Supply And Demand on Oil
The oil sector, with its past of prosperity and failure, is currently on a sharp downturn. The earnings are very low even for companies that have registered “record profits” in the recent past in the oil industry. This sharp drop in prices has forced the companies to withdraw more than 50% of their oil rigs and drastically cut down on the investments they make oil exploration and manufacture (“U.S. Energy” n.pag.). Approximately 200,000 workers in the oil sector have been laid off, and production of manufacture and drilling machinery has declined sharply (“U.S. Energy” n.pag.). The reason for this fall is the falling price of oil per barrel. The price per barrel has dropped by nearly 50% from June last year, hitting levels that were last seen in the worst of the recession in 2009 (“U.S. Energy” n.pag.). This year has seen a small amount of recovery in oil prices, but experts think that it might be years before oil prices go back to an average of $95 a barrel (“U.S. Energy” n.pag.).
This drop in oil prices can be linked directly to the pure economics of demand and supply. The United States’ domestic production has almost doubled within the past six years. This growth in domestic production has driven out imports of oil that now has to seek other homes. The U.S’s traditional suppliers; Nigeria, Algeria and Saudi, are suddenly fighting for markets in Asia. These oil pro…
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