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5 Negative Factors For Oil Prices

5 Negative Factors For Oil Prices

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Crisis Summit To Save North Sea Oil Industry

Aberdeen’s City Council is calling for a summit of government, business and labor leaders to search for ways to ease the severe challenges that low prices are posing to Britain’s North Sea oil industry.

Jenny Lang, the leader of the City Council, said her city must coordinate efforts by both the Scottish and British governments, as well as labor and industry to protect the oil-related businesses and jobs in Aberdeen.

“I have today instructed Angela Scott, our chief executive, to arrange a summit between senior politicians, [central] government officials, industry representatives, trade unions and local politicians … to develop a strategic plan to ensure job losses are either avoided or kept to a minimum,” Lang said Dec. 21 in Aberdeen.

“[W]e need to agree a strategy to deal with fluctuations that undermine confidence in the North Sea,” she said.

Related: British Oil Industry On The Verge Of “Collapse”

The threat to the North Sea oil industry, shared by companies in Northwestern Europe, has been growing for months and came to a head last week when a senior oil executive, Robin Allan, said the plunge in oil prices was bringing the United Kingdom’s oil industry “close to collapse.”

The average price of Brent crude, the benchmark North Sea oil, has dropped by more than 40 percent from more than $100 per barrel to its current level just below $60 per barrel. Allan said virtually no oil company could afford to begin new projects in the North Sea with such a low return.

“It’s almost impossible to make money at these oil prices,” Allan, the chairman of Brindex, the oil-exploration association, who also serves as a director of Premier Oil, told the BBC in an interview broadcast on Dec. 18. “It’s a huge crisis.”

What may have caught Lang’s attention was Allen’s comment that to meet previous challenges, oil companies always have managed to adapt. “[B]ut the adaptation is one of slashing people, slashing projects and reducing costs wherever possible,” Allen said, “and that’s painful for our staff, painful for companies and painful for the country.”

In announcing her plans for the summit, Lang asserted, “We are the energy capital of Europe, and in order to sustain our position and compete against other global cities, we must … find a strategic solution to allow Aberdeen to retain jobs and ensure [that] the service companies that are currently operating from Aberdeen remain anchored here for many years to come.”

Related: Big Oil Slashing Spending Amid Low Prices

The Scottish Labor Party has promised to send its leader, Jim Murphy, to attend the meeting, and has invited British Prime Minister David Cameron and Scotland’s first minister, Nicola Sturgeon, who also serves as the leader of the Scottish National Party.

Lewis Macdonald, the energy spokesman for Scotland’s Labor Party, said, “Both Jim Murphy and I look forward to working constructively with all stakeholders to find a solution that supports the thousands of jobs at risk here.”

Macdonald added, “I can only hope that Nicola Sturgeon and David Cameron answer the call in the same constructive spirit, and come to Aberdeen to look for solutions to support Scotland’s oil industry.”

By Andy Tully of Oilprice.com

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  • the blame/e on December 23 2014 said:
    Obviously what is happening here is that the oil companies are attempting to extort the public with the threat that either they pay high prices for oil or the oil companies will close up shop.

    Just as T. Boone Pickens said: "The people have gotten along just fine with oil at $100-dollars per barrel."

    Yes. The people all know what is good for them.

    Funny, but if the matter were the other way around (as it has been), where the public was threatening to walk off the job if companies did not agree to higher wages, benefits, pensions, reduced hours for the same if not more pay, improved working conditions, then we would not blame the companies for shutting down, out-sourcing jobs to take advantage of cheap slave labor overseas, moving their operations off-shore.

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