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The Crude Economy

Where the surplus oil goes

Adam Allington Dec 12, 2014
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The Crude Economy

Where the surplus oil goes

Adam Allington Dec 12, 2014
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The price of oil continues to drop around the world, which means that countries are starting to stockpile crude in the hope that prices will soon rise.

This increase in inventories also presents challenges for producers. Storing oil on railcars and tankers is an effective temporary solution, but eventually producers will have to make a decision about scaling back production.

“It’s a fairly serious decision, you don’t just start and stop these things without a consequence,” says Mark Routt of the energy consultancy KBC. A traditional oil well, he says, is usually not as productive after it’s been shut down. Some producers might be pushed out of the market as prices continue to drop and as inventories rise.

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