The Ups and Downs of Oil and Gas Pricing and What it Means

Oil and Gas Pricing is a field which not only effects of the oil and gas industry by means of exploration, development, recovery and industry, but affects all manner of things. Historically, countries, banks, and everything in-between have used oil and gas inventory resources in a similar way to gold – as hedges which are intended to offset potential losses or gains which are occurred in day to day trading.


Essentially, a hedge is designed to be a buffer, allowing banks and countries alike to have a little stability and something to fall back on, should the worst happen. Oil, alike gold, has been used for risk management purposes since time immemorial – though of recent times, hedging as risk management with oil has proved an extremely poor idea. Oversupply has been rife throughout the oil and gas industry, and lack of agreement throughout oil producing countries have been commonplace.


Saudi Arabia and Russia in particular have ceased to comply with OPEC instruction to limit production of oil, and as these oil-rich countries produce from their own reserves, oil prices throughout 2015 have fell rapidly, to a ten-year low of $26.55 on January the 20th, 2016. This has since recovered in April 2016 – when oil and gas prices rose above the $45/barrel of crude oil mark – which, while still below average, is far more characteristic of the oil and gas prices mark before 2015.


Oil and Gas Pricing is imperative for a number of businesses and of course the world’s economy, as large players such as countries and multinational banks are still deep into hedging – preferring not to liquidate these investments at rough seas, for a guaranteed loss.

While indeed it has been argued that Russia and Saudi Arabia’s noncompliance with OPEC and subsequent overproduction of crude oil, and bloating of the market forcing pricing downward has made Western economies rather strong as oil importers, (after all, low prices are better for the customer!) but exporting nations such as Korea and China have suffered in response.

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