CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JANUARY 2015
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CARIBBEAN Petroleum Update A Publication of the Caribbean Energy Information System (CEIS)
JANUARY 2015 ISSUE
REDUCTION IN CRUDE OIL PRICES: Impact on Caribbean Countries in 2014
T
he plummeting price of oil is still the most talked about energy news globally. Whilst the reduction in crude oil prices have had a positive impact on Caribbean nations, for oil producing countries like Russia and Venezuela, the reduction is wreaking havoc. But why does the price of oil keep falling? In this issue of the Petroleum Update we seek to highlight some of the factors that may have contributed to the drastic reduction in global crude oil prices. Over the last ten years, oil prices have been high fluctuating around US$100 per barrel. This is largely attributed to soaring oil consumption in countries like China and conflicts in key oil nations
like Iraq. Oil production in conventional fields couldn’t keep up with demand, so prices spiked. In June 2014, the price of Brent crude was up around US$112 per barrel, however by December 2014; it had fallen by more than half, down to approximately US$ 60 per barrel as shown in Chart 1 (see chart overleaf) Sometime in June-July 2014 the dynamics of oil consumption were rapidly changing with regards to shale gas production in the United States and the level of demand for oil in places like Europe and Asia. Similar to Russia, states such as Saudia Arabia and Iran that comprise the Organization of Petroleum Exporting Countries (OPEC) need higher oil prices to
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balance their budgets. Therefore, many were expecting the world’s largest oil cartel to reduce production in order for prices to move back up. As a collection of oil-producing nations that pumps out about 40 percent of the world’s oil, the cartel can influence the price of oil by coordinating either to cut back or boost production. However, what came as a surprise was Saudia Arabia’s response to not cut oil production. Low prices are excellent news for oil consumers in places like Japan or the US, where gasoline was the cheapest it’s been in years. But there are enormous ramifications for nations reliant on oil sales. Russia’s economy is facing a potential meltdown. Ven-
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