Abstract
Energy is not a traditional commodity where low prices is always good news! It might be good for some, but definitely, not the case for many. Energy resources including, fossil fuels and renewables, have a significant impact on our day to day activities and they have been prime contributors to our lives retention, advancements and upheaval of the world economy at large. As a result, oil has not only played the role of the master commodity on a financial and economical level, but has also extended its supreme impact to the social, sociopolitical and geopolitical aspects of the modern world. However, it is peculiar to note that even with this significance, the oil industry has been experiencing various economic shocks over the past decades. Such shocks have directly been reflected in oil price fluctuations within a dynamic and short timeframe. With the OPEC and non-OPEC production fluctuations against consistent economic growth, worldwide geopolitical conflicts and the ongoing competition between conventional and unconventional oil reserves, the swings in oil prices have become a phenomenon which is worth understanding and analyzing in order to prospect its future trends on the long run. The key question to examine is whether the recently experienced battle between production rate and oil prices will continue affecting the global market over the coming years. This study explores various factors formulating the volatile behavior of oil prices and links the contemporary situations to the historical oil price spikes and trends related to specific events that we know and several others hidden beneath. One of the main key drives for the current oil crisis is presumed to be the active production of unconventional oil which poses a significant threat to conventional oil producers and has extended its impact to both political and economic levels. Furthermore, the future of conventional oil reserves is analyzed in depth based on generated empirical models prospecting the future profiles of various extractable ultimate recoverable (EUR) scenarios while considering external factors such as socio-political and economic growth. The decline rate of conventional oil reserves productivity is expected to be prominent over the next decades as depicted by this study. This further supports our conclusion that the current positive supply oil price shock and the active emergence of unconventional oil will lead to a disruption in the future reliance and usage of conventional oil.
Highlights
The Oil & Gas Industry is in a volatile place at present
As per the empirical data analyzed by the model, in order to catch up with the high growth rate associated with Mid and High extractable ultimate resource (EUR) assumptions, total global conventional oil production shall increase by 1% per year in addition to a margin of 3-4 MBOPD to cater for aged reservoirs
The primary objective of this study was to analyze the future of conventional oil and the intrinsic outcome to the repetitive history of oil revolutions which stagnated the market for decades
Summary
The Oil & Gas Industry is in a volatile place at present. Rather, it has been in such a state for the past few years. When OPEC and other members agreed to cut back on 1.8 million barrels a day of output from the market, the oil prices have been less volatile as compared to the previous years. This has put shale drilling on an advantage as they have become increasingly profitable and efficient over time. If there is a surplus of products, prices crash, which leads to significant consequences to higher-end producers and small suppliers Even though this may be considered as a general representation to the cycle, it is inadequate for comparison with the current realities of the Oil and Gas industry. A deeper outlook is necessary before we evaluate anything further
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