7 Things You Must Know About the Price of Oil

Crude oil is the composition of million year-old treasures beneath the earth. It is the worlds most primary and lucrative resource on the planet. Crude oil can generate heat, drive machinery, fuel vehicles and airplanes and it moves the world forward into the future.

Crude oil components are used to manufacture almost all chemical products, such as plastics, detergents, paints, and even our current medicines. A hot commodity that’s not about to go away, we have a responsibility to advance crude oil production in the most efficient, cost effective and sustainable ways.

Furthering technology will allow us to delineate more crude through processes such as fracking and horizontal drilling and who knows what’s next. As long as the world wants to advance with the standard of living we now have, we are destined to continue the search for crude in new ways and in new regions around the globe.

Crude oil production takes many forms, both on land and offshore. Varying methods of production allow us to harness this resource and with the expertise of giant minds we have built islands in the sea in places like the Gulf, Offshore Newfoundland and The North Sea, to name a few. And we have mined and extracted bitumen on land, from projects like Oil Sands of Alberta, using the most advanced drilling methods in the world.

The engineering intelligence and creative genius, that we have put forward, to supply the world with oil, is truly miraculous. The top minds of the world have developed the solutions that give us the life you have today. The very last thing we should be doing is bashing the oil companies for creating the world we have become accustomed to.

We all have a responsibility to understand what creates our world of energy, what will sustain it and what will create a future that supports our kids. We should understand the industry and it’s various components so that we can make informed decisions and responsible choices with our energy. We are all responsible for finding ways to support the energy industry, so that we continue our advancement and simultaneously mitigate our risks to health, safety and the environment – it’s a baseline necessity. Anyone who’s not in that mindset should stop driving and using our every day products that come from petroleum. Life would come to a screeching halt and they would quickly realize that oil makes the world work.

The Canadian crude oil industry is completely transformed by increased global crude oil supplies resulting in lower oil prices and this is not an oil and gas industry concern it’s a fundamental concern, of all people who use petroleum products. It affects us all. Lower oil prices have challenged project economics and reduced capital spending dramatically so while total oil production continues it is at a slower pace than originally anticipated.

According to the Canadian Association of Petroleum Producers (CAPP), “The total Canadian production of crude grows from 3.7 million b/d in 2014 up to 5.3 million b/d in 2030 and market diversity and access is still required to the U.S. Gulf Coast, the U.S. Midwest and Eastern Canada in North America. International interest in accessing Canadian crude oil is also increasing as several test cargoes were shipped to global markets in both Asia and Europe in 2014.”

oil prices

The price of oil

Part of taking responsibility for our energy future is understanding the price of oil and its impact on the energy industry.

Crude oil production is impacted by many variables including availability as a natural resource, technology, rate of discovery, politics and geography and especially economics. Projects are assessed for economic viability and other factors, and either go ahead or don’t depending on the feasibility of projects in the short and long term picture. The price of oil alone is a topic that could fill this entire magazine but here’s a number of considerations that rise to the top, for understanding the fundamentals of the price of oil – when it rises and when it drops:

1. When the price of oil goes up

When the price of gas at the pumps goes up, it impacts everyone personally and most especially it impacts the business of transport. High oil prices impact how people travel, how goods are shipped and how people formulate their budgets for vacations and fuel costs for their vehicles. When home heating prices climb, people have to decide whether or not they can afford to turn up their thermostats in the dead of winter.

When oil price goes up, so too does the products made of petroleum. When various goods have become more expensive because their components also cost more, people have to make choices on what to buy or not to buy. Higher oil prices impact almost everything we do because petroleum is related to almost everything in the market today from packaging to electronics, to the chair you are sitting on.

The price of oil rising not only affects individuals but it affects corporations. As transportation costs rise so do budgetary considerations. As shipping and heating costs rise it forces companies to make changes and decisions based on those factors. Contrary to what we hear in the news at this time, the price of oil rising is not always a great thing. It has impact and considerations that are so far reaching that nobody is equipped to identify all the variables because we just aren’t that smart – yet! We can consider some of the variables – but not all of them. Even the keenest economists in the world haven’t considered all the variables simultaneously, and get it right every time. The best we can hope for, are predictions that come close.

We can however, see the impact of rising oil prices in our own lives personally and in the companies we own and work for. We can begin to see how the cumulative effects of higher oil prices tend to impact not only companies and industries but countries and nations as the cumulative energy effects impact the world overall. There’s a personal consideration, a local consideration, and international consideration and a global consideration all happening at the same time. Is it any wonder we can’t figure it all out?