Venezuela Turmoil and Oil Prices
Many of MyMarineTracker’s worldwide customers are directly or indirectly affected by the volatility of crude oil prices and how it affects their business model. These prices have endured wild swings since their high point in June 2014. Not only are elements of supply and demand affecting these prices, but there are also geopolitical factors that contribute to the many pieces pushing prices up and down. The latest of these is the instability of the socialistic Venezuelan government. The United States is Venezuela’s largest and most important oil customer, and they accounted for almost 40% of their shipments last year. U.S. refineries need this crude oil to keep operations at full production and efficiency. U.S. government officials are contemplating sanctions against Venezuelan oil and other commodities. This shortfall will most likely cause at least a temporary price increase until other U.S. sources can ‘catch-up’. Modest surplus and shortages can cause dizzying price swings as consumers’ short-term needs are ridged. Shortages cause a scramble for supply, while surpluses produce drops to equalize the market.
The long-term outlook could be a bit more positive, because India will overtake China for oil demand. Oil demand will steadily increase by 3.5 billion barrels from now until 2036, which could account for one-third of all world demand growth.
So, why did the price of crude oil plummet so far since 2014 when the high was $115 per barrel in June 2014 to a low of only $36 in early 2015? This price collapse mainly reflects too much supply chasing too little demand. There is surging U.S. shale oil production, more efficient fracking methods, and more discoveries of huge reserves in western Texas and New Mexico. Oil producers across North America may be planning more conservation on their investment plans, because they have to plan for a range of prices, not just today’s oil prices.
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