Oil prices have been falling over the past three months — a huge energy story. Prices went to a serious fallback in mid of year 2000’s; the demand for oil was rising more than supply which resulted large price spikes nearly about $ 100 per barrel. The outcome of this resulted that many energy companies found that extracting oil form difficult to drill places would be more profitable to them. As a result this supply was more than demand. This led to boom in oil production to global market by September 2014 Libya’s oil industry began extracting out lots of crude. And even, oil demand in Asia and Europe has been declining.
The mixture of lesser demand and increasing supply sourced oil prices to begin plunging as of their June peak of $115 per barrel lessening to roughly $80 for each barrel by mid-November. Oil is a good deal pricier than it had been a decade ago, when it was around $40 per barrel. But it’s sliding down for now.
Falling petrol prices had a very much adverse effect on the economy of Australia. The energy sector of Australia suffered a setback due to recent collapse in oil prices in last two days which may further result into shutting down of various projects (Mcgrath, 2014).
A giant oil exporting country like Australia’s stock market largely depends on its energy sector. It will either have to draw down its foreign-exchange stores or curb on premeditated expenses. The energy stocks are bleeding due to sharp fall in the global oil prices which had a negative impact on the prices of dollar also. OPEC had worsened the situation by declaring to maintain the productivity level. Fall in the prices of dollar i.e. CURRENCY DEPRICIATION will result into increased capital outflow from the country. It also adversely affects our TRADE SURPLUS as export revenues don’t match up with import expenditure. A continuous fall in oil prices will also lead to budget deficit and social issues like unemployment. Moreover fall in the earning of companies will yield fewer dividends to its shareholders. Low prices and dividend of energy stocks create a panic among shareholders. Oil- producing countries like United States, Australia and Libya are to be expected to witness a plummet in profits and financial activity. This may ultimately leave with recession, unemployment, lower purchasing power.