2010s oil glut
The 2010s oil glut is a serious surplus of crude oil that started in 2014–2015 and accelerated in 2016, with multiple causes. They include general oversupply as US and Canadian shale oil production reached critical volumes, geopolitical rivalries amongst oil-producing nations, falling demand across commodities markets due to the deceleration of the Chinese economy, and possible restraint of long-term demand as environmental concerns steer an increasing share of energy consumption away from fossil fuels.
The world price of oil was above US$125 per barrel as recently as 2012, and remained relatively strong above $100 until September 2014, after which it entered a sharp downward spiral, falling below $30 by January 2016. OPEC production was poised to rise further with the lifting of international sanctions against Iran, at a time when markets already appeared to be oversupplied by at least 2 million barrels per day.
In December 2015, The Telegraph quoted a major oil broker stating: "The world is floating in oil. The numbers we are facing now are dreadful" – and Forbes magazine stated: "The ongoing oil price slump has more or less morphed into a complete rout, with profound long-term implications for the industry as a whole."
Economist Nicolas Firzli warned in 2014 that "the price of oil has stabilized at a relatively high level (around $100 a barrel) unlike all previous recessionary cycles since 1980 (start of First Persian Gulf War). But nothing guarantees such price levels in perpetuity."
North American shale output
Combined U.S. and Canadian oil production nearly doubled from 2008 levels, due to substantial improvements in shale "fracking" technology in response to record oil prices. The steady rise in additional output, mostly from North Dakota, West Texas, Oklahoma and Alberta, eventually led to a plunge in U.S. oil import requirements and a record high volume of worldwide oil inventories in storage.
China's slowed growth
In spite of longstanding geopolitical rivalries – notably the GCC bloc versus Iran and Venezuela – emerging markets oil producers within and outside OPEC maintained at least some output discipline until the fall of 2014, when Saudi Arabia advocated higher OPEC production and lower price levels to erode the profitability of high-cost shale oil production.
Combatting climate change
In the quarters leading up to the 21st UN Climate Change Conference in Paris, US and European policy makers, pension trustees and academic thought-leaders became active devising new ways of fostering private capital stewardship and “greener” investment: persuading and incentivizing institutional asset owners to embrace renewable energy and a low-carbon investment ethos, more propitious for long-term growth.
Speaking at the 5th annual World Pensions Forum held in Paris on the sidelines of the UN Conference, Earth Institute Director Jeffrey Sachs argued that institutional investors would eventually have to divest from carbon-reliant oil industry firms if they could not react to political and regulatory efforts to halt climate change: "Every energy company in a pension fund's portfolio needs to be scrutinized from purely a financial view about its future, 'Why is this [a company] we would want to hold over a five- to 20-year period?'... If we continue to hold major energy companies that don’t have an answer to a basic financial test, we are just gambling. We have to take a fiduciary responsibility – these are not good bets."
President Obama insisted on America’s essential role in that regard: “We’ve led by example […] from Alaska to the Gulf Coast to the Great Plains [...] we’ve seen the longest streak of private job creation in our history. We’ve driven our economic output to all-time highs while driving our carbon pollution down to its lowest level in nearly two decades. And then, with our historic joint announcement with China last year, we showed it was possible to bridge the old divide between developed and developing nations that had stymied global progress for so long […] That was the foundation for success in Paris.”
Under Hugo Chávez and his Bolivarian government, PDVSA resources were used to fund social programmes, with Chávez treating it like a "piggybank". His social policies resulted in overspending that caused shortages in Venezuela and allowed the inflation rate to grow to one of the highest rates in the world.
According to Cannon, the state income from oil revenue grew "from 51% of total income in 2000 to 56% 2006"; oil exports increased "from 77% in 1997 ... to 89% in 2006"; and his administration's dependence on petroleum sales was "one of the chief problems facing the Chávez government". By 2008, exports of everything but oil "collapsed". and in 2012, the World Bank explained that Venezuela's economy is "extremely vulnerable" to changes in oil prices since in 2012 "96% of the country's exports and nearly half of its fiscal revenue" relied on oil production. When oil prices dropped in 2015, this worsened the crisis Venezuela was experiencing from the Bolivarian government's mismanagement.
Immediately after the death of Hugo Chavez, Castro sought a new benefactor after Chávez left Venezuela's economy in ruin and the oil that was shipped from Venezuela to Cuba began to slow. With Cuba needing new support, relations between the United States and Cuba began to be reestablished in 2014 during United States–Cuban Thaw.
However into 2016, Cuba still relied on Venezuela's oil and economic assistance. With Cuba's economy slowing as a result of Venezuela's own crisis, many Cubans feared that their nation would soon return to having similar experiences to that of the Special Period, which occurred following the dissolution of the Soviet Union, which Cuba heavily relied on.
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