Side Bar: A short, often boxed auxiliary news story that is printed alongside a longer article and that typically presents additional, contrasting, or late-breaking news.
Oil is something which is so essential that countries have been going to war over it for centuries both physically and economically. Oil is what has made the middle-east such a pivotal aspect of international markets. With the middle-east being responsible for about 80% of the world's oil production, good-ties with these countries has become a must. Countries like Iran and Saudi Arabia have based their entire economy off of the production and selling of oil in the international market. However, the rise of some other producers has threatened the middle-eastern monopoly on oil and economic war is imminent.
Current Situation of Oil
The graph shows the current oil prices which sits at $74.14/barrel is the highest price of crude oil in last 4 months. This kind of hike has a lot of countries worried as they are required to pay a higher price for crude oil which has become a necessity. This has also brought great reward to primarily middle-eastern countries as they now can charge higher and have the ability to profit off the high prices. It has essentially been argued that the reason for these high prices can be the United states retracting from the Iran Deal, imposing sanctions and threatening sanctions on the buyer of Iranian oil (read my coverage here). Others have argued this could be the growing libyan oil cartel but one thing is for certain that it his worrying many countries. For example: India, who now has to deal with this:
This has meant that India has to buy oil for about US$75 (approx: 5,000 rupees) per barrel. This means that to profit from a 70 litre barrel, oil prices have to be about Rs 75 (approx: US$ 1.09) per litre.
This kind of hike is a result simply because of the sanction on Iran and India being one of the largest importer of Iranian oil.
The New Producer
As global oil markets shift their attention from U.S. shale oil production back to a resurgent Saudi Arabia and Russia and geopolitical concerns bearing down on oil prices, Citigroup said last Wednesday that the U.S. is poised to surpass Saudi Arabia next year as the world’s largest exporter of crude and oil products.
This is the future case the United states of America is shifting from a consumer and buyer of Crude Oil to a producer and Exporter.
The table above taken from the US Energy Information Administration, shows that the United States has been increasing its Oil production since 2017 October where they jumped to 9,480 barrels in a week from 8,460 barrels a week. then another resurgence came when they increased production from 9,492 barrels per week to 10,251 in 2018 march and has been rising steadily.
The interesting thing to note is that the first increase came with the Tax-reductions of the Trump administration and the second one with the news of the United States backing out of the Iran Deal.
So, Whats next?
Many criticized the Trump Administration for backing out of a deal which was supposedly a good one for reasons regarding nuclear weapons. However, the true result as been more of an economic one because with this single removal and the importing of Oil in large numbers at lower price, Trump has set the USA on a good position as an exporter of Oil.
USA has enough supply of Crude Oil by domestic production and foreign imports.
Prices of international Crude Oil markets is high due to backing out of Iran Deal and implementing sanctions.
USA bought oil for $54/barrel and now can sell for $75/barrel ensuring profit.
Moreover, USA exported 8.3 million barrels a day in the last week of April generating about $600k in revenue. This rate is similar to Saudi Arabia's 9.3 million barrels per day and Russia's 7 million barrels per day.
The next frontier of Crude Oil is shifting to the West and the United states has developed a scenario in which it profits, while consumers importing the Oil suffer with high prices.
The only issue which arises is about morality. Is it fair that USA profits of this?
I say why not but at what cost, anyway this situation is simply well crafted and hard not to appreciate.
-Abhirup Thakur 4/7/2018
Kommentarer