Significance Of Crude Oil Supply And Its Impact On Oil Prices

Due to the increase in the oil consumed by the United States in the recent times

, oil imports have increased which is an indication that it is dependent on the gulf countries for crude oil supply. With the expansion of crude oil industry, the GDP growth rate has increased in Russia, which is one of the global oil exporters. The oil exporting countries will earn huge revenue based on the growing oil demand with high oil prices. These exporters will face a major crisis if the oil prices soar up too high as the demand for oil as well as the prices will decline thus reducing the GDP growth in the oil consuming nations. Due to increase in domestic consumption in oil exporting countries, exports may decline. Disruption in crude oil supply can cause severe price inflation.

When new oil is discovered and introduced in the domestic as well as International markets, crude oil supply increases and there might be a reduction in oil prices thus affecting the economic growth of the oil exporting countries. Demand for oil can reduce if the oil prices are high thus making alternative fuels more competitive. OPEC assigns production quota to its member countries with an aim to create favorable oil prices and to limit crude oil supply that is available in the global market. crude oil supply can be disrupted due to various factors such as political instability, technical reasons and terrorism.

In the year 2009, the United States of America was dependent on crude oil supply from countries such as Canada, Saudi Arabia, Iraq, Nigeria, Mexico, Algeria, Colombia, Brazil, Venezuela and Angola. The top crude oil supplier to the United States was Canada, which supplied 1.94 million barrels per day. Following suit was Mexico with a supply of 1.13 million barrels per day and 1.09 million barrels per day from Saudi Arabia. Saudi Arabia being the world's biggest oil supplier will concentrate on crude oil supply to India. In March 2010, it pumped 8.2 million barrels per day and UAE's oil production recorded 20,000 barrels a day during the month of March.

In 2015, supply will be surpassed by demand due to recession. Crude oil is likely to peak in the coming years leading to maximum global extraction point. If maximum production level is reached then there will be a decline in crude oil supply. New oil reserves are being explored to meet the growing demand of crude oil. Advanced and new production techniques are likely to be introduced. Non-OPEC members are turning into major oil exporting nations and they play a major role in supplying oil to the United States, which is the world's biggest oil consuming nation. It has been predicted that within 15 years, the global crude oil supply will come from unconventional resources such as heavy crude oil, oil shale and oil sands.

by: Sunil Punjabi

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