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I am a Practitioner of 'The 7e Way of Leaders' where a Leader will Envision, Enable (ASK for TOP D), Empower, Execute, Energize, and Evolve grounded on ETHICS!

Friday, May 12, 2017

Daily Lessons from Life 11 May 2017 - What's wrong with low n lower oil prices?

"PARIS: OPEC said on Thursday (May 11) that oil producers needed to make more joint efforts to match supply and demand in the oil market in the face of rising output in the United States.

Ahead of a May 25 meeting of the cartel where its members and Russia are expected to roll over an agreement to cut production, OPEC said in its monthly market report that common policies were needed for market stability.

While decreased stocks and an improving global economy were supporting oil demand, "continued rebalancing in the oil market by year-end will require the collective efforts of all oil producers to increase market stability," OPEC said.

Global oil prices recently dipped briefly under US$50 dollars per barrel for the first time since OPEC and Russia scaled back output as concerns whether the deal would be renewed and the impact of rising output in the United States weighed on the market.

OPEC members agreed in November to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to reduce the glut of oil supplies on the shore up prices.

Non-cartel producers led by Russia partially matched the cuts.

Oil prices have recovered somewhat this week as OPEC and Russian officials have signaled a renewal of the production deal is likely.

But the OPEC report confirmed the cartel's concern about a recovery in US oil output.

The cartel abandoned its traditional strategy of limiting supply to support prices between 2014 and 2016, stepping up production and causing a plunge in prices to under US$30 per barrel as they sought to squeeze out higher cost US shale producers.

While US output fell last year, OPEC sees it recovering and expanding further in 2017.

Overall, the cartel expects non-OPEC supply to increase by 0.95 million barrels per day, with the United States alone likely to contribute 0.82 million barrels per day."

When I was a little boy n then a university student in the late 70s, I was taught that high oil prices r bad for everything as everything use oil directly or indirect for Production n consumption!

Fast forward to today where oil production technologies supposedly had advanced by leaps n bounds n more productive. All these should translate into cheaper oil prices n n caused production costs of almost everything to drop n hence cost of living should also drop. Alas, something changed somehow. Now most economists n analysts cry out in horror whenever oil prices dropped!! LOL!!

Maybe we hv grown used to high n higher oil prices. People in the O&G industry expects to make big buck. Oil producers want to make big buck. Everyone involved with the oil industry want to make big buck. So, damned the consumers. Damned the majority of the world populations who don't depends on oil n gas industry to make a living.

Just keep the oil prices up n status quo will be great. Fine!!

I m confused. Maybe some smart economists n analysts can help me to explain this warped logic?

A sick cycle or just me being an idiotic idealist?

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