Editorial: The Recurrent, Thunderous Dirge of the Oil Price Rollercoaster
In the past few days the price of Brent crude has rallied to its current level of $54 a barrel, and the commodities markets have breathed a sharp sigh of relief at temporary respite.
That said, respiration is still no more than a shallow rasp for oil companies and hydrocarbon-dependent nations alike. Crude has plummeted to half of its dollar value since February 2014, and although the rebound has been welcome alleviation, consecutive months of nose-diving profits are beginning to manifest with grievous consequence.
In the North Sea arena, supermajors BP and Chevron have announced just shy of a thousand job cuts between them, and in the oil sands of Alberta, Canada, a reported one in five upstream companies are contemplating job cuts. BP made a The $969 million loss in Q4 of 2014 and Royal Dutch Shell saw an eight per cent drop in annual net profits in 2014, culminating in the announcement of a three-year, $15 billion cut in spending.
How can an industry whose top 10 listed companies have a market value analogous to the GDP of Canada and assets comparable to the GDP of Germany, the eleventh and fourth largest economies in the world by size, be so beholden to the price of 158.9 litres of petrochemical? Beholden to the extent that when an oil price downturn cycle begins to swirl, the first things to be sucked into the maelstrom are capital expenditures and previously "essential" staff.
The kind of short-termism that would pitch giants of industry into delirium tremens after six months of adverse results should have no place in the modern business sphere, yet the recurrent, thunderous dirge of the oil price rollercoaster is a lament that many veterans will have hummed a handful of times in their careers. Every bowtie, corkscrew and pretzel loop survived a Red Badge of Courage for the experienced trouper.
And, after the adrenalin dissipates and the train comes to a complete halt, those who exit the cars will be happy that the experience is over.
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