World's Largest Oil Producer
Oil is a component found in many products we all rely on daily. Not only is it used to power vehicles, but oil by-products are used in the production of plastic, chemicals, and more. So, there is a high demand for oil in all forms which is why it matters to us. Knowledge about the various oil producers and what drives pricing and supply is key to understanding the business, including the risks associated with the business.
The United States has been one of the top oil producers in the world for over 50 years, and continues this status even today, producing 19% of the world’s oil. Saudi Arabia follows closely behind, contributing about 12%. While some oil-producing countries produce enough to meet their own needs, other countries such as the U.S still purchase oil from outside of their own due to the internal demand.
How Did the U.S Surpass the Middle East
The United States is not a part of OPEC, which manages and regulates oil production among various other countries. The lower production costs for the U.S has allowed for them to be a significant competitor with OPEC countries, where prices typically experience little fluctuation and where production volume is regulated. The U.S. determines its own pricing and production volume. In recent years, as the U.S. began to produce amounts of oil that rivaled those produced by Saudi Arabia, the U.S. has been able to surpass Saudi Arabia in terms of influencing pricing and supply worldwide.
How is it that the U.S. can produce oil at a lower cost? Drilling costs are significant in the total cost of oil production. The U.S has discovered more cost efficient drilling in the Gulf of Mexico. Since its production costs are lower, the U.S. has been able to price oil more competitively than other countries. This is one of the main reasons the U.S has been able to claim the title of top oil producer in the world.
How Might This Impact the Energy Insurance Industry
Understanding the markets is key to understanding oil and energy business and risks. In order to provide excellence in service in assisting a client with insurance needs, it is important to take into account their needs as well as the current energy market. The ability to effectively and competitively meet the needs and requirements of oil and energy clients comes from knowing the business and the markets. Having the experience and agility to be able to offer the best insurance products to meet those needs in the current market is what EIURS does best.
For more information related to this blog and more, please refer to our website.