The recent sudden crash of oil prices has had a major impact on the world economy, leading to many troubled faces in the international arena. The Russians fear the effects of yet another powerful hit on their economy, Venezuela seems to be considering default and the Americans are weary of the consequences for its young and emerging shale oil industry. And then you have the Middle East, where the smallest match is enough to ignite the largest fire. But are these worries really justified or could good things come out of this ‘crisis’?

oil.png?width=400

The New York Times seem to think the latter: in their 6 December article they argue that the plummeting prices could actually turn out to be a blessing. They quote, among others, Dr. Daniel Yergin, who argues that similar developments in the past have actually turned out to stimulate economic growth.

 

One of the companies severely affected by the price drop is BP. Still, T. Boone Pickens, chairman of BP Capital Energy, does not seem to be too worried. In a CNN interview with Richard Quest, he explains that according to him the whole thing is nothing more than  ‘a commodity market reacting to a lower demand’ and should not be made into anything more.  Furthermore, he argues that this presents the perfect opportunity to ‘cut OPEC out’ of the US, something he has been advocating for over half a decade through his ‘Pickens Plan’.

 

Above all, the biggest winners of it all seem to be us: the average Joe who sees the prices at his or her local gas station getting lower and lower, and business owners who get welcome cost cuts on oil-related expenditures. 

 

All in all, it seems to be a game of winners and losers, although both camps are not yet perfectly identifiable. And as the past shows, the oil market has the nasty habit of jumping from one extreme to the other. Therefore, we will have to wait and see who will come out of this plunge a king and who a peasant. Meanwhile, enjoy the falling number on your receipt next time you fill up your car, it might not last very long.

 

What do you, the risk professionals of the world, think? Are the negative impacts of the recent developments regarding oil prices exaggerated and could it actually be a good thing? We are eager to know your opinion. Please feel free to leave a comment!

You need to be a member of Global Risk Community to add comments!

Join Global Risk Community

Votes: 0
Email me when people reply –

Replies

  • Plummeting oil prices for a net oil exporter country has also resulted in drop in our currency..working for an offshore fabrication company we are affected locally as operator has reduced capex, resulted in projects being postponed or worst, cancelled..but there is also an opportunity for us to venture into international market as we offered lower price due to lower currency..but yeah once again the materials become expensive due to same reason..lil caution on business decision, cost cutting n diversifying probably will mitigate.
This reply was deleted.

[Free COVID-19 Framework] What's the path to recovery look like?

We created a free presentation (attached), which discusses both global and organizational impacts of the COVID-19 pandemic, along with critical actions organizations should take immediately. This presentation introduces a framework that helps regions and organizations navigate a path to recovery via 9 potential scenarios. These scenarios capture outcomes related to GDP impact, public health response, and economic policies. The presentation also breaks down 6 immediate and critical actions…

Read more…
4 Replies · Reply by Steve Diaz Jul 8, 2023
Views: 204

If risk management is about decision making, are current risk management solutions irrelevant?

Now that the updated COSO and ISO risk management standards emphasize a connection to enterprise objectives and decision making, does this mean ERM and GRC solutions focused on risk registers and regulatory compliance are missing the true value of risk management?Will current risk management solutions evolve to integrate more decision support functionality or will standalone prescriptive analytics and other technology solutions take a more prominent role in enabling risk-informed…

Read more…
3 Replies
Views: 129

A question related to classification of instruments between trading and banking book.

We have an interesting question from one of our members.       "We usually perform OTC FX transactions with clients backed-to-back on the market (with Banks). Now we are going to perform a FX swap (i.e. Spot + forward) JPY/EUR for the Bank account for 1 week at the longest. The purpose is to get EUR place @ CB for LCR compliance purpose (no trading purposes). Bank's Management think that this should be considered as a trading position and therefore be classified within the Bank's trading book.…

Read more…
5 Replies · Reply by Prisha Singh Dec 26, 2023
Views: 308

Plunging oil prices: curse or blessing in disguise?

The recent sudden crash of oil prices has had a major impact on the world economy, leading to many troubled faces in the international arena. The Russians fear the effects of yet another powerful hit on their economy, Venezuela seems to be considering default and the Americans are weary of the consequences for its young and emerging shale oil industry. And then you have the Middle East, where the smallest match is enough to ignite the largest fire. But are these worries really justified or…

Read more…
1 Reply
Views: 90

Introducing the Global Risk Series - Book 1 Risk Management How Tos

Dear GlobalRisk Community member, Our community’s mission is to foster business, networking and educational explorations among members. Learn from some of the top experts in the industry as they clearly explain how to approach the most important Risk management concepts. Check out their expert tips and use the link at the end of each article to navigate back to the website to leave your comment or ask a question.   Some of the topics include: How do you Explain Risk Appetite?  How to Prepare a…

Read more…
16 Replies · Reply by GlobalRiskCommunity Mar 21
Views: 888

    About Us

    The GlobalRisk Community is a thriving community of risk managers and associated service providers. Our purpose is to foster business, networking and educational explorations among members. Our goal is to be the worlds premier Risk forum and contribute to better understanding of the complex world of risk.

    Business Partners

    For companies wanting to create a greater visibility for their products and services among their prospects in the Risk market: Send your business partnership request by filling in the form here!

lead