The oil crisis has been an ongoing global problem since as early as 2014, but what does this crisis mean for Australia?

The current oil crisis

Oil prices fell from above $100 per barrel in 2014 and dropped down to the low levels of $30 per barrel in 2016; the market has since recovered. However, there is worry that we may dip to these levels once again.

The current crisis has been attributed to excess supplies of US shale oil. Oil companies and suppliers depend on the revenue generated from oil sales, so excess stock makes it hard for them to fund their fiscal budget.

Increasing rivalry between Iran and Saudi Arabia has not helped the oil crisis and has caused the Organization of the Petroleum Exporting Countries (OPEC) to intervene, leading to an agreement between OPEC and non-OPEC members to freeze/ cut oil production in November 2016.

The deal was due to continue until March 2018. However, cracks have started to appear, and there are fears that the deal will break apart.

The effect on the rest of the world

The oil crisis has affected the economy; this has a knock-on effect on the remainder of the world. Modern society relies heavily on economic growth and the slightest economic dip has a rippled effect.

The oil industry, when booming, brings tremendous economic growth. However, this also means any hit to the oil industry negatively affects economic growth. The oil crisis in the past have caused recessions and brought countries to their knees.

Economist always pays close attention to the oil industry due to the major impact price increase and decreases have.

The effect on Australia

In the 1990s, years of strategic planning meant that Australia almost reached oil self-sufficiency, however, in the 2000s trends changed and suddenly the gap between consumption and production started widening. Currently, Australia is only 38{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} oil self-sufficient.

Instead of being, self-sufficient Australia has been turning to oil imports. While this may improve the supply of crude oil, this leaves the country vulnerable. The current oil crisis means that supplies have had to freeze/cut production, this means that another price dip could cause an economic catastrophe.

It is in the countries best interest to start aiming towards oil self-sufficiency rather than relying on oil imports since the oil industry is incredibly unstable with little signs of stability.

Conclusion

The oil crisis has been brewing since 2014 but reached its peak in 2016; however, despite signs of recovery increased instability has meant that economists fear that another dip is imminent.

Excess stock of American shale oil and ongoing rivalry between Iran and Saudi Arabia has said that the OPEC has had to work together as members and non-member to reach an agreement to freeze or cut production.

An agreement was reached in November 2016. However, there have already been signs of stress, and it is feared that the deal will collapse well before the March 2018 end date.

Up until 2000, Australia was heading in the right direction towards full oil self-sufficiency, however, due to a change in trend the country started to rely more on imported oil. This has seen a decline in production and leaves Australia incredibly vulnerable due to the instability in the oil industry.

To protect ourselves from the fallout of a potential collapse in the oil industry and reach 100{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} oil self-sufficiency, Australia should focus its efforts on increasing oil production. 

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What The Oil Crisis Means For Australia (Content Princess – SEO)

Brent crude oil tumbled from $37.28 down to $30.86 per barrel in the past year or so. How is that severe? Well, in the fourth quarter of 2014, Brent was selling at $100 per barrel, meaning its prices have plummeted, and drastically too.

With oil prices currently in freefall (as seen in the above example), sending shivers down the spines of major economies, prevailing countries take wins, and those less fortunate take losses. But what does this mean for our beautiful country? What does this mean for Australia?

The Crisis Itself

Our world has more liquid petroleum than it ever had before, also meaning it has more than it will ever actually need too, and in this fuel-guzzling, energy-driven society, that comes with catastrophic circumstances.

Drastic changes in the supply and demand of oil and other fuels can result in the tearing down of share markets, the shutdown of multi-billion dollar hedge funds and not to mention slashing government budgets, ultimately ending up in spiralling numerous countries into a recession that never needed to happen. A recession that could have been easily regulated and avoidable.

But with greed comes unforeseen, often terrible circumstances. And greed, sadly, in this day and age, is much too common and way too blind. The people are getting greedy to fail to see the aftereffects of their greed because they cannot see past the enormous stacks of money on their desks. And doesn’t that tell us a lot about the world?

What Does This Mean For Australia?

A whole lot of bad

It may seem good at first because lower oil prices mean cheaper petrol right? Wrong. While the prices overall are lower, with Australia being a net oil importer, they have lost a lot of income through oil trading, meaning the Australian dollar has also plummeted. So while the low oil prices have caused the prices of petrol to come down drastically, with the Australian dollar dropping too, it has resulted in what appeared to be a $1.45 decrease per barrel, actually turned out to be a 53 cent increase.

The entire thing paints a very complicated-looking picture for Australia because although we’re importing oil at much lower prices, being a net oil importer and all, that very much looks like a good thing. But the bad side of it is, the nation is a net energy exporter and lots of energy-related products, meaning as well as buying oil on the cheap side.  We’re also trading our exports at much lower prices too, because a lot of energy products, such as gas, follow similar price patterns to oil.

Summarising The Crisis

So yes, we may be importing stuff for much lower prices, but in turn, our main export outlets are taking major hits too, so it’s not as though the Australian economy is being boosted due to the cheap imports. Because in actuality, the economy is on the decline because of our main exports taking a hit in all this too. Add the drop of the Australian dollar into the equation, and the nation could be facing one of the most severe declines in its economy it has seen in many years.

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