It's an End of an Era for Big Oil

BP, a leading oil corporation based out of London, recently reported a record-low stock share. This share totaled to an annual loss of 6.5 billion dollars, closing 8.7 percent of the company’s shares, as recorded at the end of 2015. BP’s oil cost, which was traditionally $90 to $100 has dropped to $33 a barrel, slicing the price of oil by around 70 percent. Although, we have seen these stocks drop before. For example: the Gulf of Mexico’s BP Oil Spill, in 2010. New concerns are starting to arise for the company.

Over the past year, BP has seen massive cuts in other portions of their company. Its replacement costs were sliced by 51 percent in 2015, totaling in over 5.91 billion dollars lost. The company’s upward arm, which oversees drilling of oil, has seen losses of 728 million over the past year. In the fourth quarter alone, BP lost over 2.2 billion dollars.

BP has already taken some steps to cope with the massive annual loss. Since the start of 2015, the company has cut over 4,000 jobs and plans to cut 7,000 more by the end of 2017. These job cuts are mostly in its exploration and processing posts, like refining and manufacturing. This is in an effort to lower the annual loss of the company, but is expected to take a large effect on the company’s downstream arm, the part of the company that purifies crude oil into gas and distributes it.

BP is still suffering from the ongoing costs of the BP Oil Spill. Ever since the environmental disaster, BP has promised to pay 20.8 billion dollars to the United States Government and the states that were affected, and it keeps rising. But, many other oil companies like Tullow Oil, Royal Dutch Shell and Total are receiving similar share drops as well. If that’s so, what’s causing all of these drops in oil prices? One source suggests that this is due to the high global supply of oil, but lower consumption rates, and this can be due to a number of reasons.

One reason could be that the world is making a more positive switch towards renewable and more energy-efficient sources. This explains why the global demand for fuel has been going down. But the National Academies of Science, Engineering and Medicine reports that only about 7 percent of all the energy the United States uses alone is renewable energy, like solar power, wind power and hydropower. All-electric cars are starting to become more popular, but a huge fraction of our energy use is still mainly fossil fuels. Another reason oil prices are dropping could be due to large competition between oil marketers. The New York Times says that many African oil companies like Nigerian, Saudi and Algerian oil have switch from competing in US markets to other foreign markets in Asia. The global supply of oil is also high which could be causing the spark in competition.

So right now, we could say that the future is a little unclear. The drops in oil prices don’t seem to help BP, but because the company’s in a dire situation to replenish its annual loss, it’s forced to drop its prices to keep up with foreign companies. Or, it could mean that maybe, little by little, the globe is making a bigger switch towards cleaner and more efficient energy. But, even with all of this information, it’s hard to say if the future has gotten brighter or darker.