Oil: History & Outlook

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Oil: History & Outlook

  1. 1. OIL: HISTORY AND OUTLOOK <br />
  2. 2. <ul><li>Oil Industry History is more than five thousand years old
  3. 3. First structured oil well was built in the Gulf of Mexico
  4. 4. Imbalance in Demand and Supply</li></ul>created scope for private players to come in<br /><ul><li>After the North Sea disaster in UK in 1988 there was a change in the safety policy of the oil industry</li></li></ul><li>WORLD OIL INDUSTRY<br /><ul><li>Economies of all countries are hugely dependent on oil for growth, development and daily functioning
  5. 5. Major crude oil producing countries include Saudi- Arab, Venezuela, Iran, Iraq, Russia, etc
  6. 6. World Faced Its First Oil Crisis 1970 and 1980 The world Faced Its First Oil Crisis. Prices rose from Us $ 4 – US $ 40 in 1980’s
  7. 7. During the world war I between 1914-1918 demand for oil increased tremendously for functioning of tank, ships and planes
  8. 8. Post world war II countries of the middle east took a lead in oil production from the United States.</li></li></ul><li>YEARLY TRADING<br /><ul><li>1973: First oil crisis</li></ul>OAPEC proclaimed oil embargo in response to the US decision to resupply the Israeli military<br /> during the Yom Kippur war. Price less than $10<br /><ul><li>1979: Second oil crisis</li></ul>Occurred in the wake of the Iranian revolution. Price $15<br /><ul><li>1980: Oil glut</li></ul>Surplus of crude oil caused by falling demand due to the 1970’s energy crises. Price fell from <br />$35 to $10 due to slow economic activity<br /><ul><li>1990: Oil price shock</li></ul>Occurred due to the Iraqi invasion of Kuwait. Price rose from $21 to $46 <br />
  9. 9. RESERVES-TO-PRODUCTION RATIO(RPR R/P)<br />Reserves-to-production ratio (RPR or R/P) is the remaining amount of a non-renewable resource, expressed in years<br />RPR = (amount of known resource) / (amount used per year)<br />Unit : Trillions Of Barrels <br /> Annual Usage (2005) : 1.2-2<br /> RPR (years) : 0.03 (40-80)<br />
  10. 10. OIL SUPPLY/PRODUCTION<br />
  11. 11.
  12. 12. OIL PRODUCTION WORLD SUMMARY<br /><ul><li>World consumption around 85 million barrels per day
  13. 13. Middle east 5- Iran, Iraq, Kuwait, UAE and Saudi Arabia produce</li></ul> 20 million barrels per day<br /><ul><li>80 % world production comes from fields discovered prior to 1973
  14. 14. Major oil producers characterized by corruption, crime, political turmoil or are</li></ul>beyond their peak<br />
  15. 15. US- 208,000,000 (barrels/day)<br />OIL DEMAND/CONSUMPTION<br />Japan- 5,353,000 (barrels/day)<br />China- 6,930,000 (barrels/day)<br />Russia- 2,916,000 (barrels/day)<br />Germany- 2,618,000 (barrels/day)<br />India- 2,438,000 (barrels/day)<br />Canada- 2,290,000 (barrels/day)<br />South Korea- 2,130,000 (barrels/day)<br />Brazil- 2,100,000 (barrels/day)<br />Mexico- 2,078,000 (barrels/day)<br />
  16. 16. <ul><li>Demand of oil 86.8 million barrels per day and is expected to grow at 1.2 %
  17. 17. Growing oil demand in developing economies owing to the rise in industries
  18. 18. In India favorable demographics will lead to penetration of automobile industry and hence increase demand </li></li></ul><li>Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization<br />Created at the Baghdad Conference on September 10–14, 1960<br />Founder Members- Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela<br />Works as a cartel and aims to stabilize prices for crude oil <br />Later joined by- Qatar (1961), Indonesia (1962), Socialist People’s Libyan Arab Jamahiriya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975) and Angola (2007)<br />OPEC<br />
  19. 19. OIL PRICE<br />Crude oil prices behave much as any other commodity with wide price swings in times of shortage or oversupply<br />Energy Information Administration (EIA): crude oil prices began surging since January 2008 and reached a record high (US$145 per barrel in July) <br />The deepening of the financial crisis led to a steady decline in the price of crude oil (US$30-US$40)<br />Prices started recovering in February 2009 <br /> OPEC’s decisions also has a significant impact on oil prices<br />Less production of oil also made an increase in oil prices<br />
  20. 20. FACTORS AFFECTING <br />OIL PRICES <br /><ul><li>Inelastic Demand and Supply of oil
  21. 21. The value of the US Dollar
  22. 22. OPEC
  23. 23. Effect of war, natural disaster and recession</li></li></ul><li>RECENT TRADING<br />
  24. 24. Oil prices and the expectations<br />* IN USD ($)<br />* IN USD ($)<br />
  25. 25. MARGINAL COST OF OIL PRODUCTION<br />Marginal Cost Of Oil Production is the point below which it becomes uneconomic to bring new oil projects to market<br />Goldman Sachs (September 2008): Pegs the marginal cost of production for the oil industry at US$80-85 per barrel (/bbl)<br />Also pointed out, forecasting, the number is likely to be $85-90 per barrel (/bbl)<br />
  26. 26. “Good oil demand, reliable supply, beautiful prices, we are very happy,” Saudi Arabian Oil Minister Ali al-Niami<br />“WHAT IF??” OIL PRICES RISE???<br />“ What if ??” <br />oil prices rise ????<br />Click to view Video<br />
  27. 27. EFFECT<br />NEGATIVE IMPACT<br />POSITIVE IMPACT<br />
  28. 28. WHY THEY WILL RISE ??<br />The weakness in the USD is likely to keep Oil prices firm over the next 12 months, despite weakening of Key economies<br />Confidence of the businesses all over the world (Industrial Consumption)<br />Presence of a cartel – OPEC<br />The shift in the strategy of inventory management<br />Emergence and Growing Importance of futures market in setting oil prices (Speculation)<br />Growth in Consumer Consumption<br />High RP Ratio (approx. 41 years)<br />
  29. 29. FUTURE OF OIL<br />
  30. 30. PEAK OIL<br /><ul><li>A Reminder that oil is a NON RENWABLE </li></ul>Resource<br /><ul><li>PEAK OIL: Maximum level of Oil production</li></ul>that can be achieved globally, after which oil<br />production will begin its gradual decline.<br /><ul><li>Finite Quantity of Accessible Oil
  31. 31. As no fall in demand- Major Crisis to witness.
  32. 32. Will be achieved by 2030.</li></li></ul><li>OIL SUBSTITUTE<br />A big pool,<br />………………..<br />But we can conclude, <br />“A BIG NO POSSIBLE SOLLUTION AS EFFICIENT AS OIL”<br />
  33. 33. THANK YOU…<br />BY: <br />ANKITA DEWAN<br />KARAN MEHTA<br />MAHIMA SONI<br />PURBSHA SHARMA<br />RISHABH KHANNA<br />SAHIL TREHAN<br />

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