Update on Winners and Losers from Declining Oil Prices

Thanks to relatively new technologies, such as horizontal drilling and hydraulic fracturing, companies operating in the US shale formations brought over one million barrels per day of incremental oil to global supply over the last year. OPEC's decision not to play the role of "swing producer" meant that the market for oil would be oversupplied by greater than 1 percent relative to global demand. As a result, oil prices declined over 50 percent since June, despite making a temporary recovery a few months ago. This is sending shockwaves throughout the oil & gas industry as companies struggle to realign their operations in the face of the precipitous decline in West Texas Intermediate (WTI) and Brent crude oil prices.

Recent events have kept oil prices low longer than ARC Advisory Group had originally anticipated several months ago when we issued our first report on the effect of declining oil prices on the automation business. Potentially, negotiations with Iran could lead to a large additional supply added to the global market.  Anticipating this change, futures markets have already reacted.  Geopolitical tensions in Russia, the Ukraine, and certain areas of the Middle East continue, and as these events unfold they have to potential to further increase oil price volatility.

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Keywords: Oil Prices, Capital Spending, Automation, Oil & Gas, Upstream, Mid-stream, Downstream, Automotive, Transportation, Refining, ARC Advisory Group.