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The OPEC Cut

   One of the major events that occurred in 2016 included the OPEC cut. OPEC (Organization of Petroleum Exporting Countries) is one of the associations developed to manage and control the petroleum policies among the countries within the associations. The current news on the non-governmental organization included the cutting down on the supply of the petroleum products across the industries in the world.  According to the news by New York Times by Reed concerning the OPEC cut, it was implied that the organization proposed for a global reduction in the production of petroleum products as a way of stabilizing the prices of the oil supply in the world (Reed, 2017). The prices of oil have been going down since the year 2014 in which there has been destabilization of the economy and the supply of oil form unrecognized sources. According to the progress on the OPEC cut, by January the year 2017, most of the member countries of OPEC have agreed to the plan of reducing the amount of oil and petroleum products in the world (Reed, 2017). The changes targeted on key elements including limiting the access to the oil reserves and the unity of the OPEC countries in determining the success of price stabilization.

The Impacts of OPEC Cut on the Global Business

Most of the businesses rely on the oil and petroleum products in performing most of their operations. Moreover, petroleum products are the widely used products in the transport and running of the machinery sectors in the economy. The implication of this idea is that the overall economy would be much affected based on the developments of such strategies. The OPEC cut would have a significant effect on the oil prices. According to the approach, it would be relevant that the supply of the oil products would be reduced as compared to the demand that people may need in their working environments. The high demand and the reduced supply would mean that the prices would be increased as there would be many customers chasing after a minimal amount of the petroleum products. The consumers would be forced to spend more due to the scarcity of the resources and the high demand for the same.

High costs of production are also another element that would be a great impact as a result of the OPEC cut. For instance, it would be relevant to imply that most of the industries depend on the petroleum and oil resources in the production. The amounts of money spent on the energy are always included in the expenses of the company’s as part of the costs involved in the production (Kpodar, 2006).  The change in the prices of oil would mean that the company would have to spend more on the energy which impacts directly on the prices of all other produce.  As the production costs increase in most of the industries, the prices of the products manufactured would also simultaneously increase. Therefore, the OPEC cut would have an effect on the inflation patterns of the world.

 There would be a general price increase on the produced products as they are directly impacted by the rise in the costs of their production. The inflation would also have a significant effect on the purchasing powers of the consumers. For instance, there would be a reduction in the ability of the customers to buy based on the higher prices on products. The change in inflation would impact on the general industry performance in different ways.   The company performance would be affected based on the inability of the consumers to afford the high prices on the products that are sold.

The OPEC cut also had an impact on the transportation sectors in the world economy. Transport is a very important sector of the world economy. For instance, the movements of goods and services from one country to another also involves the use of transportation. The companies also depend on transport issues as a way of reaching their ultimate consumers. The transport sectors entirely rely on the oil products that are relevant in moving the machines responsible for the transportation of goods (McDonald, 2005). Logistic and supply chain issues are part of the transportation issues involved in business. The impact of these factors would mean that it would be difficult for exports and imports to reach other countries at low costs. The imports and exports would increase in prices thereby affecting the domestic markets. The changes in exports levels would affect how the access to basic goods and services may affect the performance of the local economies in the global sectors.

The OPEC cut would change the transport sectors. The increased costs of transport would also have a direct effect on consumer purchasing power in the world. For instance, transport is unavoidable in the economy.  The existence of personal cars in the current world is part of the consumer budgets and spending. These elements may impact on their ability to buy since they would be spending much money on transport and other movement related elements (Pahl, 2013).  These factors would lead to the destabilization of the affairs of the economy.  The domestic production of oil would also have a higher advantage in the global sectors.  The domestic productivity of the local sectors in oil producing countries which are outside the OPEC involvements may rise. For instance, not all the countries in the world are united in the OPEC regions. They may boost their domestic production through different level strategies.

Conclusion

The OPEC cut is significant even though it was developed last year. It included the attempt to correct the low prices of the oil products in the year 2014. According to the OPEC agreement, it was asserted that the prices of oil were destabilized in the industry. Moreover, they intended to cut the oil supply to increase the prices in the whole industry.  The OPEC cut being a world event has impacted the global business. For instance, there has been an increase in inflation in the global marketplace and the purchasing power of the consumers has also lowered significantly.  There is also an anticipated reduction in the performance levels of companies. The OPEC cut will reduce the purchasing power of the consumers while the petroleum industry would have a high demand and low supply, thereby creating scarcity.

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