Why is the price of crude oil going up
10 Reasons the OIL PRICES Are Going DOWN
welcome back a Luxor's depending on
where you live in the world it might
have been a while since you last started
your car hopped onto some form of
transport or flew in an airplane with a
global demand for fuel at an all-time
low what does that mean for the price of
oil in the 19th and early 20th century
the price of oil was fairly consistent
since the 1970s there been spikes and
drops for various reasons and 20/20 has
seen a massive drop due to low demand
and a lack of storage space for the
first time in history on the 20th of
April 2020 US oil prices went below zero
and settled at minus thirty eight
dollars a barrel a Luxor's let's find
out ten reasons why oil prices continue
to drop and how it affects all of us
welcome to a lox calm the place where
future billionaires come to get inspired
if you're not subscribed yet you're
missing out number one let's compare the
price of oil today and twelve months ago
oil plays a huge role in the global
economy there are three major factors
that influence the global price of oil
supply demand and geopolitics the first
commercial oil was drilled in azerbaijan
in 1847 and was mainly used for oil
lamps and kerosene
fast forward to 1901 and the first well
capable of mass production was drilled
in southeastern Texas it wasn't long
until oil replaced coal as the go-to
fuel source speculators hedgers or
traders and investors play a huge part
in determining the price of oil as of
april 29 2020 west texas intermediate or
WTI rose 18% to 1457 a barrel and
international benchmark Brent crude rose
5% to 2389 a barrel in April 2000
nineteen Brent crude was 7123 a barrel
but we should note that these prices
fluctuate constantly and may gain or
lose by the time of this publication
it's estimated that this time last year
the global oil demand was averaging
around 99
point nine million barrels a day
compared to 77 point six million today
this was the estimate brought forward by
Magnussen obscene head of analysis at
Rice NAT energy number two
demand for oil is at an all-time low the
outbreak of the corona virus has had a
huge impact on every sector possible and
oil is at a point of too much supply
with not enough demand we use oil to
fuel cars trucks airplanes trains and
ships it literally moves our world and
the byproducts are used for many reasons
including the production of chemicals
plastics waxes tars and lubricants there
are differing reports on how much oil is
needed for vehicles to run but the
general consensus is between 65 and 70
percent which was specific to
transportation in the USA with a
significant drop in people driving their
cars worldwide or needing public
transport to get from point A to B there
are far fewer people filling up their
tanks and the same applies for the
airline industry kovat 19 has dropped
the need for oil to an all-time low
which brings us to number three storage
space for oil is running out one of the
main problems with the lack of demand
for oil is that storage space is running
out fast it's not as simple as to just
put a stop to production of oil if the
wells are capped there could be
long-lasting damage and it's extremely
expensive to do this some experts
believe that production needs to drop to
alleviate the need for storage so here's
what the Organization of Petroleum
Exporting Countries or OPEC suggested
should be done and what transpired since
that suggestion crude oil is stored in
tanks and on tankers and globally
there's space for 1.2 billion barrels of
oil to be stored it's not recommended to
fill the tanks and tankers to the brim
and according to sources in the industry
there are already 80 million barrels in
floating storage oil tankers are
thinking of different places to store
their oil and are looking at rail cars
pipelines ships and caverns in
Scandinavian countries the salt caverns
are already fully booked
number four there are tensions between
Russia and Saudi Arabia OPEC which we
mentioned earlier was formed in 1960
when some of the world's major oil
exporting nations came together to
manage the supply of oil in an attempt
to set a standard price on the world
market and avoid massive fluctuations
which would affect economies OPEC is
responsible for one-third of the world's
oil supply Russia America and China were
not a part of OPEC in 2016
Russia and Saudi Arabia formed the OPEC
plus Alliance Russia was the biggest
non-opec player in this alliance and the
world's third largest producer of oil
after Saudi Arabia when it was suggested
to cut oil production originally Russia
and Saudi Arabia decided to cut by two
point 1 million barrels a day but Saudi
suggested they increased that number to
3.6 million to compensate for the
current weaker consumption Vladimir
Putin didn't agree as his concern was
giving too much ground to America
already the number one producer of oil
in the world and stated that countries
should produce as much oil as they
pleased after a recent meeting Russia
decided to leave the alliance and Saudi
Arabia have issued a stern warning to
Russia that it's a decision they will
regret with this price war waging oil
stability remains very fragile
number 5 the oil price collapse will
reshape many things it's uncertain how
Saudi Arabia and Russia will fare after
their inability to come to a mutual
agreement on lowering the production of
oil what is certain is that the price
war will mean that many smaller oil
producers in the US will go bankrupt it
also effects climate change with lower
oil prices policymakers and business
leaders may not make the switch to
renewable sources of energy it won't be
financially viable of course there is
another point of view that the oil
industry is an unreliable investment it
will also influence geopolitics for
example oil dependent countries will
really struggle with a low demand for
oil and we'll explain how exactly
they'll be affected net
number six here are the countries that
will be most affected by the lack of oil
demand every country worldwide is
affected by kovat 19 in the dropping
price of oil
however countries that will pay the
heaviest price are oil dependent ones
they include Iraq Libya Iran and
Venezuela who all struggled with
conflict uprisings and sanctions over
the years Russia has claimed to be able
to withstand oil prices ranging between
25 to $30 a barrel for up to 10 years
but Saudi is not that flexible Nigeria
is having a tough time as they rely
heavily on oil and gas which brings in
over 90 percent of their foreign
exchange earnings and that's under
severe threat right now Nigeria is
battling to find buyers for 55 vessels
full of crude oil output other countries
that cannot balance their budgets now
include Iraq Oman Angola Suriname a-and
Gabon it's also been predicted that
Canada and the US may see a recession
and Mexico may have its credit rating
downgraded further every country around
the world will feel the impact of the
dropping price of oil number seven this
is how the drop in oil price affects us
in some places consumers around the
world may see certain products being
less expensive for example motor oil
clothing plastics ink solar panels and
floor wax all items that use petroleum
should ultimately be cheaper fuel might
be marginally more affordable but with
travel limited it hardly benefits us all
products should also on paper come down
in price as the cost of getting them
from a wholesaler to retailer will be
less if this happens it could mean
consumers buy more and there's real
growth in the GDP sadly on the other
side of this pretty picture there are so
many people without work due to the
pandemic and it's predicted to get worse
the UN labor body estimates that there
will be a loss of 6.7% of working hours
globally in the second quarter of 2020
which accounts for roughly 195 million
jobs around the world other estimates
were less grim but likened the
unemployment levels to be higher than a
great depression
number eight could you buy oil and just
store it for resale if you thought it
might be possible to stock up on oil and
then resell it we've got some bad news
it's just not doable and this won't work
as your backup plan oil is sold in bulk
so even if you could theoretically store
a few barrels of oil no one would want
to buy it from you if you could
potentially store thousands of litres of
oil you'd have to consider a few things
firstly you'd still have to pay a
considerable amount for it despite the
price drop it's not really the case that
you'd be paid to take the oil off the
distributor's hands despite some reports
of that being a thing secondly you'd
have to pay to get the oil to its
storage you're probably thinking but I
have thousands liters of oil so can't I
just use that for fuel to transport the
oil well the crude oil still needs to be
refined into fuel which involves heating
the oil until it boils and separating
different gases and liquids to make the
fuel and that's a whole other process
thirdly
you'd have to pay for the storage of the
oil there would be licenses involved
because storing large amounts of oil is
a fire hazard and the fumes can kill you
crude oil is said to have a terrible
smell and the fumes are potentially
toxic basically unrefined oil is
impractical to buy and despite being
referred to as black gold cannot be
turned into profit easily stick with us
we'll share a story in a bit about
someone who tried to obtain a barrel of
oil and sell it for profit
number 9 many believe it's a great time
to invest in oil stocks so storing
actual crude oil isn't quite the
investment you need at this stage a
lexer but what about shares in oil
stocks as of Wednesday the 28th of April
2020 several oil related companies arose
more than 10% seeing several young
investors jumping on board what they
believed to be the opportunity of a
lifetime
SM Energy Matador Resources wpx energy
and PBF Energy were all companies that
went up by 10 percent or more although
many stocks have fallen enormous ly
Millennials are seeing it as an
opportunity to buy cheaper shares that
would usually not be available as an
intrepid adventurer you're advised to
just tread lightly around oil stocks and
stay focused on those stocks
likely to survive a downturn number ten
what does the future hold for the oil
price it's not a clear-cut answer but
there's a lot of speculation some
experts believe they'll be a major
comeback for oil where it could reach
$100 a barrel with the possibility of
less oil being produced and the world
rallying around sooner rather than later
there could be a high demand for a
commodity that would potentially have
less availability it would be exactly
the opposite of what we mentioned
earlier with high supply and low demand
but until that happens if it does let's
fill up our tanks and enjoy the small
respite of high gas prices
well a Luxor's here we are at the end
when do you think the oil price will
stabilize once again what role do you
think the drop in oil price will play in
the society we value your insight so
tell us your thoughts in the comments
and of course for sticking with us until
the end here's your bonus remember how
we said it wasn't feasible to buy and
try to sell a barrel of oil
well Bloomberg's Tracy alipay tried to
obtain a barrel of oil and store it in
her apartment she soon discovered that a
barrel of crude oil needed a specific
place to be stored one with lots of
ventilation because the fumes were toxic
so her idea of making a profit on oil
changed quickly when she opted for a jar
of Brent crude oil instead the oil
smelled like rotten eggs and after all
of her efforts to obtain the jar with
many trying to talk her out of it she
would have only made seven cents profit
and that doesn't include the time it
took her to source the oil fetch it
bottle it and make sure it was stored
safely and securely she may not have
gained a barrel of crude oil but she
certainly got a great article from hit
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