In mid-January 2016, a barrel of oil was quoted below 30 US dollars. This price corresponds to the level of 2010, but the effects of the financial market crisis were still clearly felt there and the low oil price was an expression of this. There are currently no economic slumps.
In earlier times, the uncertain world situation and especially the conflicts in Iraq, Syria, etc. had also provided sufficient breeding ground for rising oil prices. So why is the price of oil so low without any economic theory? Energy-intensive industries and service providers (logistics) are likely to be concerned with the question of how long this process may continue, especially against the background of the possible hedging of future raw material prices (hedging).
Several factors are decisive here. The central point, however, is fracking, which is intensively practiced in the USA. Within a few years, the USA has risen to become the world’s largest oil producer. Here one can already speak of an industrial revolution, because only a few years ago the United States was forced to secure access to the oil of other countries by open and covert military means or forceful diplomacy.
As a result, almost 2 million barrels more are currently being produced worldwide than demanded. The effects on prices are therefore inevitable.
Now the question arises as to why OPEC does not cut its production, after all, this has been an effective means of artificially stabilizing prices for decades. Here, the assumptions differ widely. Geostrategic considerations to decisively weaken
As a conclusion, it can be deduced that this low oil price will probably remain for some time, especially since winter-related consumption will soon end and one of the largest buyers, the People’s Republic of China, will also demand less due to its increasing economic problems. This also means that hedging seems dispensable at the moment.
How do you see the development? How does your company hedge raw material prices? We look forward to your comments.
Image source: Fotolia.com, Photographer: Sandor Jackal
