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Creative Strategies to Navigate Erratic Energy Economics Populations have generally accepted that change is inevitable as low oil prices have yet again put the spotlight on Gulf countries’ economic Achilles heel Writer: Michelle Meineke, Editor, Gulf Intelligence he bearish tentacles of low oil prices have stretched far and wide in the global business sector in what is a particularly uncomfortable chapter in an age-old story. Unbalanced supplydemand levels and turbulent pricing have characterised the world’s financial architecture for more than 5,000 years as early civilisations detailed price and delivery terms on clay tablets. Over the millennia, economic policy and technologies have evolved, but an essential ingredient that underpins successful business has not; confidence. While tricky to quantify, it is fair to say that investor confidence has taken a heavy hit since oil prices started falling from well-above US$100 a barrel (bl) in the first half of 2014, to below $30/bl in January this year; marking a 12-year low. Oil prices are now hovering around $50/bl, with a weak promise of upward movement causing greying energy accountants to continue using ancient cash management strategies. Newspapers are drowning in ink detailing energy
“OIL PRICES started falling from well-above US$100 a barrel in the first half of 2014, to below $30 in January this year”
$30
a barrel
companies’ asset sales and shortened payrolls. BP posted its worst loss in two decades last year, with $8.1 billion profit in 2014 flipping to a $5.2 billion loss in 2015 and Abu Dhabi’s National Oil Company (ADNOC) is slashing 5,000 jobs from its payroll this year, roughly 10 percent of its workforce. Numerous examples of economic strife are echoed throughout Europe, the Middle East and beyond. Very few are immune. Brexit did little to ease the jittery energy markets and financial institutions blindsided by the UK’s 52 percent majority for a lone-ranger profile from the 24 June meant the FTSE 100 closed the day at 3.2 percent lower. Cash injections and debt packages are vital to energy producers’ increasingly ambitious plans to cater for the 48 percent increase in global energy demand by 2040 that is outlined by the US Energy Information Administration (EIA). Sharpening energy-related businesses’ competitive edge is also particularly relevant today as emerging oil & gas producers threaten to elbow established players
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