The price of crude oil has fluctuated wildly over the past 4 years. Having peaked in October 2018, the price plummeted by nearly 40% to January. Fears concerning oversupply in the market, coupled with global economic uncertainty, brought the price crashing down.
In efforts to firm up pricing, the Organization of the Petroleum Exporting Countries (OPEC) and Russia agreed to cut production by 1.2 million barrels per day. The price of oil has been firming since these efforts were made, but not nearly to the heights of autumn last year.
An uncertain future for the price of crude oil seems likely, as the USA has instigated sanctions on both Venezuela and Iran. It is expected that production in these countries could fall by 1.76 million barrels per day combined. The USA is Venezuela’s largest oil importer, and restriction to imports from PDVSA, Venezuela’s state-owned oil company, will have a significant knock on effect. The sanctions come in light of President Maduro’s refusal to cede power to opposition leader Juan Guaido, who many recognise as the official leader.
Fluctuations to crude oil pricing have a direct effect on the cost of food and beverages. Production and transport costs are a key component in the overall cost of food and drink and are underpinned by oil cost. Forecasts for this year, by the U.S. Energy Information Administration, predict an average price of $61 and $62 per barrel for 2019 and 2020 respectively, around $10 below 2018’s average.
Whilst bad news for crude oil producers, if forecasts are correct, we would expect to see lower costs associated with food production and transport for the next couple of years.