Business Report

The statistical data through my research about the prices of oil in Kuwait that turned out to be on a graph to show historical data of oil prices within the past five years. The figure above, shows the price per barrel between 2014 and 2018. It is obvious that prices decreased dramatically within this period. In 2014, the price per barrel reached $109, which is considered the highest of all times. The year after, the price suddenly dropped to as low as $35 per barrel. The Kuwaiti government had to react so quick to this significant change. The government had to increases the fuel prices of over 105%. The year after, the price climbed humbly to reach $49 per barrel. As of today, the price is set at $68.10 per barrel.

OPEC, which is an acronym of the Organization of the Petroleum Exporting Countries, is an intergovernmental organization. It was formed at the Baghdad conference in September 1960 by Iran, Kuwait, Saudi Arabia, Iraq, and Venezuela. These counties were the leaders in oil production at that time. Many countries joined the organization shortly after the formation, which are Qatar, UAE, Libya, etc. After the significant fall in oil prices in 2014, the OPEC formed announced that it won’t reduce the production of oil, however the price kept dropping (Dr.Wafaa, 2016). The demand was too low in comparison with the huge supply and that was one of the main reasons of the fall (The Economist, 2014).

There are many factors that could manipulate the change in the prices. Kimberly Amadeo mentioned in her article “Oil prices are controller by traders who bid on oil futures contracts in the commodities market” (Amadeo, 2018). It was mentioned that there are mainly the factors that determined oil prices. First, is the number of supply for the oil since the OPEC has limited the supply to 61% of the world’s oil exports. What OPEC mainly tries to do is balances the oil production to keep its price around $70 per barrel. Second factor is access to the oil reserves supply. Countries like Saudi Arabia can easily access its reserves if the oil price went too high. The third factor is the oil demand. Demand might rise during the summer, which might lead to an increase to its price and vise versa (Amadeo, 2018).

What are the factors that caused Kuwait oil decrease? There are many reasons that caused oil prices to decrease. First factor is that Iran returned to the international oil scene. Dr. Wafaa Sbieti said that Iran nuclear deal with US in 2015 made a huge difference in the GCC’s economy. The U.S. had to buy crude oil from Iran as part of the Nuclear Deal. Nevertheless, Dr.Wafaa also said that the second factor that made oil price to decrease is the development of oil production in some countries, which includes US, China, Iran, and many others. The U.S. found a new oil field in 2015, which made raised its production by 9.2 million dollars. Furthermore, Dr.Wafaa indicated that the third reason that led the prices that Japan and Russia are facing a global recession. Moreover, Brazil, China, and India are experiencing low economic growth rate.

What is Kuwait plan in order to increase its oil production?

Kuwait now holds around 6 percent of the world’s oil reserves, and is the fifth-biggest produces in the OPEC. Kuwait Plans to raise oil-production to as much as 4.75 million barrels a day after 2030 as the OPEC member builds refineries in Asia to process more of its crude, the head of state-run Kuwait Petroleum International Ltd. Said. (Bloomberg Markets,2017). The plan is to expand processing plants in China, India, Vietnam, the Philippines and Indonesia. Bakheet Alrashidi, the minister of oil Kuwait and the president and chief executive office of KPI, wanted to create a plan to expand the production. His plan is to make KPI refine around 800,000 barrels a day outside of Kuwait within five years, including the plant under construction in Vietnam. “The future in the business is for big refineries with integrated petrochemical plants,” al-Rashidi said.(Mahdi, MacDonald, Fattah, 2017).