As readers of the financial pages are well aware of, an oil price war has raged for the past five years. When oil giants like Exxon-Mobil began large-scale development of shale oil extraction, Saudi Arabia attempted to kill that market development by ramping up production in 2014 to lower the overall world price per barrel. The idea behind this move was to flood the market with cheap oil, make shale oil more expensive by comparison, and kill incentive for what was a more expensive production process.
This strategy backfired horribly on the Saudis. Technological innovations made wide-scale shale extraction economically feasible, and the oil giants proved more than willing to play the Saudis at their own game to beat them, and they did. Having sufficient resources to ride out any price drop and still yield profit, the big oil producers were content to let oil crash to a $20 price per barrel by the beginning of 2016. Meanwhile, Saudi Arabia and other OPEC states faced looming budgetary and political challenges due to the price drops. Venezuela, Nigeria, Libya and Algiers lost the financial capacity to balance national budgets and adequately fund social spending, employment or food imports, resulting in domestic unrest and financial meltdowns.
There are now signs that these four OPEC powers have finally prevailed upon the Saudi government to reverse course and impose production cuts to dry up the present supply glut, thereby sending prices higher, or so it is hoped. As things stand now, oil may never again climb to $120 per barrel prices but they will rise above present $50 per barrel prices to be certain. The end of the Price War will see to that, as will mergers in the energy market reducing the number of companies involved in oil production and refining. Indications are that prices on the West Texas Intermediate (WTI) exchange are climbing back up to the $60 levels for the first quarter of 2017. Long-term, this promises growing returns for investors.
However, there are other developments market players may wish to pay attention to if they wish to fully profit from the coming shifts in the energy sector. If you take a look at their site, it will be possible to discover where the big bonanza in the next few years is to be found. Check out their projections today.