The Narrative Of Falling Oil Prices - 1337 Words

The narrative of falling oil prices has been played out in financial news as a blessing for consumers and a bane on the energy sector, namely on oil companies and oil-exporting countries. However, a crucial piece of the narrative has been largely forgotten, and that’s the shock that such oil prices have had on private equity investors in the energy markets for the past year. What was once a lucrative and seemingly obvious investment into the oil boom of the post-recession has, for the last year, turned into an energy fund disaster for many PE firms. Yet despite the record-breaking losses that these funds have incurred, private equity firms have recently been doubling down in the market, increasing energy investment to previously unseen levels. Such actions beg the questions: why are PE firms so confident in the energy sector, and should they be? As the narrative commonly begins, oil prices are way down. Way way down. In fact, since June 2014, the price of a barrel of oil has b een cut in half reaching levels last seen during the bottom of the 2009 recession. The causes of such rapid declines are best attributed to a simple supply and demand model. On the supply side, domestic oil production has doubled in the last six years. As the world’s largest crude oil consumer in the world, the US was once a large and reliable buyer of foreign oil. But with domestic demand for foreign oil waning, exporting countries such as Saudi Arabia, Nigeria, and Algeria have had to find newShow MoreRelatedTalisman Energy Case Analysis1480 Words   |  6 PagesCase Analysis: Talisman Energy Inc: The Decision to Enter Iraq Talisman Energy Inc. after a failed oil venture in Sudan due to poor handling of public relations is contemplating entering Kurdistan after the Iraq War. 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