly $700 on cheaper gasoline last year, compared with 2014.And 2016 may be even better for household budgets. The nationwide average price for a gallon of regular is now $1.99, according to AAA, the auto club. That's 21 cents cheaper than a year ago.
The New York Times reveals:
3. United States domestic production has nearly doubled over the last six years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once was sold in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices. Canadian and Iraqi oil production and exports are rising year after year. Even the Russians, with all their economic problems, manage to keep pumping. (KRAUSS, 2016)
4. There are signs, however, that production is falling in the United States and some other oil-producing countries because of the drop in exploration investments.
On the demand side, the economies of Europe and developing countries are weak and vehicles are becoming more energy-efficient. So demand for fuel is lagging a bit. (Geewax, 2016)
References
Geewax, M. (2016, jan 05). Troubles Are Up In The Middle East, But Oil Prices Are Down. Huh? Retrieved jan 07, 2016, from npr.orf: www.npr.org/sections...-prices-are-down-huh
KRAUSS, C. (2016, Jan 06). Oil Prices: What’s Behind the Drop? Simple Economics. Retrieved Jan 07, 2016, from New York Times: www.nytimes.com/inte...ment/oil-prices.html