Headline Feb 18, 2015/ ''' O'' FOR OIL : DEAR STUDENTS! '''


O'' FOR ORANGE. The world has never been more wrong for teaching this, in the learning paradigm,  to the little Angels.

If you don't buy that, then remember to ask Saddam Hussain, when you get to meet up with him in the hereafter.

AT FIRST LOOK, the collapse in oil prices over the past year, from $107 per barrel in June to below $50 per barrel recently, seems like a proverbial free lunch for the consumers of the world.

CHEAPER OIL will put money in consumers' pockets. But would this effect trickle down to the poor of the developing nations: Just about Zero Chance.   

A LOOK AHEAD, and the world is holding its breath : Think its easy to predict where oil will go?

Consider what the very bright analysts at the  IMF  concluded last October when they took stock of where the global oil industry was headed:

They warned the world about the risks of rising crude prices.

The IMF estimated that oil prices could rise by as much as 20% over the course of a year, should the militant  ISIS  manage to push farther into Iraq and seize the country's valuable oil wells.

The negative effects, the  IMF  concluded, could be enough to knock up to 1.5% off global growth.

That's not quite what happened.

The war against  ISIS still rages in Iraq, but the country's oil keeps flowing. In fact, by December last, Iraq was still producing a record  4 million  barrels of oil a day.

Russia, meanwhile, last month pumped a post-Soviet record of  10.67  million barrels of oil a day. And in the  U.S., even as prices were falling through the floor, oil-production is nearly double what it was 7 years ago.

And it is projected to grow keep growing in the short term. In total, the world produced  92.18  million barrels of oil a day in 2014  - a daily surplus of at least a million barrels.

Turns out, high oil prices are one thing the global economy doesn't have to fear.

At least not for now. The long term impact is of cheap oil is depend on whether prices stay depressed for years or just months. 

Goldman Sachs  -which notoriously projected in 2008 that oil could eventually hit $200 a barrel   -slashed its forecasts to $50.40 for  2018  and $70 for 2016.

Some traders have even bet that oil could go as low as $20 a barrel by June  -a level not seen since shortly after  Sept 11,  2001, attacks.

Economics 101 would suggest that ultra-low prices should induce greater consumption, but aside from the U.S.   -where fuel consumption rose 7.1% year over year in the four weeks leading up to Jan 9  -that hasn't really happened.

The same IMF that warned of the negative effects of a sudden oil-price rise in October has now cut its forecasts for global economic growth by 0.3% even though oil is cheaper than it's been for for nearly six years.

There's too much crude on the international market  -global oil inventories by almost 800,000 barrels a day last year   -and not enough takers.

As the country with the world's biggest spare capacity   -the amount of dominant oil production that can be turned on like a tap  

-SAUDI ARABIA  could single-handedly reverse the price slide by cutting production. It's done so in the past, most recently after oil-crashed following the 2008 global financial crisis.

But last November, Saudi Arabia and its partners in the OPEC cartel did something different, keeping production steady at around 30 million barrels a day.

It's just not certain why, why\?!

Iran and Russia are less able to endure low prices, while undercutting new production in countries outside OPEC.

It costs just a few dollars to extract oil in Saudi Arabia, far, far less than the price of fracking for oil in Texas or drilling ultra-deep walls off Brazil's coast.

The Honour And Serving of the  ''operational research''  continues. Thank you for reading and see you on the following one.

With respectful dedication to the Students, Professors and Teachers of Saudi Arabia. See Ya all on !WOW!  -the World Students Society Computers-Internet-Wireless:

''' Students Get A Lift '''

'''Good Night and God Bless

SAM Daily Times - the Voice of the Voiceless


Post a Comment

Grace A Comment!