In this month’s blog series, globalEDGE features the global energy industry. This series will discuss the industry outlook for 2015, the potential for mergers and takeovers, countries that benefit from falling oil prices, global carbon markets, and volcanoes as an energy source. Many analysts hold the belief that oil prices will continue to fall in the first half of 2015, before increasing in the second half of the year. The shale revolution in the United States, Saudi Arabia’s insistence on maintaining its market share, and a weak global economy have all contributed to the lowest oil price per barrel in five and a half years.

Currently, the global oil market is oversupplied by approximately 1.5 million barrels per day. An increase in supply coupled with a decrease in demand leads to a decline in prices. The oversupply of oil globally is due to heightened production in countries around the world. Thanks to the surge in hydraulic fracking, oil production in the United States has increased from 5.6 million barrels a day in 2010 to 9.3 million barrels a day currently. Oil production has also been on the rise in Iraq and Russia. In fact, Iraqi oil exports are the highest they have been in three decades and Russian oil output is at its highest point since the Soviet era.

It has been widely noted that the price of oil would rebound if countries produced and therefore supplied less. However, some countries, such as Saudi Arabia, are hesitant to do this because they fear that other countries would take their business. In a period of strong global economic growth, an increase in the supply of oil would be met with increasing demand, as the manufacturing and transportation industries would require more fuel to produce and transport goods. However, in the current, sluggish global economy, the demand is simply not there to meet the increase in supply. Until global production of oil slows or the global economy turns around, the price of oil will remain low.

Stay tuned the rest of this week to learn more about the global energy industry!

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