Oil Prices- Effect of its volatility

Blog Post created by akriti19 on Oct 8, 2016

Oil industry, with its history of booms and busts, has been in its deepest downturn since the 1990s.  Earnings have gone down for companies that made profits in the preceding years, making them to completely decommission roughly two-thirds of their rigs and having a sharp cut on their investments in exploration and production. Many small and large scale companies have gone bankrupt since the recent fall in the price of oil barrels, which at one point fell more than 70 percent compared to June 2014 levels.
Since last year prices have recovered a few times, and now appear to be bound by a range of $40 to $50 a barrel. However many wells remain unprofitable, although the industry has managed to cut costs. Many shale wells in Texas that were once profitable at only price levels above $60 a barrel are now profitable at levels above $40. An escalating rise in the rig counts.
But executives think it will be years before oil returns to $90 or $100 a barrel, a price that was pretty much the norm over the last decade. However to tackle this phase the exploration and production companies are now largely focusing on investing on developing newer and efficient technologies subsequently cutting down investments in the exploration sector in the times to come.




Reference: The New York Times