The costs of crude oil had fallen into their lowermost ranks from the time when the similar crisis occurred in 2009 worldwide downturn, pounded by the disappearing possibility that Saudi Arabia would decide to decrease the production in order to pause the product’s shifting in the course of the last year.
According to the author of the article ‘Oil Prices Plunge 5% After OPEC Stands Pat’ Clifford Krauss, the costs for oil throughout the world have distorted from more than a hundred and ten dollars for a barrel to less than half of this price in one year and four months.
Moreover, the author states that the oil business is winding from its most intense catastrophe since the end of the twentieth century not only on the territory of the United States but throughout the rest of the world. Not so long ago the American standard for oil prices crossed the mark of thirty-eight dollars for a single barrel. This cost appears to change drilling and carrying out shafts into a mislaying suggestion in almost every oil arena across the nation.
Furthermore, the author states that a broad diversity of issues could be responsible for the decreasing of the oil prices. As the experts claim, these factors most likely include the progression of the oil industry in America and Iraq during the past several years and a decelerating in request progress from China and other emerging nations.
Nonetheless, the final factor that has led to the price decreasing was the choice made by the Organization of the Petroleum Exporting Countries also referred to as OPEC and is controlled by Saudi Arabia and a small number of Persian Gulf associates. At the end of the autumn in 2014, the OPEC decided not to change manufacture in order to support the costs, as the similar situation frequently occurred in the past, and this decision was the one that directed the expenses into a downfall.
The OPEC claimed that “before they made any decision about future production cuts, they wanted to see the impact on global markets of new barrels from Iran — expected to be as many as 500,000 a day by the second half of 2016 — as Tehran complies with the recent nuclear deal” (Krauss, 2015, para. 8). Moreover, they proposed that Saudi Arabia could be eager to reduce the prices under the condition that the rest of the most important manufacturers were ready to implement the same strategy.
From the analytical point of view, the strategy of Saudi Arabia towards the oil prices could be evaluated as a risky move in an attempt to prove their superiority over the other leaders in this industry sector. Nonetheless, it is known that the economy of Saudi Arabia stands on the oil production, as it makes almost ninety percent of the export of the country. As a result, the implemented strategy is not safe for the economy as well as the state of business throughout the world economic arena.
As a result of this strategy, the International Monetary Fund has made the warning that their reserves possibly will end on the course of several years due to the condensed incomes and high communal expenditure they depend on in order to preserve the internal harmony, even despite the fact that the Saudi Arabia endures to possess substantial assets. This would result in shifting of the whole economic sector and the Saudis becoming the chief oils producers.
References
Krauss, C. (2015). Oil prices plunge 5% after OPEC stands pat. Web.