Oil Industry

reogma|Oil Industry
2 mins read

In 2015 the oil demand growth of the world is expected to be around 1.46 MB/D after an upward revision of around 84 TB/D. In 2016, world oil demand is predicted to go up by 1.29 MB/D after a downward revision of about 50 TB/D.

Market Overview

World’s Oil Demand

In 2015 the oil demand growth of the world is expected to be around 1.46 MB/D after an upward revision of around 84 TB/D. In 2016, world oil demand is predicted to go up by 1.29 MB/D after a downward revision of about 50 TB/D.

World Oil Supply

Non-OPEC oil supply is predicted to go up by 0.88 MB/D in 2015, after a downward revision of about 72 TB/D, which is due to lower-than-predicted output in the US. In 2016, non OPEC oil supply is expected to increase slightly by 0.16 MB/D, after a downward revision of 110 TB/D from the earlier report. OPEC NGLs are predicted to grow by 0.19 MB/D in 2015 and 0.17 MB/D in 2016.

Balance of Supply and Demand

Demand for OPEC crude oil is expected at 29.3 MB/D in 2015, 0.1 MB/D more than the previous assessment and going up by 0.4 MB/D from the previous year. In 2016, the required OPEC crude is projected about 30.3 MB/D

We find out that both supply as well as demand factors have played a major role in the sharp price decline. Futures markets suggest that the oil prices will be rebound but will remain lower than the level of recent years.

The fall in oil prices gives an opportunity to many countries to decrease the energy subsidies and use their savings towards other targeted transfers, and for some to increase energy taxes and lower other taxes.

Market Trends

Automakers are investing to make the United States more competitive. Automaker investments are contributing towards the revival of manufacturing units in America. Chrysler, Ford and General Motors are some of the leaders.

With the significant drop in oil prices over the past year, it becomes essential to understand how the auto industry will be affected.

Lower Oil Prices will Fuel Demand for Automobiles

Based on an understanding of complementary and substitute goods, the US auto industry is showing effects based on recent reduction in the price of oil. A decrease in oil price means that the automobile owners will have more disposable income which could be used for other purchases.

Owners who are trying to extend the lifetime of their vehicle may think about using the extra income they save from lower fuel prices in order to finance the purchase of a new vehicle.

For those who were not able to afford the expenses of vehicle ownership, lower fuel prices makes driving cheaper and thus, vehicle ownership becomes much easier. Thus we can expect the production and supply of automobiles to go up in USA.

The reduced cost of driving also means that the difference amongst the gas and the smaller fuel-economy substitutes less important, creating a shift of consumer preferences towards the big and more powerful vehicles.

While the American automakers enjoy the significantly high profits from this trend in the market, they would be wise to invest such increased earnings in a strategy that will improve fuel-efficiency of their vehicles to comply with the greener standards.

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