While fundamentals play a primary role in oil pricing, there also is an emotional component. Even when world demand exceeded supply, and oil skyrocketed to more than $100 a barrel, the number was artificial. At that time, concerns that Middle East volatility could impact the availability of oil influenced prices upward. Today, given the current supply overhang, reports of OPEC’s refusal to freeze production, sends prices lower. The silver lining in this downturn is about resiliency. It is astounding how quickly companies have leveraged innovation to optimize operations and lower “break-even” costs. In fact, on the other side of this downturn companies will be better positioned to be more profitable when prices rebound. We won’t see $100 a barrel return, but global growth will fuel demand, with prices settling to a “Goldilocks” level as excess supply is burned off. Meanwhile, the continued focus on innovation is making the industry stronger long term.
Senior Vice President