Will Glut of Oil Bring Another Tragic Recession to Global Entrepreneurs? Deep Analysis
It is good news to a house wife to buy oil at cheap prices. The slack in the oil price must help million consumers to cut expenses and lay aside few more dollars for future expenditure. However, this stereotype conviction must not be fully apropos and correct in broader sense. Oil dumping issue needs to be given a priority. Major oil companies will be affected due to the sudden nosedive in the price of lubricant products to sell. Side effects of dumping of oil will certainly jeopardize the American exporters who will have to suffer from the brunt of such massive decrease in the oil price. Major oil exporters in Gulf region have already decided to sell oil at the cheap prices. It willproduce differentresults and people have to evaluate thiscrisis on the tectonic ofextrapolatedfacts, surveyreportsand statreviewspublished inmajore-journals.
Drop in Oil Prices – Who Gets Benefits- Consumers or Nations?
For the time being, many major oil exporters like Saudi Arabia, Venezuela and Kuwait are condemned due to the decrease in the oil distribution comparing with oil produced by these countries. This artificial oil depletion is a part of strategic move by these oil exporters to have financial benefits by selling stored crude oil at high prices. In this connection, Hubbert curves confirm the steady decline in the cumulative oil production due to the out of stock of underground natural resources. Crude oil is finite and there is higher possibility of oil depletion if the natural resources including fossil underground slowly run out of stock. Hubbert peak theory predicts the rate of oil production based on the previous self-discovery study and survey reports. Hubbert curves have also predicted this sudden oil depletion in Gulf region. Many market analyzers suspect that Gulf nations and even China in Asia compensate the loss by producing excess oil to bring down the price of this liquid gold. Certainly, customers will be happy to get such valuable lubricant commodity at cost effective prices. On the other hand, few more experts have stated confidently that the demand for oil and lubricant products is slowly going down. In the market, the value of oil is decreasing. Therefore, oil exporting nationshave toreadjustpricesof oilto bealive inthis globalindustry.
What is Anti-dumping Law? How Is It Effective to Regulate Oil Glut?
Anti-dumping laws need to be introduced to save foreign countries like America from the recession. This new law will enable the US to impose embargo on those exporters for selling oil at cheaper prices. However, experts have spotted a number of loopholes in this anti-oil dumping regulation. According to them, it is a one sided law to cripple large oil producers in different nations. WhenAmericahad to sell storedoilatoverwhelminglylow prices duringrecession to collect proceeds formaintenanceof oil reservoirs , clearance of debt and machineryupkeep , this country was not cross examined under theanti-dumping law. This law is applicable to any Gulf nation which sells crude oil to any foreign country at surprisingly low prices. This anomaly in the anti-dumping law will discourage Gulf oil producers to concentrate on the oil production. There is another factor to note while assessing the effectiveness of anti-dumping law. If heavy embargo in the form of higher tax is imposed on any accused nation for violating law to export crude oil at very low price, other nations will take the place. For instance, if Saudi Arab stops selling oil to America, it will ship oil to Europe. So, it doesn’t sound constructive and effective to many experienced market analyzers. Well, there is another baseless thing to point. It is absolutely absurd to charge or accuse Saudi Arabia due to the sale of oil at low prices when they lock into agreement with the US. How is it a heinous crime to sell oil to American clients at cheap rates? This bias in the anti-dumping law has raised an important concern. So there will be a flexible and dynamic mechanism to invent with the right solution to overtake the global crisis. Oil prices must be tuned up to boost up oil producing nations to invest fund for upgrading their up and downstream sectors to keep the smooth flow in oil production.
Focus on OPEC
OPEC made a historical oil production by generating 31.7 million barrels in last November. OPEC oil production rate increased by 230,000 barrels per day in previous month. Recently, oil price dipped to under $37 per barrel will cause a depression in the oil industry. If theoil priceruns down just like aforcefulcascade, the conditionof largeoilexportingcompanies in the worldwillhave episodes of deep melancholy and frustrationto experience. OPEC needs to be kept energetic to face global recession. Thetemporarypricedepletion in oilmust bea minus factor toOPEC whichhas increased theoilproductionrate to have morerevenues. However, this dramatic nosedive in the oil prices seems to be a part of strategic maneuver of both US and Saudi Arabia. Through the convergence of geopolitical areas, the US and Saudi Arabia will fracture the grown rate of OPEC. It will force OPEC to lessen the oil production so that these countries will be able to readjust the prices of oil at acceptable rates in future. Riyadh also uses oil as a weapon to teach Russia and Iran a lesson due to their involvement in backing Syrian president to create disturbance in Saudi Arabia. Russia mainly depends on oil and this sudden price slack in the global oil industry must be a boomerang to obstruct the economic growth of the country.
US Engaged to Decrease the Oil Import Dependency
On the other hand, in 2015, America imported around 9.4 million barrels of crude oil from almost 82 nations. This country bought petroleum products in shape of crude oil, natural gas, refined gasoline products, and diesel. US exported 4.8 mmb/d of petrol to around 136 countries. US also imports oil and petroleum products from top exporting countries like Saudi Arabia, Venezuela and Mexico. The US import dependence issue was highlighted at various conferences. To be frank, America buys or imports crude oil from different countries like Saudi Arabia and Venezuela and OPEC. This tendency to buy crude oil experienced a drop in 2010 by 49.3 percent. However, oil import analysis is done based on input and output levels. At input level, America buys unrefined crude oil from other nations and then it transforms this crude oil into much refined petroleum products. It is output level. Due to the inceptionofadvanced oilrefinerytechnology, the imported outputoil has been decreased tomakeAmericamuch more selfreliant. The oil import dependency at the input output level has decreased to a great extent.
Oil Prices Dropped Heavily to Affect Iraq Uber
Sudden drop in oil prices has brought unbearable burden to Kurdish Peshmerga and Iraqi military to continue their Jihad against militants. Iraq is not able to accumulate sufficient fund to pay military personnel, working staff members and Kurdish supporters who fight to terminate extremists. Kurdish regional administration is planning how to manage $18 billion debt which must put them in worse financial condition. Iraq is expecting better turnout. Oil prices must soar up to help Iraq and its allied force to build up strong defense for counterattacks.
Embargo Lifted from Iran