The renowned oil industry businessman and Member of the Steering Committee at the Latin American Mining and Energy Association ALAME, Luis Giusti, in a recent interview spoke on the current situation of the oil sector and stated that "Without doubt the structural cause has been a Oversupply of crude in the order of 1 million barrels per day (bpd). However, this oversupply has existed for about three years, but before, since 2011 when Saudi Arabia had broken the OPEC union by acting alone, it gradually became the great modulator of price by opening and / or closing production between 9.8 and 10.2 million barrels per day to keep the price at $ 100 / barrel. Moreover, every time an OPEC meeting was in sight, Saudi Oil Minister Ali Naimi made a pre-empting publicly stating that everything was fine, that the price of $ 100 / barrel was good for everyone And that no action was required. What happened on this occasion, when the meeting of the organization was coming on November 27, was that the Saudis simply kept silent. In addition, their actions spoke for them, when they discounted the prices of their crude. A closure of about 800,000 barrels per day would have been enough to keep prices up, but the combination of a bland OPEC meeting and Saudi Arabia's position led to price collapses. Everything seems to indicate that the Saudis' decisions were to protect their "market share" especially in the USA, where the volume of imported oil has been declining and where they compete with Mexico, Venezuela and West Africa. A final comment is that many are wrong to assume that the drop in prices will annihilate Shale Oil in the USA, because most of the important players there already paid for their land and their drills, in addition to hedging their Production and can hold low prices for quite some time. "
According to some analyzes that different experts have done, this is a conjunctural situation. Likewise, Luis Giusti believes that "This is another cycle of the oil market, especially because prices have fallen too fast. In just three months the price has fallen by more than 50%. When that happens there is a total disincentive to accumulate inventories, which is a promise that it will not take long for a rebound. If political considerations are added to it, it should be said that OPEC or Saudi Arabia alone are likely to decide to cut output, in addition to much delayed output growth in Russia and possibly in Brazil. Towards the end of the year a demand increase of around 1.4 million bpd is anticipated, not to mention the harshness of the current winter in the northern hemisphere, which could have an incidence earlier than is estimated. You have to wait and watch, because only time will tell. You can accurately predict supply and demand, but it is difficult to predict attitudes and intentions of humans. "
With regard to the actions that the OPEC and non-OPEC oil countries could take to change this trend, Giusti said that "OPEC oil countries could decide to meet again and schedule and distribute a cut. The non-OPEC oil countries will do nothing, because they will always produce as much as possible, especially if prices are lower. In the history of the last 20 years, only Mexico and Russia have been summoned to collaborate, but they have done little or nothing what they have done in terms of production closures. "
According to its experience in the sector, it also believes that the oil industry will continue to strengthen, develop new technologies and stimulated by human ingenuity, increasing its production to meet the world's energy needs: "We must not forget that oil And natural gas meet almost 65% of the world's primary energy needs.
Although oil-producing countries suffer a substantial decline in their export earnings, the other side of the coin is that the economies of all countries benefit from cheaper energy. But that effect is not immediate, because the oil and natural gas chain is long and has elasticity.
For their part, oil companies without exception, are doing the same thing they have done throughout history, and is reducing costs as much as possible, including review of dividend policies, to protect as far as possible The margins of profitability. The oil countries are reviewing their budgets and cutting back as far as they can, trying to protect the highest priority programs. The rest of the world aspires to benefit from lower energy prices".
In the specific case of Venezuela, and especially its supply contracts to third countries, Giusti says that beyond the difficult economic situation that the country may be going through, it will continue to produce some 2.5 million bpd, and consequently will continue Being a very important player in the global oil balance.
In the case of Colombia, it considers that the tax conditions of the oil sector in Colombia are not adverse. "In fact, the royalty is low and the income tax is the same as that of the industrial sector. Many other countries impose much higher taxes on oil. Colombia continues its oil campaign with a steady pace. Another thing is different geology, and compared to Venezuela and Mexico are two oil giants, Colombia is small. But in Colombia the institutional framework, the contract and the respect for the contract, and degree of investment of the country have made the country competitive. "
With respect to the instability in the price of the dollar, in Colombia the currency has risen more than in other countries. This undoubtedly implies greater adjustments in the economy of the country, which states that "Colombia is a country with a very diversified economy, and although oil revenue generates large amounts of dollars, which are now diminished, the challenge of the Bank Of the Republic is to prevent the Colombian Peso from being appreciated too much because it would affect many other sectors of the national economy, especially other export sectors, while encouraging imports. But that question was left to the authorities of the National Executive and the Bank of the Republic, who are in charge of the difficult tasks of coordinating the country's economy. "