Bankruptcy among Oil Companies

The price of crude oil has plunged to new troughs with the ever increasing supply demand imbalance. A weakening global economy warranting modest demand for fuels coupled with an unrelenting supply from the OPEC nations being the major culprit. This write up aims to explore the impact of the current scenario on the financial stability of various Oil & Gas Corporations and why so many of them have been driven to bankruptcy. Introduction A global economic slowdown has reduced the oil demand for most developing economies and unfortunately, this comes at a time when there is already an oversupply in the market. For the Oil companies to stay afloat in such a hostile environment, their cost of production has to be at par, if not lower than the fallen crude selling prices. Achieving this is not too difficult for companies operating in geographies possessing 'easy oil'- that which can be extracted at the lowest possible costs, but for companies relying on shale drilling and other cost-intensive methods of production such as deep-sea drilling, this scenario spells doom and is turning out to be the end of the road for many.   Author: Ajiteshpreet Singh Bhatia