Case Study the offshore drilling industry.edited.docx -...

This preview shows page 1 - 3 out of 6 pages.

Running head: CASE STUDY: THE OFFSHORE DRILLING INDUSTRY Case Study: The Offshore Drilling Industry Student’s Name Institution Affiliation
CASE STUDY: THE OFFSHORE DRILLING INDUSTRY 2 Whether the Offshore Drilling Industry is an Attractive Industry No, the offshore drilling industry is not attractive. The main reason why this industry is not an attractive one is that the market prices of oil have been continuously fluctuating, thereby affecting the aspirations of energy companies. From the case, from June 2014 to January 2015, this industry experienced a significant reduction in the market price of oil. For instance, between this period, the market prices of oil reduced to $49 per barrel all the way from $115 per barrel. On logical grounds, it could be argued that the offshore drilling industry is often hit hardest when the prices of oil reduce because the market largely determines the prices at which they sell the oil; however, their costs of production are a bit fixed. As argued in the case, however lucrative it may sometimes be, this industry is not an attractive one because there are several moments when the price of production can higher than what the companies get after selling the drilled oil. On reasonable grounds, it could be argued that if the cost of producing a barrel of oil is higher than what it can fetch on the market, the companies involved in this industry will incur losses and ultimately lose the appetite to produce oil. Whenever the oil prices reduce, companies and the industry are left wondering how much longer the decline in prices would persist, something that affects their productivity. Therefore, the offshore drilling industry is not attractive because oil prices are and will always remain volatile.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture