The World Surrounding The Oil Industry - 1070 Words

Oil. The very word brings mixed emotions to the mind the minute it is spoken, but with good reason. This single substance has the power to run the entire world, and this is exactly what it is doing. The foothold that oil has on our society can be seen every day with the millions of people worldwide who rely on it to power their cars to their destinations. So how can something that so many people depend on suddenly plummet in price so rapidly? Is the age of oil coming to an end? These questions that demand a deeper investigation into the world surrounding the oil industry. As for the price of all goods and services, the price of oil is driven by supply and demand. Furthermore, the price of oil is also driven by many other factors such as†¦show more content†¦This leads to a lower demand, and removal of the cost of shipping oil overseas. With this in mind, it is easy to see that with a local supplier the oil industry has created a surplus of crude oil, thus pushing prices down in order for these companies to compete with their competitors (economist). All of these factors took a role in the recent drop in oil prices, but the simplest explanation lies in the laws of supply and demand. Quite simply, a higher supply has led to a lower demand for oil. This is driven by the fact that the domestic oil production in the United States has almost doubled in recent years. Countries such as Saudi Arabia, Nigeria, and Algeria who used to sell oil to the United States are now being forced to find customers in different markets, but they continue to produce oil in record numbers. Worldwide production of oil is increasing at a rate that is out growing the demand for oil, which causes the price to drop in order for these companies to continue to gain revenue. (nytimes) On top of this, the demand for oil has also began to lag because vehicles are becoming more and more energy-efficient every day. (nytimes) All of these factors pushed the oil industry to its limit when pr ices reached a new low. Oil prices took a drastic plunge in February of 2016, the largest recorded plunge in recent years. The price per barrel dropped from the June 2014 peak of almost $108 a barrel to a record low $26.21 in February (CNN1). Yet, why