Future Oil Prices Set To Soar
Friday March 27, 2009
The global financial crisis has seen many businesses struggle as demand decreases, and oil companies are no stranger to this effect. Recent reports have shown many companies scaling back operations on key fronts that require high oil prices to survive.
The oil price slide in 2008 has seen oil prices drop from $147 a barrel to currently trading at around $50 per barrel, which is roughly one third the price of its peak. Such a large price drop is bound to have global implications, and successful companies in all sectors are reducing costs to face conditions of a new economic climate.
What this could mean in the future is exorbitant price rises if potential demand exceeds supply as markets recover. As more challenging oil production potentially lags behind stock market recovery, when demands do hit again we could see a critical undersupply and a potential price spike that will send the cost of oil per barrel soaring.
In the modern economic climate where oil is such a major factor for many businesses, both directly and indirectly, this has serious implications for stock markets on the whole. Even potential clean energy projects that could one day reduce the dependence on oil have potential to suffer.
As global oil watchdogs trim their supply predictions, oil giants maintain a plan to invest in the current down-cycle, but for many companies, the credit crunch will make accessing the necessary capital difficult. That's not to mention justifying the more expensive oil refining processes, such as refining oil from sand and drilling in extremely deep water.
Of course, there is the chance that demand for oil will not increase in the mid-term as predicted, and this could see the opposite problem where many countries may build up a surplus of oil that drives prices down.
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