07:46 GMT +317 November 2019
Listen Live
    An Iranian oil worker makes his way through Tehran's oil refinery south of the capital Tehran, Iran, Monday, Dec. 22, 2014

    ‘Oilageddon’ is Nearing as Oil Producers Scramble for Last bits of Market

    © AP Photo / Vahid Salemi
    Business
    Get short URL
    1134
    Subscribe

    Amid dramatically falling global oil prices that dipped below $40 a barrel on Monday, oil producing states already started to fight over the oil market, trying to sell as much oil as possible further aggravating the situation, Muhammad As-Sayyad, the former head of Bahrain’s National Oil and Gas Authority (NOGA), told Sputnik in an interview.

    The current drop in energy prices started last fall due to the oversupply of oil. Normally, when these kinds of situations occur, OPEC interferes and cuts global oil production. However, this isn't the case this time around — OPEC, led by Saudi Arabia, refused to decrease production, leading to a record amount of oil being pumped out of refineries despite the steady and ongoing decrease in prices.

    This resulted in a free-for-all situation in which oil-producing nations refuse to sacrifice their own share of production for the sake of increasing global prices. And now, as prices keep falling, it has led to the struggle over the oil market and potential customers, as oil producers try to sell as much oil as they can, As-Sayyad explained.

    The situation is expected to get worse considering that Iran, which has been recently freed from sanctions and thus has an extra quota of 4 million barrels a day, is looking to flood the oil market with more crude. There certainly are potential customers willing to buy Iranian oil and that would lead to an even further decrease in prices, the former head of NOGA told Sputnik.

    Oil producing nations will be hit hardest by the current situation. Budgets of the Persian Gulf countries, for example, depend 80 percent on oil revenues (on average). Following the current drop in prices, it's clear that the future budget of these countries will suffer dramatically. They will either have to increase their non-oil revenues or significantly reduce their spending. Harsh austerity policies are expected to happen, As-Sayyad said.

    Related:

    Oil Prices Drop on Glut Supply Fears
    Low Oil Prices Destroy Financial Power of Saudi Arabia
    Lower Oil Prices Contribute to US GDP Growth – White House
    Shell to Cut 6,500 Jobs in 2015 to Reduce Costs Amid Low Oil Prices
    Tags:
    falling prices, oil price, OPEC, Muhammad As-Sayyad, Saudi Arabia, Iran
    Community standardsDiscussion
    Comment via FacebookComment via Sputnik