The price of oil is dropping, and in late October 2014, it showed its largest one-day drop in years. Part of this stems from a sudden drop in the demand for oil right now, and this is causing some countries with oil as a major export to worry about their economic stability. Some of the countries that have had this drop in price affect them include Iran, Venezuela, and Russia, as the demand for more oil is dipping around the world.
However, the output of oil is still quite high right now, particularly in the United States. The fact that the United States is utilizing techniques such as fracking as a means to increase their oil and gas output means that the U.S. is able to add more to the oil market than it has in years. The companies are able to boost their oil production substantially to meet the nation’s needs, reducing reliance on oil and gas from foreign countries. Because the U.S. is a major user, this could be one of the reasons for the overall drop in price.
Interestingly, even though there is a drop in the prices, OPEC, the Organization of the Petroleum Exporting Countries, does not want to slow or halt oil production. Many of the countries producing oil are still pumping the crude regularly because they want to maintain their control of the market. Saudi Arabia, a major producer, feels that they would much rather keep their market share, even if they have to reduce their prices. Iran stated that they will do the same, all in an effort to keep their hold on the market.
What does this mean for the average consumer though? It means that they have seen a drop in the prices at the pump. This drop started in June and the cost of gas is now about 15% less than what it was at the start of summer. If the prices continue to drop, some experts feel that the price could even drop below $2 on average, which has not been seen in some time.
Because of the continued output, it means that the companies doing the drilling, as well as those businesses that support these companies with equipment and supplies, will not see much of a difference in their workload. However, some of the oil companies may well see a drop in their profits at the end of the year.
Oil Works, Inc. is a complete drilling rig equipment manufacturer and service provider based in the Permian Basin for over 20 years. OWI’s product and service offerings include Derricks, Substructures, Drawworks, Mud Systems, Walking Systems, Power Generation, Control Systems, Iron Roughnecks and complete Rig Solutions built to API and ISO standards. OWI is also proud to offer 24/7 Service and Support.