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Oil and Gas Forecast for 2015: Impacts on Business

17 DEC 2014
Career Path : Administration

oil money

Oil and gas markets are currently experiencing a great deal of volatility, which will have major implications for 2015 business plans and economic forecasts. Although the current market has seen a dramatic reduction in prices, the fact is that businesses should not assume that this trajectory will continue. For this reason, most businesses should ensure that they have made adequate preparations for both a continued drop in gas and oil prices as well as a rebound in rates.  Business leaders will need a strong grasp of the current and future economic impact of oil and gas price trends.

The Causes of the Current Decline in Market Values

Currently, the primary causes for the drop in oil prices include the following:

• Increased American oil production.
• Reduced Asian demand for oil
• Increased production from Saudi Arabia
• Rising production from Iraq and Libya

In addition, the continuing rise in fuel-efficient engines allows consumers to get by with less fuel, reducing demand without a concurrent reduction in travel and consumer spending.

The Impact on Businesses

All businesses, even if they are not directly associated with the fossil fuel markets, have been impacted by these changes. As the cost of oil decreases, manufacturing and shipping costs will also decrease, even as consumer demand rises due to increased amounts of disposable income. Indeed, many online business degree programs have already integrated the impact of oil and gas prices on the economy into their course plans.

The benefits of these lowered prices can be used in two primary ways. The first is to simply take advantage of reduced expenses and increased consumer demand in order to increase company profits. This can be especially beneficial for businesses who are satisfied with their current market position or who wish to immunize themselves from a possible rise in fuel prices.

The second course of action is to make use of these trends in order to expand the business. Reduced manufacturing and shipping costs can help a company increase its investment in future expansion. This can be especially useful for those companies that are seeking to expand into new markets. However, it is important to avoid over expansion due to the fact that gas and oil prices may unexpectedly shift.

Potential Dangers in the Oil and Gas Markets

Although oil prices have dropped to near-record lows, the fact of the matter is that the oil market is traditionally characterized by high volatility. There are a wide range of issues that could see oil prices rise again, including increased political tension in the Middle East or other regions and a rise in fuel demand in the developing world.

For this reason, many MBA and MBA online programs are currently stressing the importance of having a firm grounding in international affairs so that future executives can evaluate the changing world environment. In fact, many online business degree programs offer specialties that focus on international markets and trade to further equip their graduates with the tools needed to negotiate the modern business world.

Ultimately, falling oil and gas prices will serve as a reminder that the business world is in constant flux. By effectively predicting and adapting to future fuel price trends, wise companies can position themselves to take advantage of both current and future changes in oil and gas prices.

How do you think the volatile fuel market will impact businesses most in 2015?