Friday, February 17, 2017
3 Ways For CEOs to Manage and Profit from Oil Price Fluctuations
Energy CEOS: 3 Ways For CEOs to Manage and Profit from Oil Price Fluctuations
As a CEO of the largest energy companies' your biggest challenge is how to remain profitable in a tremendously volatile industry.
This first article is about Saudi Arabia and the possibility that it may change its stance on the decision to cut back on oil production as early as June of this year. Why Saudi Arabia May Unravel OPEC's Big Deal? by Julian Lee & Jennifer Ryan at Bloomberg Gadfly Saudi Arabia has been the primary engine and player in the production cuts agreement. Thus far Saudia Arabia has been nearly 90 percent compliant with the cuts. However, there is some uncertainty surrounding the impact of factors such as U.S. shale production, domestic crude oil demand, and cooperation from other nations part of the cut.
Photo by: Svetoslav Nikolov
The second article talks about how Trump’s Energy Policies will influence the energy markets in U.S. and demand for oil and gas around the world. The Trump Energy Shock by Liam Denning & Mark Gongloff at Bloomberg Gadfly. There is a strong correlation between US oil output and crude oil prices. The Trump administration has already started to relief US oil producers from " burdensome regualtions" there will be a surplus of US crude oil entering the global market quickly since oil from shale can be produced in less than nine months.
Based on my review of these two articles and relevant studies I have done at Northwestern University Medill IMC program I have developed 3 action items you should consider when a volatile situation arises
Weigh the costs of integration - Companies must consider the financial effects from upstream and downstream operations
Identify what is profitable in your portfolio - It's important to determine which assets are most profitable and ones which may need to be reconsideration
Consider the impact of global trends - Global demand will continue to be an important factor determining the price of crude oil.
The next time prices of crude oil or any other commodity change dramatically you will have a strategic way of managing uncertainty.
I am a master's student specializing in business journalism at the Medill School of Journalism at Northwestern University. I am passionate about the energy markets and renewable energy. I will be graduating in the Fall of 2017.